STATE OF NEBRASKAState Government

Program: Various, including AL 93.778 – Grants to States for Medicaid – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2405NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 45 CFR § 75.405(b) (October 1, 2024) states, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 45 CFR § 75, Appendix V, Subsection (G)(2), (October 1, 2024) states the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 45 CFR § 75, Appendix V, Subsection (G)(4), (October 1, 2024) states, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev. Stat. § 81-1120.22 (Reissue 2024) provides the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 45 CFR § 75.444(a) (October 1, 2024) states, in relevant part, the following: For states . . . , the general costs of government are unallowable. . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . ; (2) Salaries and other expenses of a state legislature . . . [.] A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically, so charges are appropriate for the services provided. • Maintenance of adequate documentation to support both rates charged and the approval thereof. • Periodic review of internal service fund balances to ensure revenues are not in excess of expenses. Condition: The Agency lacked adequate documentation to support the rates charged by the Office of the Chief Information Office (OCIO). Additionally, the Agency’s Material Division lacked adequate documentation to support service rates charged for the Print Shop. Furthermore, we noted also that the Agency lacked adequate documentation to support the allocation of security costs in developing building rental rates. Lastly, the OCIO Internal Service Fund Balance was greater than 60 calendar days for cash expenses for normal operations incurred. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2024-029 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) As noted in prior audits, the OCIO lacked adequate support for service rates charged. The Agency was in the process of developing a standard procedure for each rate, but no changes were made for fiscal year 2025. In that year, the OCIO receipted $27,337,548 in Federal dollars for services performed for Federal programs. Of this amount, $15,736,395 was charged to Medicaid. As the rates were unsupported, the amount of questioned costs could not be determined. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of updating its rates through a new methodology, but no changes were made for fiscal year 2025. Receipts from sales for that year totaled $3,171,998. As the rates were unsupported, the amount of questioned costs could not be determined. Building Division The rental rate charged to agencies for building space includes an allocation for security costs. We noted that neither the State Capitol Building (Capitol) nor the Governor’s residence was allocated any costs for security, even though both locations have security. Because these locations were not allocated any security costs, Federal programs could be overcharged. Moreover, security costs to the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2025 indirect allocations for security total $1,137,662. OCIO Internal Service Fund Balance Per the Agency’s calculation, as of June 30, 2024, the OCIO Internal Service Fund Balance for allowable costs was $26.743 million; however, the allowable reserve was only $20.826 million, a difference of $5.917 million. The Agency has not completed its calculation for June 30, 2025; however, per the APA’s review of the State accounting system, the fund balance has increased by over $9 million during State fiscal year 2025 and was significantly larger than the allowable reserve at June 30, 2025. Cause: Procedures are inadequate to ensure that rates are sufficiently supported, and the Internal Service Fund Balances do not exceed allowable thresholds. Effect: Without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services, and the Agency’s internal service funds will exceed the allowable threshold per Federal regulations. When security costs are not allocated to all buildings in an equitable manner, moreover, the risk of Federal programs not being charged in accordance with Federal cost principles is increased. Recommendation: We recommend the Agency review its allocation of security costs to ensure that such costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. Lastly, we recommend the Agency implement procedures to ensure fund balances do not exceed the allowable threshold. Management Response: The OCIO agrees with the finding as it is the result of rates calculated 18-24 months in advance of the period under review as this was the 2nd year of the State’s fiscal biennium. Efforts have been made to both reduce the number of rates for clarity as well as right size the rate to align with cost recovery expectations more effectively. In addition, OCIO will be engaging in a period of “no-bills” to customer agencies to draw down the identified federal funds OCIO had previously collected and are in excess of the 60-day allowable threshold. The Print Shop is reviewing other options to provide Printing Services to state agencies. DAS Building Division - The methodology for the allocation for security (an Indirect Cost) is a management decision and there have been no changes in the allocation methodology. APA Response: As noted above, security costs to the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. This is true regardless of any management decision.

Program: Various, including 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds; 10.555 – National School Lunch Program – Reporting Grant Number & Year: Various, including SLFRP1965, March 3, 2021, through December 31, 2024; 253NE308N1099, FFY 2025 Federal Grantor Agency: Various, including U.S. Department of the Treasury and U.S. Department of Agriculture Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is presented properly. 2 CFR § 200.510(b) (January 1, 2024, and January 1, 2025) states that the auditee must prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements that includes the total Federal awards expended, the total Federal awards expended for each individual Federal program, and the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2024) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state’s central system. EnterpriseOne is the official accounting system of the State. Condition: Several programs did not have expenditures or the amount provided to subrecipients reported accurately on the SEFA. We notified the Department of Administrative Services (Administrative Services) of the errors, and the SEFA was subsequently adjusted. A similar finding has been noted for several years. Repeat Finding: 2024-030 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted 12 programs for various State agencies needed correction. This included overreporting AL 21.027 by $4,254,865 and underreporting AL 10.555 by $4,757,669. Additionally, a program was originally included on the SEFA for over $16 million that was initially selected as a major program; however, it was determined subsequently that the program should not have been reported on the SEFA. The total expenditures and amounts provided to subrecipients, as both originally reported and per the final SEFA, were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue agency training, review of chart of accounts setup, review of object account usage, and working with State employees to help ensure the SEFA is accurate and complete.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Reporting Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal controls require procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting was not completed for the one subaward issued by the Agency for the Coronavirus Capital Projects Fund program. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: Twenty-nine subawards obligated to 10 subrecipients, totaling $65,921,433, were required to be reported during the fiscal year ended June 30, 2025. We tested 11 of the subawards (to three subrecipients), and one of those subawards was not reported. The subaward obligated $35,000,000 to one subrecipient in March 2024 for a Multi-Purpose Community Facility Project. This award was required to be reported in the FFATA Subaward Reporting System (FSRS) by April 30, 2024. Upon inquiry, it was noted that the Agency was unaware that FFATA reporting was required for this program and, as such, had not completed the required reporting. After our inquiry, the Agency attempted to complete the reporting; however, as of November 3, 2025, the award still had not been reported. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that all required reporting was completed. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure all subawards are properly reported as required. Management Response: DED acknowledges that it failed to complete the Federal Funding Accountability and Transparency Act (FFATA) for the subaward that DED issued for the Coronavirus Capital Projects Fund program.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 253NE308N1199, FFY 2025; and 253NE308N1099, FFY 2025 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2025) states, in part, the following: (a) Reporting of first-tier subawards – (1) Applicability. Unless the recipient is exempt as provided in paragraph (d) of this award term, the recipient must report each subaward that equals or exceeds $30,000 in Federal funds for a subaward to an entity or Federal agency. The recipient must also report a subaward if a modification increases the Federal funding to an amount that equals or exceeds $30,000. All reported subawards should reflect the total amount of the subaward. (2) Reporting Requirements. (i) The recipient must report each subaward described in paragraph (a)(1) of this award term to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) at http://www.fsrs.gov. (ii) For subaward information, report no later than the end of the month following the month in which the subaward was issued. . . . Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020 as of January 14, 2026. A similar finding was noted in the prior audit. Repeat Finding: 2024-031 Questioned Costs: None Statistical Sample: No Context: We met with the Agency to verify that the reporting had been completed. However, during our discussions, it was noted that the Agency was still unable to upload the required reports because it was using the wrong Federal Award Identification Numbers (FAINs). As of January 14, 2026, the reporting still had not been completed. For the fiscal year ended June 30, 2025, the Agency paid subrecipients $134,745,728 from the Child Nutrition programs. Cause: The Agency had not developed adequate procedures to complete the reporting requirements and was using the wrong information for the FAINs, causing the data-upload file to be rejected. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not complying with Federal regulations. Recommendation: We recommend the Agency update its procedures and complete the FFATA reporting as soon as possible. Management Response: The FAINs used for FFATA reporting did not match the coding utilized in the E1 payment system the NDE uses. Therefore, the report of recipient payments was not generating data that the sam.gov reporting system recognized and would accept.

Program: AL 84.010 – Title I Grants to Local Educational Agencies – Subrecipient Monitoring Grant Number & Year: All open, including S010A230027, FFY 2024; S010A240027, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 200.332 (January 1, 2024, and January 1, 2025) requires a pass-through entity to monitor the activities of subrecipients as necessary to ensure that subaward funds are used for authorized purposes in compliance with Federal regulations, track Single audit requirements and verify that a Single audit was obtained if required, review financial and performance reports of the subrecipient, and follow-up and resolve all audit finding pertaining to the Federal award. 2 CFR § 200.501 (January 1, 2024), as it applies to audit requirements of entities for fiscal years ended prior to October 1, 2025, states the following: (a) Audit required. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provisions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514[.] Good internal control requires policies and procedures to ensure that subrecipient monitoring is sufficiently designed and performed regularly to provide assurance that grant funds are used in accordance with Federal requirements. This includes maintaining adequate documentation to support fiscal monitoring performed for Federal programs and documentation of follow-up procedures performed when subrecipients are expected to have Federal expenditures exceeding Federal audit requirement thresholds but do not receive a Federal Single audit. Condition: The Agency’s procedures can be improved to ensure that: • Subrecipients’ uses of funds were monitored to ensure compliance with all Federal and grant requirements. • Subrecipients obtain Single audits mandated by Federal requirements. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency disbursed $106,911,261 of Title I Federal funds to 242 different subrecipients during the fiscal year ended June 30, 2025. We noted the following during our subrecipient monitoring testing. Insufficient Subrecipient Fiscal Monitoring Procedures Per its fiscal monitoring procedures and schedule, the Agency is to perform fiscal monitoring of the various subrecipients on a three-year rotational cycle. These procedures include reviewing subrecipient expenditures claimed for subgrant awards applicable for the period the Agency is monitoring. We randomly selected 25 subrecipients to review the fiscal monitoring documentation provided by the Agency. We noted the following for two subrecipients: • For one subrecipient tested, the fiscal monitoring was last completed in August 2021 for the 2019–2020 program year, during which no compliance errors were noted. Per the Agency, fiscal monitoring was scheduled to be performed again in calendar year 2023 for the 2022–2023 program year; however, this monitoring was never performed. As of June 30, 2025, no fiscal monitoring review had been initiated. Additionally, during a review of reimbursement requests submitted during the fiscal year, we noted some questionable expenditures, including $3,027 spent on hotels at Disney’s Animal Kingdom in Florida, which were reportedly in association with a teaching conference held eight miles away at the Orlando World Center Marriott. The daily rate charged by the hotel was $299 per night; the Government Services Administration’s rate for lodging in Orlando for June 2024 was $140 per night. We also noted that a possible travel expenditure of $955 was paid to Holiday Express for which no support was obtained. These types of higher-risk expenditures further highlight the need for subrecipient monitoring to be performed regularly. • For another subrecipient, the Agency last completed its fiscal monitoring in August 2025 for the 2023–2024 program year. However, monitoring documentation was not sufficient to determine what monitoring procedures were completed or whether that monitoring was adequate. While we did observe various records on file, including employee time and effort logs and invoices supporting supplies and service costs, the audit worksheet that the Agency is supposed to complete for all fiscal monitoring performed did not indicate what items were reviewed or the conclusion regarding those items. We did observe an exit letter issued by the Agency in August 2025, which indicated that no issues were found. Single Audit Tracking Procedures During our review of subrecipient audits and Single audit tracking procedures implemented by the Agency, we noted that, for one subrecipient tested, the Agency had identified the subrecipient as having more than $750,000 in Federal expenditures for the subrecipient’s fiscal year ended August 31, 2024, but noted that no Single audit was required. After we inquired with the Agency, no documentation could be provided to support that the Agency performed any follow-up procedures to verify that a Single audit was not required. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements or to ensure that subrecipients obtained Single audits when required. Effect: Without adequate monitoring and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency strengthen procedures to ensure that subrecipient monitoring is properly designed to ensure compliance with all Federal and grant requirements and that documentation is maintained to support procedures performed. We also recommend the Agency strengthen procedures to ensure that subrecipient Single audit requirements are properly tracked, and all Single audits are reviewed in a timely manner. Management Response: NDE agrees with this finding.

Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Reporting Grant Number & Year: H126A240039, FFY 2024; H126A250039, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State to be sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 34 CFR § 76.707 (July 1, 2024), personal services performed by an employee of the State are obligated when the services are performed. Good internal control and sound accounting practices require adequate policies and procedures to ensure that information included in Federal reports is correct and accurate. Condition: The Agency lacked procedures to ensure that the unliquidated obligations and administrative costs were reported accurately on the RSA-17 reports. Repeat Finding: 2024-033 Questioned Costs: None Statistical Sample: No Context: We tested two RSA-17 reports submitted by the Agency. We noted the following: Grant H126A240039, Quarter Ended March 31, 2025 • The Federal Share of Unliquidated Obligations reported on line 18 was $3,760,436. The amounts reported were not correct due to the following: o The Agency did not report $190,628 of payroll costs charged to the grant on April 2, 2025, which was associated with work performed during the period March 10, 2025, through March 23, 2025. o The Agency reported $626,761 of unliquidated payroll obligations for payroll costs charged to the grant on April 16, 2025, which was associated with work performed during the period March 24, 2025, through April 6, 2025. Work performed during the period April 1, 2025, through April 6, 2025, would not constitute an obligation as of March 31, 2025. Grant H126A250039, Quarter Ended March 31, 2025 • The Non-Federal Share of Unliquidated Obligations reported on line 29 was $110,371. The amount reported was incorrect, as it excluded $441,446 in payroll costs for vocational rehabilitation services performed from March 10, 2025, through March 23, 2025, which were coded to non-Federal funds on April 2, 2025. • The Administrative Expenditures reported on line 37 was $1,533,909. The amount reported was incorrect because it counted indirect costs twice, resulting in an overstatement of $244,108. Cause: Inadequate review and documentation of amounts reported. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that obligations and expenditures are being properly reported in accordance with reporting requirements. Management Response: H126A2400390 - Federal Share of Unliquidated Obligations: Agency error in noting that 3/23/25 payroll had not posted by 3/31/25, and inclusion of partial payroll (4/1-4/6) in unliquidated obligations. H126A2500390 - Non-federal Share of Unliquidated Obligations: While these payroll costs were obligated to H126A2500390 on the 4/2/2025 payroll, Nebraska VR anticipated a JE from H126A2500390 to H126A2400390 would be completed because the match requirement for H126A2500390 had been met, and an overmatch of general funds would have resulted in an MOE penalty. Based on the information at that time and the assumption the costs would be paid from H126A2400390, they were included as an unliquidated obligation on the H126A2400390 RSA17. Due to an opportunity to capture additional federal dollars via the re-allotment process, it was later determined to leave the payroll costs coded to H126A2500390 and draw down additional federal funds. For future reports, unliquidated obligations will be reported as is. Administrative Expenditures: When providing documentation for the audit, Nebraska VR discovered this error and reported it to the auditor. The federal report has been re-opened and the error corrected.

Program: AL 84.365 – English Language Acquisition State Grants – Subrecipient Monitoring Grant Number & Year: All open, including S365A230027, FFY 2024; T365A240027, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 200.332 (January 1, 2024, and January 1, 2025) requires a pass-through entity to monitor the activities of subrecipients as necessary to ensure that subaward funds are used for authorized purposes in compliance with Federal regulations, track Single audit requirements and verify that a Single audit was obtained, if required, review financial and performance reports of the subrecipient, and follow up and resolve all audit finding pertaining to the Federal award. Good internal control requires policies and procedures to ensure that subrecipient monitoring is sufficiently designed and performed regularly to provide assurance that grant funds are used in accordance with Federal requirements. This includes maintaining adequate documentation to support fiscal monitoring performed for Federal programs, such as documenting the populations of transactions that agree or reconcile to reimbursement requests, identifying the specific transactions that are being reviewed, and maintaining supporting documentation for those specific items reviewed. Condition: The Agency lacked adequate procedures for monitoring subrecipient use of funds to ensure compliance with all Federal and grant requirements. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency disbursed $6,255,240 of Federal funds to 26 different subrecipients during the fiscal year ended June 30, 2025. We randomly selected 10 subrecipients to ensure that subrecipient monitoring was adequate to ensure that funds were used in accordance with Federal requirements. We noted issues with monitoring procedures for eight subrecipients tested. The following table identifies the eight subrecipients, the total amount of aid paid during the fiscal year ended June 30, 2025, the last school year reviewed, and the funds subject to monitoring for those years. See Schedule of Findings and Questioned Costs for chart/table. Insufficient Subrecipient Fiscal Monitoring Procedures Per the Agency’s fiscal monitoring procedures and monitoring schedule, the Agency is to perform fiscal monitoring of the various subrecipients on a three-year rotational cycle. These procedures include reviewing subrecipient expenditures claimed for subgrant awards applicable for the period the Agency is monitoring. There are two subprograms that subrecipients may be awarded Federal funds by the Agency, Immigrant Education (IE) for schools that have experienced a significant increase in number of immigrant children and youth in their schools, and English Learners (EL) for schools to use to help identified students attain English proficiency and meet challenging State academic standards. During review of fiscal monitoring documentation provided by the Agency, we noted the following: • For one subrecipient tested, the Agency could not provide documentation to support the Agency’s last completed review. The Agency did provide an engagement letter, dated November 18, 2025, indicating that it had started a new monitoring review of the subrecipient for the 2023-2024 school year; however, this was after our audit period and was not yet completed. • For seven subrecipients tested, we were unable to determine how the Agency had sampled transactions for the subrecipients’ accounting records, such as a general ledger report of transactions, supporting the expenditures for the periods being reviewed. In one instance, no such records were provided in the review documentation. In another instance, the accounting records did not agree to the period being reviewed, and there was no documentation of a reconciliation by the Agency. For the remaining five, there were appropriate accounting reports; however, there was not adequate documentation of items selected for review. Additionally, when considering the specific IE and EL subprograms for which subrecipients are awarded funds, we noted the following: o For two subrecipients, there was no documentation that amounts awarded under the IE or EL subprogram were reviewed. For one of the subrecipients, documentation was provided, but it was not clear if it was actually reviewed by the Agency. o For four subrecipients, transactions were identified as being reviewed for the IE subprogram; however, there was no supporting documentation on file that could be provided to us for verification. o For four subrecipients that received EL subprogram funds, documentation was not adequate to support amounts reviewed. For one, there was no indication of amounts reviewed. Amounts were identified for the other three, but the Agency did not have any supporting documentation for the amounts identified, or it was not clear that supporting documentation was actually reviewed. We also noted that, for one subrecipient tested, the most recent fiscal monitoring review was completed in calendar year 2021, which was over three years prior. As the Agency’s procedures indicate every subrecipient should be subject to fiscal monitoring at least once every three years, we consider this review to be untimely. Other Issues Noted During our review of one subrecipient aid payment tested, we noted that the Agency’s reimbursement request review did not obtain documentation for credit card transactions, totaling $7,118, as required by the Agency’s grant management procedures. The Agency personnel that reviewed the request had indicated they reviewed the credit card transactions; however, no documentation was obtained and on file to support the transactions in accordance with the Agency’s grant management procedures. Additionally, we noted one instance of the Agency not having documentation on file to demonstrate that it followed up on corrective actions being taken by a subrecipient for issues the Agency identified during its subrecipient monitoring. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements. Effect: Without adequate monitoring and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency strengthen procedures to ensure that subrecipient monitoring is properly designed to ensure compliance with all Federal and grant requirements, and documentation is maintained to support procedures performed, including maintaining documentation of follow-up performed when corrective action plans are required for problems identified during the monitoring. Management Response: NDE agrees with this finding.

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. . . . 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of five subawards/amendments tested. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-035 Questioned Costs: None Statistical Sample: No Context: Per the usaspending.gov website, the Agency had reported 20 subawards/amendments obligated during the fiscal year ended June 30, 2025, totaling $1,378,197. We tested five subawards/amendments. One subaward was not reported in the FFATA Subaward Reporting Systems (FSRS) as of February 18, 2026. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal Requirements. Management Response: NDE agrees with this finding.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2201NETANF, FFY 2022; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2301NECCDD, FFY 2023; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “maintain effective internal control over the Federal award that provides reasonable assurance that the [State] is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020) and the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”), “[a] government program may not be reimbursed in excess of its actual costs, i.e., make a profit.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that, when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: Inadequate procedures to ensure the accuracy of journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP), resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-037 Questioned Costs: $3,986,559 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 14 journal entries related to the PACAP. We noted the following: • Four journal entries to reconcile Foster Care Title IV-E expenditures to the PACAP contained multiple errors, including using aid amounts as administrative costs, miscalculating the portion of the Bridge to Independence (B2I) program that can be charged to the grant, not accounting for all amounts already charged to the grant, and adding in additional amounts earned that did not exist or were calculated incorrectly. For one entry, the Agency not only calculated the wrong amounts to charge to the grant, but then posted the exact same entry from the previous quarter instead of the current quarter’s entry. In total, $306,667 was overcharged to the Foster Care Title IV-E grant due to these errors. We consider this amount to be Federal questioned costs. • Another journal entry for Foster Care Title IV-E was posted to correct an error in previous quarters’ journal entries. The Agency was charging program-related training costs at a 50% Federal financial participation rate (FFP), while such activity is allowable at a 75% FFP. However, the Agency did not correctly account for all the costs that had already been charged to the grant for training costs. This error led to the Agency charging an additional $1,777,318 in costs to the Federal award that was already charged to the grant. We consider this amount to be Federal questioned costs. • One journal entry was to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP. The Agency’s calculation included costs earned by the Summer EBT program but failed to include amounts already charged to the Summer EBT Federal grant of $72,292. Additionally, the Summer EBT program is a separate Federal grant from SNAP and should have been accounted for separately. The full $72,292 is the Federal portion and is considered questioned costs. • One journal entry to reconcile Medicaid administrative expenditures to the PACAP did not properly account for $35,114 in personnel costs that had already been charged to the grant. As a result, the Federal funds were overcharged this amount and are considered questioned costs. • One journal entry to allocate costs related to Field Office Administration to various programs across the Agency for the month of March 2025 was calculated incorrectly and did not account for all programs involved. Each quarter, Field Office Administration costs are allocated in the PACAP to various programs based on hours worked in the field offices. The journal entry tested was meant to do the same calculation, but on a monthly basis, so programs can keep track of their budgets more timely. When calculating the amounts to allocate, however, the Agency used six months of costs, or $1,798,755, rather than just the costs that occurred in March 2025, or $171,255. Further, the Agency did not move the costs to all of the applicable programs, such as Foster Care and SNAP. Lastly, the Agency used the Labor Hours from the quarter ending December 31, 2023, rather than the quarter ending March 31, 2025. Due to these errors, Medicaid was overcharged $131,637, which are considered Federal questioned costs. • For one journal entry to move costs from the State General Fund to a Cash Fund for $1,766,949, the Agency used the incorrect business units within EnterpriseOne, which resulted in multiple Federal programs being overcharged through the PACAP, as listed below. We consider these to be Federal questioned costs. See Schedule of Findings and Questioned Costs for chart/table. We also selected six adjustments made to the PACAP and noted the following: • Two adjustments tested were related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district, and the amounts owed to each school district, for the Federal share of expenses. Schools are responsible for covering matching funds. The Agency makes an adjustment to the Cost Allocation Plan to account for the matching funds that are not shown on the State Accounting records. However, we noted that the Agency is calculating this adjustment based on the amount of allowable expenses provided by the contract, and not the actual amount of Federal funds paid to the schools. The Agency reduces the amount to pay to the schools for missing provider enrollment, negative claims, and/or recoupments. We then reviewed the CMS-64 reports and noted that the Agency is claiming the entire amount of allowable expenses provided by the contractor, and not just the amount paid to the schools. It is not reasonable to claim costs on the CMS-64 reports that are not actually spent. We recalculated the amounts that should have been reported based on the actual amounts paid to the schools and noted that the Agency overclaimed $566,018 in Federal costs. Of the $566,018, $110,970 is due to a 3% fee for administration that the Agency subtracts from each school’s payment. The Agency then essentially pays itself this amount through a reconciliation journal entry. Administrative costs of the Agency are distributed through the PACAP to benefiting programs and would include charges to Medicaid; therefore, the Federal portion of the 3% administrative fee should have been credited back to Medicaid, but it was not. The $566,018 is considered Federal questioned costs. • Two adjustments tested were to correct prior period allocation errors. Both errors were due to a finding from the Fiscal Year 2024 Single audit. The Agency’s calculations to correct allocations included errors, such as using the incorrect statistics, using the incorrect amounts, and inputting the incorrect amounts into the cost allocation system. These errors resulted in the following programs being overcharged. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper, and journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees with the finding.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.090 – Guardianship Assistance; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2501NEGARD, FFY 2025; 2201NETANF, FFY 2022; 2401NESCSS, FFY 2024; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2401NECCDD, FFY 2024; 2501NECCDD, FFY 2025; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “maintain effective internal control over the Federal award that provides reasonable assurance that the [State] is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. Good internal control and sound accounting practices require policies and procedures to ensure that all administrative costs are allocated to the proper funding source for activities performed. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: The Agency did not properly charge Federal programs for 9 of 27 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2024-038 Questioned Costs: $2,743,946 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 27 PACAP allocations. We noted errors for 9 of 27 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharged to be questioned costs. We noted the following: RMTS Allocations For four of four allocations tested based on the Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs. Additionally, costs were included in the allocations that were either misassigned or unrelated to the cost centers being allocated. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The September quarter allocation included 4,481 activity observations and the March quarter included 4,402 observations. We noted the following: o Four responses were invalidated by supervisors; however, these responses were originally left blank as they were not completed by employees. This resulted in four additional responses being created as activities funded by the State. o For two responses that were not included in the sub-sample for supervisory review, the supervisor performed a review and invalidated the moments. As these were not originally selected for supervisor review, this invalidation resulted in two additional responses being created and recorded as activities funded by the State as well as the original responses remaining under their original funding source. o One response was originally recorded as SNAP and was later invalidated by the supervisor. This moment was incorrectly not moved to “Non-DHHS Activity” and remained coded as SNAP on the final allocation. • The Agency did not properly allocate observations in accordance with the PACAP for 7 of the 81 activities in the quarter ended September 31, 2024, and 2 of the 75 activities in the quarter ended March 31, 2025: o Six of the observations included Child Protection Initial Assessment. Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. The Agency did not properly update the formula used to calculate each quarterly allocation for Child Protection Initial Assessment from the previous quarter. In both quarters tested, this resulted in overcharges to the Adoption and Guardianship programs and undercharges to the Foster Care program. o Two of the observations should have been allocated evenly between SNAP and the State; however, the observation was incorrectly allocated three ways, between SNAP, the State, and the Social Services Block Grant Program (SSBG). This resulted in overcharges to SSBG and undercharges to SNAP and the State. o One of the observations should have been allocated with two-thirds to the Temporary Assistance for Needy Families Program (TANF) and one-third to SNAP; however, the observation was incorrectly allocated evenly between TANF and SNAP. This resulted in overcharges to SNAP and undercharges to TANF. Additionally, two business units were misassigned to the RMTS allocations. • One business unit with total charges of $125,246 during State fiscal year 2025 was assigned to the Economic Assistance RMTS allocation when it should have been assigned to the P&S RMTS allocation. Impacts of this error included undercharges to Foster Care and overcharges to SNAP. • The second business unit with total charges of $5,433,458 during State fiscal year 2025 was assigned to the P&S RMTS; however, it should not have been assigned to either RMTS allocation as the costs were related to the Youth Rehabilitation Treatment Center in Kearney, Nebraska. This resulted in overcharges to Federal programs, including Foster Care and Adoption Assistance. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Time Study Allocation One allocation tested was based on a time study of the Legal and Regulatory Services Team for the quarter ended March 31, 2025, which allocated $1,126,957 of administrative costs. The time study was completed annually by the attorneys of the Legal and Regulatory Services Team. We noted the following issues regarding the time study and the allocation tested. • The Agency’s processes and procedures for the time study were not adequately defined in the PACAP, and there were no written processes and procedures for how the time study would be completed. • The time study used for the basis of the allocation tested consisted of only 26 of the 33 attorneys that were part of the team, and the time study was only conducted during a two-week period. Additionally, a paralegal also completed the time study, which was against the Agency’s stated procedures. • An Internal Auditor’s payroll costs were also included in the allocation; however, the Internal Auditor was not part of the Legal and Regulatory Services Team. This resulted in $16,281 in misallocated costs. • Hours coded on the time study for “Child Welfare” were all allocated directly to Foster Care; however, the “Child Welfare” hours should have also been allocated to Adoption, Guardianship, and other State programs. • Hours coded on the time study for “TANF” were incorrectly charged to LIHEAP. As the same time study was used for allocations for all four quarters of the State fiscal year 2025, we calculated the impact for all four quarters. Questioned costs by program for the Time Study allocation are as follows: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $39.5 million in costs were allocated using these counts during the State fiscal year 2025. We tested the allocation for the quarter ended September 30, 2024, and noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers they used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for the allocation tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for the quarter tested and overcharging all other programs in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP, for September 2024 as of August 2025. The detailed report did not agree to the summary spreadsheets.   • Other recipient counts were off due to clerical errors: o The recipient count for the TANF Solely State Funded Plan was incorrect. The recipient count used by the Agency was zero, but the supported number was 2,017 recipients. o The recipient count for SNAP included 1,609 more recipients than what was supported. Having recalculated the quarter’s allocation, based on the supported recipient counts available, we have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 36 cost centers allocated to State and Federal programs through labor hours. Over $295.6 million in costs were allocated by labor hours during the 2025 State fiscal year. We tested seven of these allocations, and one had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. For the allocation tested for Cost Center 25C23545, we noted that five business units related to Home and Community Based Services were being incorrectly mapped to Cost Center 25C23545. Additionally, the labor hours statistic should have allocated the costs throughout the Finance and Program Integrity Section, but it only allocated costs to one unit within this section. These errors resulted in CHIP being overcharged $85,174. Time and Effort Report Allocations We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended September 30, 2024, which allocated $1,077,853 of administrative costs, based on Time & Effort reports. During testing, we noted the payroll costs for 71 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees included three Child and Family Services Specialist Supervisors (CFSSS), and a Program Specialist. The three CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Because of this error, the following programs were overcharged. See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $17,529,039 in project costs for State fiscal year 2025. The iServe Nebraska Portal, which is an online application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021 and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs only to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that are utilizing, or intend to utilize, the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated the following: As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan. In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the previous fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The allocation method was last updated by the Agency, and approved by the Federal grantor, as of September 28, 2023, to include the Child Care program and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program (AABD) and State Disability Program (SDP). However, the Agency-provided implementation date for Child Care, AABD, and SDP was the same as the implementation date for the initial four programs, July 26, 2021. So it remains unclear why all benefiting programs were not being included in the allocation of this cost center from the start of implementation. • The SSBG program began implementation in October 2023 and went live in April 2024, but no costs have been allocated to this program. Similarly, the Refugee Assistance program began implementation in March 2024 and went live in July 2024, but no costs have been allocated to this program either. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2025 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure the following: employee pay is recorded correctly; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 93.658 – Foster Care Title IV-E – Allowable Costs/Cost Principles Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): 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. 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 1356.60(b)(1) (October 1, 2024) states, in part, the following: Federal financial participation is available at the rate of seventy-five percent (75%) in the costs of: (i) Training personnel employed or preparing for employment by the title IV-E agency administering the plan, and; (ii) Providing short-term training (including travel and per diem expenses) to current or prospective foster or adoptive parents[.] Per 45 CFR § 1356.60(c), Federal financial participation is 50% for administrative expenditures. The Public Assistance Cost Allocation Plan (PACAP) has the following description for the Protection and Safety New Worker Training 75% cost center: This cost center contains training costs for CFSS staff during their training period of the first six months of service. There are approximately 70 trainees in the Children and Family Services Training Program at any one time. The cost center also includes the interagency agreement with the University of Nebraska to manage and deliver the training program. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State accounting system to ensure that amounts charged to the Federal programs are proper. Condition: The Agency incorrectly charged payroll costs to the Protection and Safety New Worker Training 75% cost center. Repeat Finding: No Questioned Costs: $3,304,598 known ($650,976, 2401NEFOST; $2,653,622, 2501NEFOST) Statistical Sample: No Context: During testing of Foster Care payroll, we noted that 337 employees were included in the Protection and Safety New Worker Training 75% cost center, which is 267 more than what was included in the cost center description within the PACAP of 70 workers. After further review, we noted that 296 employees were incorrectly coded to the Protection and Safety New Worker Training 75% cost center, resulting in $3,304,598 in Federal questioned costs. Cause: The Agency was not timely updating employees’ coding within its payroll system when a Child and Family Service Specialist (CFSS) Trainee was promoted. Effect: When the payroll system is not timely and correctly updated when employees’ job changes, there is an increased risk of Federal programs being charged incorrectly. Recommendation: We recommend the Agency strengthen procedures to ensure payroll is recorded properly. Management Response: The Agency agrees with the finding.

Program: AL 93.658 – Foster Care Title IV-E – Allowable Costs/Cost Principles Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. Per 45 CFR § 75.303 (October 1, 2024): 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. Per the Public Assistance Cost Allocation Plan’s (PACAP) RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the PACAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Additionally, for two quarters tested, we noted that the number of RMTS surveys generated and validated were not in compliance with the PACAP. Repeat Finding: 2024-040 Questioned Costs: $29,201 known ($16,314, 2401NEFOST; $12,887, 2501NEFOST) Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 validated RMTS surveys and noted that inadequate documentation was provided on 13 surveys. For 9 of 16 surveys tested, the workers erroneously reported that they were working on a Foster Care IV-E case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. For one of six surveys tested, the worker erroneously reported he was working on an Alternative Response case when the survey should have been reported as Child Protection Initial Assessment. For 3 of 12 surveys tested, the worker erroneously reported working on a Child Protection Initial Assessment. • For one moment, the worker was conducting a family team meeting for a Foster Care Non IV-E case. The worker incorrectly reported that he was working on an Initial Assessment. • For one moment, the worker gave a response to the RMTS survey; however, we were unable to find what case she was working on. The Agency was unable to determine if coding to Child Protection Initial Assessment was correct. • For another moment, the worker responded that she was preparing for a training on the Child And Family Services Review (CFSR), which is not related to the Child Protection Initial Assessment. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below: See Schedule of Findings and Questioned Costs for chart/table. According to the PACAP, 2,761 RMTS surveys are generated per quarter for each cost pool (SSW and Children Family Services Specialists (CFSS)) for a total of 5,522 moments. Additionally, 10% of all RMTS surveys generated are selected at random to participate in a subsample. The subsamples are validated by the worker’s supervisor. We selected the quarters ended September 2024 and March 2025 for testing. We noted the number of RMTS surveys generated were not in compliance with the PACAP as follows: See Schedule of Findings and Questioned Costs for chart/table. There were 552 RMTS subsamples for each quarter tested for a total of 1,104. This does agree to the subsample requirement in the PACAP. However, only 500 of the RMTS subsample surveys were validated, leaving 604 moments not validated. Due to the low number of subsample moments validated, we were unable to complete testing of supervisors validating the subsample moments and it was determined to be an ineffective control. The Agency noted supervisors should be trained in the completion of the RMTS form, validation process, and the importance of accurate and timely validation response. We asked the Agency for documentation to support that supervisors had been trained in the RMTS process. The Project Analyst provided training compliance reports for both economic assistance and protection and safety employees. The training compliance report for economic assistance for the fiscal year included 83 supervisors with 37 who completed the training for a 44.6% completion rate. The training compliance report for protection and safety workers for the fiscal year included 172 supervisors with 100 supervisors who completed the training, a 58.1% completion rate. Due to the low percentage of supervisors completing the training, this was determined to be an ineffective control of the RMTS process as well. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. The Agency did not have adequate documentation of supervisor training on the RMTS survey process. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. We also recommend supervisor training is completed and adequately documented. Management Response: The Agency agrees with the finding that system-generated subsample moments were not adequately validated. It should be noted, however, that the required number of surveys were validated, just not as the system was intended to be used via the subsample generation process.

Program: AL 93.575 – Child Care and Development Block Grant – Allowable Costs/Cost Principles Grant Number & Year: 2301NECCDD; FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 45 CFR § 75.303 (October 1, 2024) states, in relevant part, the following: 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. Title 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: One of 25 operating expenditures tested was not properly charged to the Federal grant. Repeat Finding: No Questioned Costs: $1,358 known Statistical Sample: No Context: We randomly selected 25 operating expenditures paid with Federal funds. One of the expenditures tested was charged to the incorrect program. That $1,358 expenditure was for computer equipment and was charged to the Child Care and Development Block Grant (Child Care). However, the employees who benefited from the computer equipment worked in the Developmental Disabilities Division. Therefore, the Child Care block grant was incorrectly charged. The total Federal sample tested for Child Care was $11,351, and total Federal operating expenditures for Child Care during the fiscal year totaled $2,597,660. Based on the sample tested, the dollar error rate for the sample was 11.96% ($1,358/$11,351), which estimates the potential dollars at risk for fiscal year 2025 to be $310,680 (dollar error rate multiplied by the population). Cause: Employee error. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Subrecipient Monitoring Grant Number & Year: 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2024) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. Per 45 CFR § 75.431(c) (October 1, 2024): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Good internal control requires procedures to ensure Federal requirements are met. Condition: The Agency’s subrecipient monitoring procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-041 Questioned Costs: None Statistical Sample: No Context: The Agency paid $30,643,635 to 31 TANF subrecipients during the fiscal year. We tested the desk review the Agency completed during the fiscal year for one subrecipient and noted the following: • The subrecipient tested is a child advocacy center (CAC). The Agency stated it allows CACs to charge expenses to TANF up to the percentage of TANF-eligible clients the CACs serve in a month. The subrecipient tested reported that 90.38% of the clients it served for the month tested were TANF eligible. However, during its desk review, the Agency did not view support for this percentage to ensure it was proper and adequately supported. • The Agency did not require the subrecipient to charge benefits to TANF consistently. The subrecipient charged 80% of the salaries and wages for four employees to TANF and 63% of the salaries and wages of the other two employees to TANF. The subrecipient charged FICA and retirement benefit costs to TANF individually by employee based on these percentages. Thus, the subrecipient charged 80% of these costs to TANF for four employees and 63% of these costs to TANF for two employees. However, the subrecipient charged 80% of its insurance (health, dental, and vision) benefit expenses for all employees to TANF. This included the two employees whose wages and other benefits were charged to TANF at 63%. We also selected two subrecipients for testing that would have required a Single audit based on the amount of TANF funds received from the Agency during the subrecipients’ previous fiscal years. One of the subrecipients received $1,871,251 in TANF funds during the subrecipient’s fiscal year 2024. The subrecipient should have submitted a Single audit for fiscal year 2024 by March 31, 2025. However, it had not submitted the report at the time of fieldwork on December 12, 2025, and the Agency had not followed up with the subrecipient. Cause: Inadequate review procedures. Effect: Noncompliance with Federal regulations and an increased risk for fraud or errors to occur. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure compliance with Federal regulations. We further recommend the Agency strengthen procedures to ensure subrecipient audits are obtained and reviewed timely. Management Response: The Agency partially agrees. The Agency disagrees with the second bullet point. We agree that the subrecipient is not charging benefits to TANF consistently. However, they are charging less than they potentially could. As long as the provider is not over charging the grant, we do not see any need to force the provider to charge more. APA Response: Fringe benefits should be charged to Federal awards consistent with how salaries and wages are charged to the Federal program per 45 CFR § 75.431(c). Had the subrecipient tested charged insurance benefits expenses consistent with how the salaries and benefits were charged to the program, it would have charged less – not more – to the program.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2401NERCMA, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): 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. 45 CFR § 400.2 (October 1, 2024) defines “refugee medical assistance” (RMA) as “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program . . . .” Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance, published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Good internal control requires procedures to ensure eligibility is correctly determined, and benefits end when the period of eligibility expires. Condition: For 5 of 35 Refugee Resettlement Program (RRP) assistance payments tested, the payments were noncompliant with Federal and State regulations. A similar finding was noted in the prior audit. Repeat Finding: 2024-042 Questioned Costs: $3,663 known Statistical Sample: No Context: The RRP helps refugees and other eligible newcomers achieve economic self-sufficiency, well-being, and successful integration in the United States. The RRP provides both aid payments directly to individuals who are deemed eligible for cash assistance (RCA) and medical assistance (RMA) through the managed care program. We randomly tested 35 aid payments: 20 to individuals who received RCA payments and 15 for RMA payments. We noted the following: • Three of 15 RMA recipients tested appeared to have been eligible for Medicaid; however, their monthly capitation payments were paid by RRP. As a result, we question costs of $2,198. • Two recipients tested received RMA benefits after their 12-month eligibility period had ended, resulting in additional questioned costs of $1,465. We did note during testing that the Agency had identified some of the capitation payments were incorrectly charged to RRP; however, the Agency had not corrected these payments at the time of fieldwork. RMA aid expenditures for the fiscal year totaled $1,123,609. The Federal RMA sample tested was $3,663, and Federal payment errors noted for the random sample tested were $732. The dollar error rate for the sample was 19.98% ($732/$3,663), which estimates the potential dollars at risk for fiscal year 2025 to be $224,497 (dollar error rate multiplied by the population). In addition to the $732 Federal questioned costs noted in the sample items tested, we noted $2,931 of Federal questioned costs on other RMA payments on behalf of these recipients. Cause: The Agency incorrectly enrolled refugees under the RMA program, when the refugees were eligible for Medicaid and incorrectly set the eligibility end dates within its case management system. Effect: Increased risk of loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure RMA recipients are eligible, and benefits are discontinued when the period of eligibility expires. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Subrecipient Monitoring Grant Number & Year: Various, including 2401NERSSS, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2024) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2024) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. * * * * (x)(3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 45 CFR § 75.431(c) (October 1, 2024) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. A good internal control plan requires procedures to ensure subrecipient expenditures are properly documented in accordance with Federal regulations, and payments apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-043 Questioned Costs: Unknown Statistical Sample: No Context: The Agency paid 13 subrecipients a total of $5,316,302 during the fiscal year ended June 30, 2025, for the program. Subrecipient reimbursement requests were submitted quarterly with a summarized invoice of costs incurred and the general ledger. The Agency reviewed the quarterly invoices and general ledger to ensure submitted expenditures were consistent with the approved budget. In addition, the Agency performed quarterly desk audits where it selected lines of expenses to obtain the underlying support from the subrecipient. Depending on the timing and the time period reviewed, the Agency’s procedures required it to select 10% or 40% of expenditures for the quarterly desk audit. We randomly selected three subrecipients for testing and requested documentation of the desk audits performed by the Agency for the three subrecipients. We noted the following: • Subrecipient One: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $176,958, and the Agency selected 81.6% of the expenditures for review, which is more than what the Agency’s policies required. We noted that the Agency obtained timesheets for all employees to support the allocation percentage; however, the Agency did not obtain other records, such as pay stubs, to support that the correct percentage of wages was charged to the grant for the employees tested. The Agency also reviewed two fringe benefits expenses, totaling $17,928, but it does not appear the Agency received documentation to determine that the amounts charged were correct. • Subrecipient Two: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $70,779. The Agency selected just over 40% of the expenses to test. We noted that, for five employees the Agency selected, the timesheets provided did not specify the cost objectives the employee worked. One of these employees had his wages split 50% between the Refugee grant and another Federal award, but there was no documentation to support this was the correct allocation. Additionally, the Agency reviewed the fringe benefits charged to the grant; however, no documentation was obtained to ensure the amount of fringe benefits charged was correct. The Agency identified noncompliance for inadequate timesheets, but there was nothing documented on how the Agency followed up to resolve the noncompliance. • Subrecipient Three: The Agency completed a desk audit for the quarter ended March 31, 2025. The expenses for the quarter totaled $87,047. The Agency selected over 40% of the expenses to test; however, the Agency did not review fringe benefits, which were for 21% of the expenses. We also noted that, for nine hourly employees, no timesheets were provided to support the number of hours worked. The Agency had identified the lack of timesheets as noncompliance, but it was unclear how the Agency followed up on this noncompliance. Cause: There appears to be adequate written procedures; however, documentation of how the Agency completed its reviews and follow-up of noncompliance was inadequate. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Subrecipient monitoring procedures could be improved by documenting what steps were taken when noncompliance issues were noted and how they were resolved. Procedures could also be improved by obtaining all needed source documentation to support payroll and benefit charges. This may include timesheets, paystubs, payroll registers, benefit documentation, and other financial records. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.991 – Preventative Health and Health Services Block Grant – Allowability & Subrecipient Monitoring Grant Number & Year: 2301NERSSS, FFY 2023; NB01TO000039, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2024) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.403(f) (October 1, 2024), states that costs should “[n]ot be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period.” 45 CFR § 75.405(a)(1) (October 1, 2024) requires costs to be incurred specifically for the Federal award in order to be considered an allowable cost. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities. . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. A proper system of internal controls requires procedures to ensure subrecipients are following subaward terms and Federal regulations, including ensuring costs are adequately supported, reasonable, necessary, allowable, and not included as a cost of any other federally financed program. Condition: We performed an attestation of the Nebraska Department of Health and Human Services’ payments to The Karen Society of Nebraska (KSN) for the period July 1, 2023, through December 31, 2024. KSN was a subrecipient of the Agency. We noted the Agency’s monitoring procedures of the subrecipient were inadequate. A similar finding was noted in the prior audit. Repeat Finding: 2024-043 Questioned Costs: $55,880 known ($35,880, 2301NERSSS; $20,000, NB01TO000039) Statistical Sample: No Context: We performed an attestation examination of the Nebraska Department of Health and Human Services’ payments to KSN for the period July 1, 2023, through December 31, 2024. During the period July 1, 2024, through December 31, 2024, the Agency paid $55,880 to KSN through subawards funded by the following Federal programs: See Schedule of Findings and Questioned Costs for chart/table. We reviewed the payments made with Federal funds and noted numerous issues with Federal questioned costs, totaling $55,880. We noted the following related to payments made with Federal funds: Unallowable Expenditures Unsupported Personnel Costs The subrecipient payments to KSN for the Refugee and Entrant Assistance State/Replacement Designee Administered Programs (Refugee) and Preventive Health and Health Services Block Grant (PHHS) Subawards included reimbursements for personnel costs, totaling $46,656, during the period July 1, 2024, through December 31, 2024. KSN provided timesheets to support these costs, which included dates, start and end times worked, and employees’ names and signatures. KSN also provided pictures of checks written to individuals for the personnel costs and stated that they were contractors and not employees. However, KSN could provide neither contractual agreements nor any other documentation that described the services provided by the individuals, dates or estimates of time required to complete the services, or rates of compensation. In addition, the timesheets provided did not contain detailed information on which of the Subawards the individuals worked on and instead listed only brief descriptions, such as “Health Promotion” or “Meeting.” As a result, we were unable to determine how many hours the individuals worked on each of the Subawards, if any. Additionally, one of the proclaimed contractors, identified on documentation submitted to the Agency for both subawards as the “Coordinator” was also the Executive Director of KSN. The Executive Director received a monthly salary, was an authorized signer on the KSN checking accounts, and performed other regular duties on behalf of KSN. As an employee, the Executive Director was required to keep time records in accordance with 45 CFR § 75.430(i)(1), including records that reflect the total activity for which he was compensated, and supported the distribution of his wages among the activities and Subawards he worked on. However, the time records submitted to the Agency for reimbursement reflected only the hours, dates, and times he worked on a single Subaward. Due to the issues noted above, we questioned all personnel costs paid to KSN by the Agency during the period July 1, 2024, through December 31, 2024. Printing and Cleaning Supplies The Agency reimbursed KSN $4,735 for printing and cleaning supplies during the period July 1, 2024, through December 31, 2024. We questioned all $4,735 of these costs, as the costs were charged to multiple grant awards, incurred at the end of the period of performance, inadequately supported, or did not appear reasonable and necessary. • Costs Charged to Multiple Grant Awards In addition to the PHHS and Refugee Subawards awarded by the Agency to KSN, we noted that Lancaster County (County) paid American Rescue Plan Act (ARPA) grant funds to KSN for the purpose of providing “funding for video equipment, contractual services costs, and administration costs to help with prevention and educational presentations” during the period July 1, 2024, through December 31, 2024. However, we noted several printing supplies that were charged to multiple grant awards, including the PHHS Subaward, Refugee Subaward, and the County ARPA grant award, as shown in the table below. We questioned the entire amount paid to KSN by the Agency, totaling $2,221. See Schedule of Findings and Questioned Costs for chart/table. • Costs Incurred at the End of the Period of Performance We also noted that KSN ordered a printer, printer ink, and a printer carrying case on September 28, 2024, for $413. These costs were reimbursed by the Agency as part of the PHHS Subaward on October 24, 2024. However, the period of performance for the subaward ended on September 30, 2024, only two days after the purchase was ordered. It appears unlikely that this purchase was incurred for the Federal award and, therefore, would be unallowable per 42 CFR § 75.405(a)(1). We questioned the entire $413 purchase. • Inadequately Supported Costs On August 2, 2024, the Agency reimbursed KSN $1,412 for cleaning supplies as part of the Refugee Subaward, which included $461 of supplies ordered on July 10, 2024. However, KSN failed to provide detailed support showing what was purchased for $75 of the total order amount, so we questioned these unsupported costs. • Unreasonable and Unnecessary Costs Further, KSN had three separate office locations in Lincoln, Omaha, and Madison, Nebraska. Cleaning supplies were authorized for reimbursement by the Agency as part of the Refugee Subaward for use at the training sessions held at the locations. However, we noted $1,965 of the reimbursed cleaning supply costs did not appear reasonable based on the number of locations and the number of supplies ordered, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted $61 of supplies, shown in the table below, which were reimbursed by the Agency for the Refugee Subaward, appeared to be for personal use, as the purchases were for vehicle cleaning supplies. Further, these vehicle cleaning supplies did not appear reasonable based on the purpose of the Subaward, which was to provide refugee-related services. Therefore, we questioned these reimbursed costs. See Schedule of Findings and Questioned Costs for chart/table. Translation Costs The PHHS Subaward stated that, as part of the award, KSN would translate a total of 12 health information booklets to be distributed in print. At the time of reimbursement, KSN provided lists which showed a total of 46 translations to substantiate the reimbursed costs. These lists included only a description of the translation and the number of words translated. The Agency did not obtain or request support for the costs, including copies of the translated material, before reimbursing KSN a total of $1,684; therefore, we questioned the total amount reimbursed. Additionally, for 2 of the 46 translations, we found discrepancies between the number of words on the translations found online, compared to the number of words KSN was reimbursed for, as shown in the table below. Further, the translation titled “Prepare for a hurricane or tropical storm” did not appear to be a reasonable or necessary cost for refugees living in Nebraska. See Schedule of Findings and Questioned Costs for chart/table. Travel and Training Costs KSN was reimbursed $1,805, from both the Refugee and PHHS Subawards, for travel costs during the period July 1, 2024, through December 31, 2024. Based on the documentation provided, the reimbursed travel costs were often for trips taken to locations other than the three KSN offices, and the purpose of the travel was listed as “Health Promotion.” No other documentation was provided to support that the reimbursed travel costs were reasonable, necessary, or allocable to the Subawards, so we questioned the $1,805 of payments from the Agency. We also noted the travel costs included mileage reimbursements for trips taken by individuals on days when they had no hours recorded on their timesheets to the Subawards. KSN was also reimbursed a total of $1,000 from the Agency as part of the PHHS Subaward for costs associated with training students in five face-to-face classes. The supporting documentation provided for these costs consisted solely of timesheets signed by the trainer. No other documentation, such as sign-in sheets signed by attendees, was offered to verify that any students attended the classes. Therefore, we question the $1,000 included in reimbursement from the Agency. Payments to the Executive Director The Executive Director of KSN worked as the coordinator for both the Refugee and PHHS Subawards and was reimbursed by the Agency for his services during the period July 1, 2023, through December 31, 2024. During this time, he also received a salary of $1,675 per month from KSN. Further, we discovered that the Executive Director of KSN had full-time employment with a private firm during the fiscal year. We obtained timesheets from the firm and compared the hours worked to those reimbursed by the Agency. As a result of this comparison, we noted 1,308 hours worked at the firm, totaling $23,544, were also reimbursed by the Agency. We summarized the overlapping hours below, along with the amounts reimbursed for those hours. See Schedule of Findings and Questioned Costs for chart/table. While we might not expect the Agency to be aware of outside employment of subrecipients, the Agency is required by 45 CFR § 75.302(b)(4) (October 1, 2024) to adequately safeguard all assets and ensure that they are used solely for authorized purposes. The Agency should have required KSN to provide additional documentation to support what services were actually performed by the Executive Director in relation to each Subaward, as required per 45 CFR § 75.430(i)(1). Had this documentation been requested, it is likely the Agency may have noticed the discrepancies in the timesheets and could have denied payments. While the Executive Director acknowledged that KSN’s record keeping could be improved, we consider this beyond the scope of poor record keeping. The timesheets provided to the Agency appear to have been falsified, as the Executive Director could not have been working full-time at a private firm while also performing duties for the Refugee and PHHS Subawards. Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure that they are adequate and timely performed to ensure both the allowability of costs and adherence to Federal regulations and subaward agreements, including ensuring there is proper coordination between the Agency’s divisions when multiple subawards are awarded to the same subrecipient. We also recommend the Agency review these findings to determine if any sanctions against KSN are warranted, and the repayment of funds is necessary. Management Response: The Agency agrees. DHHS acknowledges the finding related to deficiencies in subrecipient monitoring and documentation oversight identified during the audit period. DHHS agrees that, for the period reviewed, documentation obtained from the subrecipient was insufficient to fully demonstrate allowability, allocability, and reasonableness of certain costs in accordance with federal requirements. Since the period of performance under review, DHHS has taken steps to strengthen subrecipient monitoring practices and improve front-end documentation requirements to ensure that costs are adequately supported prior to reimbursement. These actions are intended to reduce the risk of unsupported or unallowable costs and to improve consistency and compliance across programs.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Reporting Grant Number & Year: 2401NERSSS, FFY 2024; 2501NERSSS, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 2 CFR § 170, Appendix A 1. (January 1, 2024) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency. . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. . . . Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same section states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of eight subawards tested. An additional four subawards were not submitted timely, and one of those subawards noted an incorrect date. A similar finding was noted in the prior audit. Repeat Finding: 2024-044 Questioned Costs: None Statistical Sample: No Context: According to the Agency’s Subaward tracking spreadsheet, there were 14 subawards/amendments obligated during the fiscal year ended June 30, 2025. We tested eight of those subawards obligated to three subrecipients. One of those subawards was not reported as of February 4, 2026. The subaward should have been reported by May 31, 2025. Additionally, four subawards were not submitted timely. Two subawards were 25 days late, and the other two were 156 days late. One subaward amendment submitted 25 days late incorrectly reported that the subaward amendment was signed on July 21, 2024, but the subaward amendment was signed on April 28, 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate controls, there is an increased risk that subawards will not be reported timely and correctly. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance – Reporting Grant Number & Year: Various, including 2401NELIEA, FFY24, and 2501NELIEA, FFY25 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 96.30(a) (October 1, 2024) states, in relevant part, the following: Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. Good internal control requires procedures to ensure that all Federal reports contain complete and accurate information. Condition: The State lacked procedures to ensure that Federally required reports contained complete and accurate information. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: During our testing of Federally required annual and quarterly LIHEAP reports submitted for the fiscal year ended June 30, 2025, we noted the following: Annual Carryover Report On the annual carryover report, the State is required to report the amount of LIHEAP funds unobligated at the end of year one of the grant. Based on the amount of unobligated funds, the State then reports the amount of funds allowable for carryover into year two and the amount of unobligated funds that are to be returned to the Federal government. During our review of the September 30, 2024, carryover report submitted for grant 2401NELIEA, we observed the following variances between the amount reported and underlying accounting records. See Schedule of Findings and Questioned Costs for chart/table. The variance above was due to the Agency incorrectly assessing the effects of correcting journal entries made after September 30, 2024. In determining the amount of unobligated funds, the Agency used the projected amount of the correcting journal entries rather than the actual amount of the journal entries that were made. Annual Performance Data Report Following the end of each Federal fiscal year, the State is to report the estimated uses of LIHEAP funds and the average household benefit by type of LIHEAP assistance provided. We observed numerous errors in the annual performance data report submitted for Federal fiscal year 2024, as summarized in the tables below. The inaccurate reporting was the result of the Agency inaccurately compiling the data used to determine the amount of unobligated funds and inconsistently reporting administrative and planning costs. Further, due to the method used to estimate uses of LIHEAP funds, the errors in the unobligated, administrative, and planning costs were pulled through to the other report fields, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted that the average household benefits reported by the Agency did not agree to the underlying documentation on file. The reported amounts agreed to neither the amount calculated by the Agency, which failed to update the reported amounts properly, nor the amount we calculated due to the errors noted above. See Schedule of Findings and Questioned Costs for chart/table. Lastly, we noted that the Agency reported an average heating assistance benefit of $514/household using infrastructure act funds. However, the Agency could not provide documentation to support how this amount was calculated. The Agency subsequently informed us that the funds were used for supplemental payments, which were set at $143/household, resulting in an overstatement of $371/household. Quarterly Performance Reports All LIHEAP recipients are required to submit quarterly performance data, including the number of households assisted during the quarter, cumulative obligations, and program implementation detail. We tested the reports submitted for the quarters ended September 30, 2024, and June 30, 2025. During testing of these two quarterly reports, we noted the following: Number of Households Assisted & Cumulative Obligations During our review, we noted variances in the amounts reported for the number of assisted households and cumulative obligations, as detailed in the table below. See Schedule of Findings and Questioned Costs for chart/table. For both reports, we noted the following errors when the Agency compiled the household data: 1) improperly reporting applicant-only households as assisted households; 2) errors in the reporting logic of the Agency’s LIHEAP system; 3) households being counted multiple times; and 4) households being reported in the wrong quarter. Additionally, we noted that the amount of obligations reported was inconsistent with the carryover report submitted for September 30, 2024, and was overstated when compared to the amount of unobligated funds reported on the carryover report. Program Implementation and Support Information On the report submitted for the quarter ended September 30, 2024, the Agency reported that the State had increased the number of unduplicated households served by over 3,951 households. The Agency could not provide support for how this amount was determined and reported to us that the number of households served had actually decreased during the year. Cause: 1) Inadequate review of grant activity to ensure the obligations were determined properly; 2) logic errors in system reports; and 3) inadequate procedures to ensure data was not duplicated for reporting purposes. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency review its procedures, making necessary updates to ensure that obligations and household assistance data is reported in accordance with reporting requirements. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance – Reporting Grant Number & Year: 2401NELIEA, FFY24, 2501NELIEA, FFY25 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted both timely and accurately. Condition: FFATA reporting was not submitted timely for four of four subawards/amendments tested, and the amount of the subaward/amendment reported was inaccurate for two of four subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 16 subawards obligated during the fiscal year ended June 30, 2025. We tested four of those subawards. Two of the subawards had incorrect subaward amounts reported, and four of the subawards were not submitted timely, ranging from 55 to 196 days late. Additionally, we noted that the reported action date for two of the four subawards tested was inaccurate. In one instance, the action date was reported as June 7, 2024; however, the subaward was issued on July 11, 2024. In the other instance, the action date was reported as January 13, 2025; however, the subaward was not issued until February 20, 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that subawards are reported timely and accurately. Effect: Increased risk of noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that subawards are reported timely and accurately. Management Response: The Agency agrees.

Program: AL 93.569 – Community Services Block Grant – Subrecipient Monitoring Grant Number & Year: Various, including 2501NECOSR, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2024) requires a pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 45 CFR § 75.405(a) (October 1, 2024) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. 45 CFR § 75.430(i)(1) (October 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Per 45 CFR § 75.431(c) (October 1, 2024): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Good internal control requires procedures to ensure that Federal requirements are met. Condition: The Agency’s subrecipient monitoring procedures for reviewing expenditure reports can be improved upon. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency required Community Services Block Grant (CSBG) subrecipients to submit monthly and quarterly expenditure reports. The Agency reimbursed the subrecipients monthly after reviewing and approving the monthly expenditure reports. The Agency did not require the subrecipients to provide detailed supporting documentation for expenses claimed on the monthly expenditure reports. However, the Agency did require the subrecipients to submit line-item detail of all expenses reflected on the quarterly expenditure reports. From the line-item detail provided, the Agency selected expenses to review and requested the subrecipients to provide detailed supporting documentation for these expenses. We reviewed two quarterly expenditure report reviews the Agency completed, each for a different subrecipient, during the fiscal year. We noted the following: • The Agency selected one employee’s salaries and wages to test for each subrecipient. The Agency did not obtain adequate supporting documentation for salaries and wages that both subrecipients charged to the program. o For the first subrecipient, the employee tested was paid $3,947 in salaries and wages for work during the quarter, and the subrecipient charged this entire amount to the CSBG program. However, per the employee’s timesheet, the employee’s time was coded to a non-CSBG program. The subrecipient recorded a journal entry to move the employee’s wages to the CSBG program. The Agency did not follow up with the subrecipient for an explanation for why the wages were transferred. o The second subrecipient charged $2,974 in salaries and wages to the CSBG program for the employee tested. While the Agency obtained timesheets and paystubs for support, the amount charged did not agree directly to the support, and the Agency could not explain how the amount charged was determined from the support. • For the first subrecipient, the personnel expenses claimed included $25,159 in other benefits (over 23% of the subrecipient’s expenses for the quarter), which included accrued leave and “other fringe benefits.” The Agency obtained detail from the subrecipient’s accounting system to support this amount but did not review detailed support (such as paystubs or leave records) for this amount to verify the subrecipient properly charged the benefits to CSBG in accordance with benefits received. • For both subrecipients, the Agency did not document how it determined the non-personnel expenditures were charged to the CSBG program in accordance with benefits received. Following APA inquiry, the Agency provided explanations for how it determined some (but not all) of the expenses were proper. • For the first subrecipient, the Agency did not obtain adequate underlying supporting documentation for two expenses, totaling $230. The Agency obtained internal records from the subrecipient but did not obtain vendor invoices. Cause: Inadequate review procedures. Effect: Noncompliance with Federal regulations and an increased risk for the occurrence of fraud or errors. Recommendation: We recommend the Agency strengthen its subrecipient monitoring procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility & Matching Grant Number & Year: 2401NETANF, FFY 2024; 2301NECCDD, FFY 2023; 2401NECCDD, FFY 2024; 2401NECCDF, FFY 2024; 2501NECCDM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2024) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. 42 USC § 9858k(b) (1992) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for– (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.55 (October 1, 2024) states, in relevant part, the following: (a) Federal matching funds are available for expenditures in a State based upon the formula at § 98.63(a). (b) Expenditures in a State under paragraph (a) of this section will be matched at the Federal medical assistance rate for the applicable fiscal year for allowable activities, as described in the approved State Plan, that meet the goals and purposes of the Act. To be eligible for services, 45 CFR § 98.20 (October 1, 2024) requires a child to be under 13 years of age, a citizen, and reside with a family whose income does not exceed 85% of the State’s median income. Title 392 NAC 3-001.02(D) requires the recipient and child care provider to ensure that the services are delivered as authorized. Title 392 NAC 3-004.01 states the following: A provider must establish a private pay rate before being approved as an enrolled provider. Child Care Subsidy payments to a provider will not exceed the private pay rate. Title 392 NAC 3-004.01(A) states the following: The Department pays by attendance, not enrollment. Providers do not receive payment when the provider is on vacation, is ill, or is not providing care for some reason unrelated to the child or recipient. Title 392 NAC 4-002 states, in relevant part, the following: Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; * * * *   (E) To accept a rate which is reasonable, necessary, and does not exceed the amount charged to private-paying persons; * * * * (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.] The Child Care Subsidy Provider Handbook (June 2023 revision), Section 5 (“Financial Matters”), states, in relevant part, the following: You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided. You should mark “A” on the calendars for children who are absent. Up to five absent days can be billed per child per month. Nebraska Department of Health and Human Services’ Guidance Document for the Child Care Subsidy Program has the following guidance for Title 392 NAC Chapter 2-011, Categories of Eligibility Based on Income: The total amount of the sliding fee assessed will be based on 7% of the household’s gross income for all of their children enrolled in the subsidy program. It will not vary with the number of children in care, the amount of care they need, or the type of care they choose to use. The sliding fee must be paid each month to the provider before the provider bills the Department, it covers the first dollars of payment, regardless of when service begins or ends. The Child Care Subsidy Provider Handbook (June 2023 revision) requires that, for providers other than child care centers, “[P]arents/caregivers must sign the calendar at the end of the billing period.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2024-045 Questioned Costs: $27,326 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support, did not agree to support, or billed more than authorized, as detailed below. Federal Random Sample We tested 25 child care claims paid with Federal funds. We noted seven claims with errors. Some payments had more than one type of error. • For one claim tested, the household’s income was not calculated correctly, which resulted in the family fee co-pay being incorrectly calculated. The Agency originally calculated the household’s income to be less than 100% of the Federal Poverty Level, and a family fee co-pay was not assessed. However, the household’s income was understated by $2,077, and a family fee co-pay of $315 should have been assessed. • For one claim tested, the rate the provider charged was more than the provider’s private rate. The provider charged $41.40/day, but the provider’s private rate was only $28/day. Additionally, the provider charged $28.70/partial day, but using an Agency-provided conversion table, the partial rate charged should only have been $15.56/partial day. • For five claims tested, the providers billed for more days than what was recorded on the child’s attendance sheet: o One provider improperly billed the Agency for the wrong sibling. o One provider billed for 21 days of child care in a month; however, the attendance calendar only reported 20 days of child care in the month. o One provider billed for 7 full days and 12 partial days of child care in a month; however, the attendance calendar only reported 2 full days and 12 partial days of child care in the month. o For two claims tested, the attendance records were not provided. • For one claim tested, the attendance record was not signed by the parent, as required for providers other than child care centers. Federal payment errors noted for the sample tested were $2,679. The total Federal sample tested was $12,979, and total child care Federal assistance claims for the fiscal year were $85,359,477. Based on the sample tested, the case error rate was 28% (7/25). The dollar error rate for the sample was 20.64% ($2,679/$12,979), which estimates the potential dollars at risk for fiscal year 2025 to be $17,618,196 (dollar error rate multiplied by the population). In addition to the $2,679 in questioned costs noted on the sample items tested, we noted $446 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation. Excessive Units The Nebraska Family Online Client User System (NFOCUS) application was used to automate benefit/service delivery and claim processing and payments for the Child Care program. Due to the volume of claims processed by the NFOCUS application, the Agency did not perform a review of each claim paid. Therefore, the Agency relied on edit checks within the system to review claims and deny or suspend claims that did not meet the criteria determined by the Agency. In the prior year audit, on Finding 2024-015, we noted that the “UN” edit check (“Units too high for service dates and frequency”) was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal, which appears to have been properly corrected in January 2025. However, the Agency posted several journal entries to charge the Federal child care grants during fiscal year 2025 for claims that occurred prior to January 2025. Therefore, numerous claims charged to the Federal child care grants during fiscal year 2025 did not have the “UN” edit check properly applied to them. We identified 865 lines paid with Federal funds, totaling $368,795, where the number of days or partial days billed exceeded the number of days in the service period. We selected 24 claim lines, totaling $33,870, for review and noted 16 claim lines with errors as follows: • The claims charged to Federal funds were “Version 1” of the claim. Sometimes an error is detected, and a “Version 2” of the claim is created with an underpayment or overpayment. We noted that 12 of the claim lines tested had a Version 2 where overpayments were created. However, the overpayments collected and recouped are credited to the State General Fund, not Federal funds. The 12 claim lines totaled $17,256 and are considered Federal questioned costs. Errors noted included two claim lines that billed 120 partial days for a 28-day period. The errors were discovered, and a Version 2 was created on January 18, 2025, but on January 30, 2025, the Agency moved the Version 1 claim to Federal funds, resulting in the Federal grant being overcharged. • Four claim lines did not agree to the attendance records, resulting in Federal questioned costs of $6,945. o One provider billed 37 partial days and 13 days for one month, when the attendance record only supported 19 days. o Another provider billed 58 partial days and 10 days for a 15-day period. The attendance record only supported 10 days. o A third provider billed 168 partial days in a 29-day period, which is not feasible. The attendance record only supported 12 partial days. o The last provider did not provide the attendance record. The provider billed 37 partial days and 15 days for one month. State Matching Claims States are required to match the Federal funds spent with the Federal Matching grant with State funded expenditures at the Federal Medical Assistance Percentage (FMAP) rate for the applicable fiscal year. Those State funding expenditures must be an eligible and allowable activity per the State Plan. The Agency periodically performs journal entries to move child care claims to the applicable business unit to identify and track the State matching expenditures. During the fiscal year, the Agency moved $10,560,322 of child care claims paid with State General funds to the business units for State matching expenditures. We tested 25 child care claims paid with State matching funds. We noted six claims with errors. • For one claim tested, the rate the provider charged was more than provider’s private rate. The provider charged $40/full day and $36/partial day, but the provider’s private rates were only $37/full day and $27/partial day. • For one claim tested, the provider billed for child care over the authorized amount. The provider was authorized 41 hours of child care a week; however, per the attendance sheet, the child received over 46 hours for one week tested. • For four claims tested, the providers billed for more days than what was recorded on the child’s attendance sheet. o One provider billed for 28 full days and 15 partial days, while the attendance sheet reported 27 full days and 0 partial days. o One provider billed for 8 full days and 5 partial days, while the attendance sheet reported 10 full days and 0 partial days. o One provider billed 13 full days and 6 partial days, while the attendance sheet reported 10 full days and 6 partial days. o One provider recorded full days of service from 8:00 a.m. to 5:00 p.m. for nine hours of service each day for the claim tested. The total number of days billed was 21 full days. However, according to the school calendar, school was in session for 15 of the 21 days billed; therefore, it is unreasonable that the provider provided services during the entire time billed. Payment errors noted for the sample tested were $943. The total sample tested was $10,490, and total child care matching claims for the fiscal year were $10,560,322. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate for the sample was 8.99% ($943/$10,490), which estimates the potential dollars at risk for fiscal year 2025 to be $949,373 (dollar error rate multiplied by the population). Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. The edit check “Units too high for service dates and frequency” was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal prior to January 2025. Effect: Ineffective review of claims increases the risk for errors, fraud, and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We also recommend the Agency ensure billing documents agree with attendance sheets. Management Response: The Agency agrees.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2024): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. Per the Federal Notice of Award for 2101NECDC6, “ARP CCDF Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the American Rescue Plan Act (ARPA) grant after the period of performance. A similar finding was noted in the prior audit. Repeat Finding: 2024-047 Questioned Costs: $2,829,758 known Statistical Sample: No Context: ARPA Child Care and Development Fund (CCDF) Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024. Expenditures for the ARPA grant included two journal entries for claims originally paid with State funds from April 2024 through June 15, 2024. The claims were for the service period January 2024 through May 2024, which is after the obligation period. There was no obligation to pay these claims as of September 30, 2023, as services had not been provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency had verbal discussions with the Federal grantor and believed, based on those discussions, that the expenditures were allowable. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency disagrees. Federal Partners approved this process in writing, which was provided to the APA. These costs are allowable and in the federally allowed period for these grants. APA Response: To support its position, the Agency relies upon a cursory email response from its Federal Partners. That generic, one-sentence message lacked the detail necessary to address our finding. Additionally, an almost identical finding in the prior year’s audit required a management decision by the cognizant Federal agency per Title 2 CFR § 200.521(a); however, we have yet to receive it.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability Grant Number & Year: 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2024) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. The Frequently Asked Questions (FAQs) for the Restoration and Enhancement Program (https://dhhs.ne.gov/Documents/NE_DHHS_CCDF_REP%20FAQ%20_Revised_5.1.2024.pdf) includes, in part, the following: The goal of the Restoration and Enhancement Program (REP) is to improve facilities, invest in new equipment, and enhance the quality of child care homes and centers throughout the state of Nebraska. * * * * III. 6. All Restoration and Enhancement Program funds must be spent on or before November 30, 2024. Requests for extensions will be reviewed case by case. * * * * IV. 1. Programs may only need to repay any funds that are not spent on or before November 30, 2024, if the program has not remained open and caring for children for 12 months after the award date, or if the grant funds were spent on items not allowed. Repayment may be required if the applicant provides inaccurate or false information or there are other applicable instances of non-compliance. * * * * IV. 2. Ten percent (10%) of programs who receive Restoration and Enhancement Program grant funds may be audited to ensure the proper use of grant funds and continued program eligibility. All grant recipients are required to keep receipts of the items purchased for 5 (five) years for potential auditing purposes. Repayment may be required if the applicant cannot provide receipts. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure grants to child care providers were spent properly and complied with State and Federal requirements. Repeat Finding: No Questioned Costs: $388,654 known Statistical Sample: No Context: Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided states supplemental discretionary Federal funding to help more families afford child care and to improve the quality of child care for all children. The Restoration and Enhancement Program (REP) utilized this funding to assist licensed child care providers to improve facilities, invest in new equipment, and enhance the quality of child care homes and centers. Funding could be used for minor remodeling and for upgrading child care programs to meet state and local health and safety requirements and also to improve the quality of care to meet accreditation or other quality enhancement programs such as Step up to Quality. During fiscal year 2025, a total of $4,493,424 in grants was paid to 94 eligible child care providers. Providers had until November 30, 2024, to spend the funds. We tested 10 grant payments to child care providers, totaling $688,254. We requested the application, award notification, and supporting documentation for expenditures, including proof of payment such as a cancelled check, bank statement, or credit card receipts. The Agency did not require the child care programs to submit documentation for their purchases, so the Agency had to request the supporting documentation for the expenditures from the child care providers we selected for testing. Six of the 10 grant payments tested did not provide adequate supporting documentation. We noted the following issues: • One child care center was awarded $152,128. The center submitted receipts, totaling $51,451, for allowable expenses. The center provided $131,809 in receipts that did not appear allowable, which included the following: $82,874 in loan payoffs; $43,195 in flooring expenses not approved in the grant agreement; and $5,740 for unknown items. All expenses by the child care center were made after the November 30, 2024, spending deadline; therefore, we questioned the entire $152,128 awarded. • One Family Child Care Home I provider was awarded $23,071. The provider submitted receipts that supported $13,524 in allowable expenses. The remaining $9,547 was not adequately supported, so we questioned the costs. Additional documentation provided was not sufficient to determine if the expense was allowable per the grant agreement. This included several screen shots of toys and other items that appear to be from Amazon, but no prices were listed or other information was missing that was needed to verify the expense was allowable. The grant agreement awarded $20,695 to the provider to install fencing, replace windows, purchase a toilet, and repaint walls with non-toxic paint. The invoice provided for these expenses totaled $21,023 but did not include proof of payment. We requested proof of payment for these expenses, and the provider submitted copies of three handwritten receipts, totaling $13,128, that noted payments were made in cash. We then requested receipts for the remaining $7,895 and asked for bank statements to see if there were large cash withdrawals that corresponded to the large cash payments. The provider did not submit any additional receipts or copies of a bank statement, and she stated that she used cash from her safe for these expenses. She also stated that a new toilet was not installed, but a kid’s toilet set was added to the existing toilet. Pictures were provided to support the installation of the fence, replacement of windows, painting of walls, and kid’s toilet seat. • One child care center was awarded $128,843. The center submitted receipts, totaling $63,749, for allowable expenses. There were two receipts provided that did not appear allowable: a quote for $7,415 for installing a fence with no accompanying proof of payment; and a credit card receipt for $474 that did not include a description of what was purchased. No receipts were provided for the remaining $65,094 grant awarded, and this amount is questioned. • One child care center was awarded $213,945. The center submitted receipts, totaling $211,267, and noted that it had not spent $2,678 of the grant payment. Per a review of the receipts submitted, $144,439 was supported, and $69,506 was not adequately supported and is questioned. The center was awarded $84,985 for external modifications and submitted $138,655 in invoices. The center stated that it underspent money in other categories, so it believed it could use this money towards the external modification category where it installed fencing and turf for the playground. This substitution was not allowed per the grant agreement. Expenses under the External Modification category required a quote, so these additional expenses were not approved and are unallowable. The provider also submitted $4,955 in duplicate receipts and $21,906 in expenses that did not appear allowable for the following reasons: 1) receipts included items noted as unallowable on the Frequently Asked Questions (FAQs) for the REP program; 2) receipts did not include sufficient information to determine whether the expense was allowable; 3) the expense was not approved by the Agency on the application, such as painting, drywall, and electrical work; and 4) no proof of payment was provided for a $2,001 invoice that included labor to build a storage tote rack and to move items in and out of storage, and mileage reimbursement. • One child care center was awarded $84,845. The center submitted receipts, totaling $84,845; however, all items were purchased after the November 30, 2024, spending deadline. Receipts were dated between June 16, 2025, and September 16, 2025. The entire $84,845 grant payment is questioned. • One Family Child Care Home I provider was awarded $14,508. Invoices provided did not support the full amount awarded. We determined only $6,974 of expenses were allowable, resulting in $7,534 in questioned costs. One invoice, totaling $7,750, was for a custom playhouse building and dirt work. We requested proof of payment and pictures of the playhouse. The provider submitted a handwritten receipt for $7,550, which was $200 less than the invoice amount. When asked for a copy of the bank statement, the provider told the Child Care and Development Fund Administrator that her daycare parents pay in cash, and she saved this money to use for the project and did not use the grant money. The provider submitted two pictures of the outside of the playhouse. Per the county gWorks website, it appeared the playhouse was an elevated structure on the property in August 2023, and updates were made to the existing playhouse. It appears a new roof was installed, the existing stairs were removed, and the structure was placed on the ground. No pictures were provided of the inside of the structure, so it is unknown if it is a playhouse. The work appears to have been completed by the provider’s son because the invoice noted that the checks were payable to him. See Schedule of Findings and Questioned Costs for chart/table. Another invoice for $500 was for the assembly of items purchased for the child care center, including two tricycles, three drift bikes, table and chairs, a rock wall climber, and a double tricycle. Payment was due to the provider’s daughter. Again, we asked for proof of payment and were provided with another hand-written receipt. The invoice was dated November 13, 2024, and the receipt was dated October 15, 2025, which raises questions about when the receipt was written. Regardless, it does not appear reasonable for the provider to pay a relative $500 for assembling these items using the grant funds. Federal payment errors noted for the REP sample tested were $388,654. The total sample tested was $688,254, and the total REP payments for the fiscal year were $4,493,424. The REP payment dollar error rate for the sample was 56.48 % ($388,654/$688,254), which estimates the potential dollars at risk for fiscal year 2025 to be $2,537,437 (dollar error rate multiplied by the population). As part of the REP grant monitoring process, the Agency audited 10% of grant payments made to child care providers. There were 122 grant payments, totaling $7,125,998, made during State fiscal year 2024, and 94 grant payments, totaling $4,493,424, made during State fiscal year 2025, for a total of 216 grant payments. The Agency selected 25 grant payments to audit. As of December 9, 2025, four audits were still under review by the Agency. Of the 21 audits completed by the Agency, only 10 of the grant payments passed. The remaining 11 grant payments had various issues. This included expenses after the November 30, 2024, deadline, no receipts or incomplete receipts, items purchased not approved on the application and no quote, quotes not agreeing to invoice vendor or amount, expenses prior to the grant award, and not all funds being spent. Both the Agency’s testing and our random testing identified similar issues with over 52% of grant payments having findings. Therefore, it does not appear that the Agency’s procedures to audit 10% of the payments after the fact was an adequate control. Cause: Inadequate control procedures. The Agency performed audits on only 10% of the subgrants after the fact. Effect: Noncompliance with Federal regulations. Additionally, a lack of adequate supporting documentation increases risk of payments not being made in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure that payments are adequately supported and in accordance with State and Federal requirements. We further recommend the Agency take steps to recover funding that was not spent or was not spent properly. Management Response: The Agency partially agrees. The Restoration and Enhancement Program (REP) frequently asked questions allows for programs to receive an extension to spend funds after November 30, 2024. The program reviewed situations where funds were spent after the spend date and approved based on the provider's justification. The agency has conducted internal audits of child care providers who received grants funded by the American Rescue Plan Act (ARPA). Specific to the REP grant, the program audited approximately 10% (21 child care providers) and after identifying concerns with multiple providers within the initial sample determined an expanded audit was necessary. The Agency is in the process of auditing an additional 50 REP cases and will take appropriate action on any findings from the cases under review. APA Response: The provider’s justifications and the Agency’s approval for spending funds after November 30, 2024, were not provided to us. Additionally, the period of performance ended on September 30, 2024, which raises the question of whether it is appropriate to allow providers extensions to spend the funds.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2501NECCDF, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2024), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] 391 NAC 1-005.02 provides the following: The Department will conduct an unannounced inspection each year to assess compliance with licensing regulations. A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding was noted in prior audits since 2017. Repeat Finding: 2024-046 Questioned Costs: None Statistical Sample: No Context: Child care centers and family child care homes are subject to health and safety requirements. Each type of provider is subject to separate but similar State regulations. We tested 25 child care providers subject to health and safety requirements. We noted the following: One child care center tested did not have a sanitation inspection within the last two years. The last sanitation inspection was completed on February 14, 2023, four months overdue as of June 30, 2025. The Agency submitted a referral on February 14, 2025, for the next inspection due; however, the Agency did not provide documentation to support follow-up was completed on the referral. For a school-age-only child care center, the last sanitation inspection was completed on September 19, 2025, according to an email provided by the Agency from the Douglas County Health Department. However, a copy of the inspection report was not provided to us; therefore, we could not verify whether the health and safety requirements were met. Five of 20 child care centers tested did not have a fire inspection within the last two years: See Schedule of Findings and Questioned Costs for chart/table. The referrals sent for three of the overdue fire inspections were not made timely. The Agency did not provide documentation to support that any follow-up was completed on the referrals. As of the end of fieldwork on January 8, 2026, no follow-up had been done for almost 8 months to over 19 months. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities.   Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowability Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002 states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (June 2023 revision), Section 5, states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate documentation on file to support that payments were in accordance with Federal and State regulations. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states the corrective action is completed. Repeat Finding: 2024-050 Questioned Costs: $256 known (2401NEFOST, $195; 2501NEFOST, $61) Statistical Sample: No Context: We tested 25 Foster Care claims for maintenance. Foster Care maintenance payments include payments to foster parents and payments to licensed child care providers for child care when work responsibilities preclude foster parents from being at home. For five of the claims, the providers billed for more days than what was recorded on the child’s attendance sheet, as noted in the table below. See Schedule of Findings and Questioned Costs for chart/table. For a separate claim tested, the attendance calendar provided appeared to be prepared by the provider after it was requested by the Agency as the calendar was for services in September 2024, but the calendar was noted as being prepared and signed on December 3, 2025. We questioned costs of $23, which is in-sample. Federal payment errors noted in the sample were $202. The total Federal sample tested was $10,052, and the total Federal maintenance payments during the year were $7,295,988. Based on the sample tested, the dollar rate error was 2.01% ($202/$10,052), which projects the potential dollars at risk for fiscal year 2025 to be $146,649 (dollar error rate multiplied by the population). In addition to the $202 questioned costs noted on the sample items, we noted $54 of questioned costs on other line items of the claims reviewed. Cause: Inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowability Grant Number & Year: 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Good internal control requires procedures to ensure expenditures are reasonable, accurate, and adequately documented. Condition: The Agency did not have adequate procedures to ensure that Tribal administrative payments were coded properly. Repeat Finding: No Questioned Costs: $10,494 known Statistical Sample: No Context: We tested four Foster Care contract payments. For one of the payments tested, we noted that the payment was not properly coded in the State’s accounting system and overcharged the Foster Care grant. The payment was to a Tribal entity to reimburse its administrative costs related to child protection and safety services. The total amount that should have been charged to the Federal grant was $77,879; however, the Agency improperly coded $88,373 to the Federal grant, resulting in $10,494 being overcharged. Upon further review and discussion with the Agency, payments to this Tribal entity for the months of July 2024 to September 2025 overcharged $127,628 to the Federal grant. Federal payment errors noted in the sample were $10,494. The total Federal sample tested was $270,143, and the total Federal contract payments in the population were $3,486,052. Based on the sample tested, the dollar rate error was 3.88% ($10,494/$270,143), which projects the potential dollars at risk for fiscal year 2025 to be $135,259 (dollar error rate multiplied by the population). Cause: Employee error. The Agency’s spreadsheet to calculate the split coding for the payments was not set up properly. Effect: Without adequate oversight procedures, there is an increased risk of payments not being coded properly, resulting in the Federal grant being overcharged. Recommendation: We recommend the Agency improve procedures to ensure that payments are properly coded in the State’s accounting system. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Reporting Grant Number & Year: 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. 45 CFR § 75.302 (October 1, 2024) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. . . . Condition: The Agency lacked adequate procedures to ensure the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 30, 2024, and March 31, 2025. During our review, we noted clerical errors that included the following: 1) the Agency’s supporting spreadsheets not agreeing to the actual reports; 2) using the incorrect amounts for calculating prior period adjustments; 3) reporting the same costs multiple times; and 4) calculating the incorrect percentages for reporting Bridge to Independence expenses. See the tables below for the net errors noted. See Schedule of Findings and Questioned Costs for chart/table. Cause: Clerical errors and inadequate review. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Allowability Grant Number & Year: 2501NEADPT, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2024), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2024) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (June 2023 revision), Section 5, states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: We noted that two of five Adoption Assistance payments tested, which were for child care, did not have adequate documentation on file to support that the payments were in accordance with Federal and State regulations. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2024-051 Questioned Costs: $1,025 known Statistical Sample: No Context: We tested five assistance claims and noted the following: • For one claim tested, the Agency was unable to obtain the attendance calendar from the provider. With no attendance calendar, we were unable to verify the payment amounts were accurate, resulting in total Federal share questioned costs of $906. • For another claim tested, the provider billed for eight full days and eight partial days of child care, while the attendance calendar for the child showed only nine full days and zero partial days of child care, resulting in questioned costs of $119. Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.659 – Adoption Assistance – Level of Effort & Reporting Grant Number & Year: 2401NEADPT, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2024) states in part: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per Instructions for Completion of Form CB – 496: Line 12. Reporting Period - Expenditures of Adoption Savings On Other Title IV-B or Title IV-E Allowable Services (from line 8 amount) – This line consists of the actual title IV-E agency expenditures (without federal matching funds) of calculated cumulative adoption savings for the purposes of providing title IV-B or title IV-E allowable services other than those specified for reporting on lines 10 and 11 of this Part. Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 USC 673(a)(8)(D)(ii) “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate procedures to ensure Federal Financial Reports (FFRs) were accurate. Adoption Savings reported were not in accordance with Level of Effort requirements. The Summary Schedule of Prior Audit Findings states the corrective action is completed. A similar finding was noted in the prior audit. Repeat Finding: 2024-052 Questioned Costs: None Statistical Sample: No Context: We tested Part 4 of the September 2024 report for the Annual Adoption Savings Calculation and Accounting Report. We noted the following: • Line 12, Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services, reported $558,014, but $413,076 of these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 13, Total Expenditures of Calculated Adoption Savings, was overstated by $413,076 due to the error noted on Line 12. The Agency’s Corrective Action Plan stated that it updated both its FFR procedures/instructions to include steps to review Level-of-Effort Requirements and the amounts reported on its September 2023 Annual Adoption Savings Report. We received the Summary Schedule from the Department of Administrative Services on August 6, 2025. However, when we reached out to the Agency on January 28, 2026, the Agency stated it had not completed the corrective action. Cause: Inadequate review procedures. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2024) states, “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately document services provided in the EVV (Electronic Visit Verification) system, and confirm that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states that the provider can provide services to only one client at a time, and services will not be paid unless performed during the actual hours noted in the EVV system. Title 471 NAC 15-005.01(A) states that the provider will comply with all EVV billing requirements. A good internal control plan requires procedures to ensure services provided agree to the service needs assessment or individual support plan and service authorization. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) In General. Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: “(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— “(i) for calendar quarters in 2019 and 2020, by .25 percentage points; “(ii) for calendar quarters in 2021, by .5 percentage points; “(iii) for calendar quarters in 2022, by .75 percentage points; and “(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person’s intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) and personal care service claims, we noted the following: • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without the verification of the location the services were provided. • Services billed exceeded the number of hours authorized. • PAS and personal care services appeared to be claimed at the same time the provider was working at another job, resulting in apparently fraudulent billings and payments. • The PAS and other employment hours exceeded 24 hours in one day for one client, which is not possible. • The PAS and personal care providers had the ability to edit the billable start and end times in the EVV system. • The Agency authorized a PAS provider to perform services for three clients, totaling up to 118 hours a week, which is unreasonable. • Providers billed for unfeasible scenarios, such as the supposed performance of duties that were supposed to be done once a week but were billed as being done every day. Similar findings have been noted in prior audits since 2014. Repeat Finding: 2024-053 Questioned Costs: $11,136 known ($11, 2405NE5MAP; $11,125, 2505NE5MAP) Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency also offers personal care services under the Aged and Disabled (AD) Waiver to recipients with disabilities. These services enable the participants to carry out tasks that they are unable to perform because of their disabilities. The Agency implemented an electronic visit verification (EVV) system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century CURES Act, passed by Congress in 2016. The EVV system electronically captured and verified provider visit information and providers were required to submit claims to the Agency electronically through this application. We judgmentally selected four providers and a PAS agency based on high total dollars. For those providers, we selected one week of claims for testing, and one month of claims for the PAS agency for testing. We also randomly selected five PAS payments for testing and, from there, one week of claims was tested. In addition to the billing issues identified for the weeks tested, we noted two of these providers had outside employment that conflicted with the PAS hours billed. We expanded testing for these two providers. We identified $13,044 in potentially fraudulent payments made to the providers during fiscal year 2025. In addition to the potentially fraudulent payments related to hours claimed while at another job, we noted $6,315 payment errors related to other issues. Total Federal share questioned costs were $11,136. The Federal share of payments tested totaled $18,927. See Schedule of Findings and Questioned Costs for chart/table. The total Federal share of PAS claims paid for the fiscal year was $6,212,765, and the State share of PAS claims paid for the fiscal year was $4,334,744. The following information describes issues noted with each provider. Judgmental Testing Provider #1 For the initial week tested, the provider was authorized a total of 39.75 hours per week for a PAS client and 40 hours per week for a client who received personal care services through the AD Waiver program. The provider did not follow the SNA when billing for tasks for the PAS client. The SNA authorized some tasks to be completed seven days a week, but the provider billed on only three days. For example, the provider was authorized to receive assistance on and off the toilet six times per day for seven days per week, but the provider performed services on only three days. We consider the services billed on the other four days to be overpayments. We identified 18.5 hours that were overbilled. We did not question costs for these hours because they were included in the hours questioned as potential fraud described below. The provider used the Global Positioning System (GPS) verification method for the initial week tested, and we noted that some of the times billed did not seem reasonable for both the PAS and personal care clients. For example, the provider billed 22.5 hours from 10:39 a.m. on June 1, 2025, to 9:00 a.m. on June 2, 2025, for the personal care client. We also noted three instances during the week where the provider changed the end times of the visit – most likely to avoid exceeding the service authorization. The claim form in the EVV system included the scheduled end time, the actual service end time, and the billable service end time. The ability to edit the billable start and stop times recorded in the EVV system, with no secondary review, places doubt on whether the services were performed as billed. These two clients lived with the provider making it convenient to clock in and out as the provider pleased. See the table below: See Schedule of Findings and Questioned Costs for chart/table. The provider not only billed for 79.5 hours of PAS and personal care services in the week tested but also worked full-time for a family counseling business. Due to all of these issues, we reviewed the claims submitted for a three-month period from March 31, 2025, through June 25, 2025. We obtained employment records from the family counseling business and compared the PAS and personal care billings to the employment records. During this comparison of records, we noted also that the provider was billing independent living services through the Home and Community-Based Services (HCBS) Waiver. We identified 70 days during which PAS, personal care hours, and independent living services overlapped with times that the provider was recorded as having been working for the family counseling business. For 45 days out of the three months, the total Medicaid and employment hours exceeded 24 hours, which is impossible. See examples for two days in the table below: See Schedule of Findings and Questioned Costs for chart/table. The visits were completed through a device using GPS. As stated earlier, the PAS and personal care clients lived with the provider. The independent living services were provided remotely. The services would not be allowed to be provided at the same time the provider was working another job. Based on some of the times the PAS and waiver services began and ended, another individual may have aided the provider in falsely claiming that PAS and waiver services were performed, as the provider could not have been in two places at once. We questioned 690 hours as potential fraud, totaling $10,906 ($6,273 Federal Share and $4,633 State Share). The total amount paid to the provider for the period tested was $13,847; therefore, we questioned nearly the entire amount paid to the provider for overlapping hours. The table below contains examples of the overlapping hours: See Schedule of Findings and Questioned Costs for chart/table. The following chart summarizes the potential fraud questioned costs by program: See Schedule of Findings and Questioned Costs for chart/table. We also noted other billing issues. In one case, the provider double billed a PAS service on April 30, 2025. The visit form on April 30 had a clock-in time of 3:03 p.m. and a clock-out time of 12:03 a.m. on May 1, 2025. Upon crossing from one day to another, the visit generated two claim forms in the EVV system. The first claim had an end time of 11:59 p.m., and the second claim form had the start time of midnight or 24:00 on the next day. In this case, the provider changed the billable start and end times for both claims and was able to double bill 4.75 hours, resulting in $41 in Federal share questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Overlapping hours were billed on May 25, 2025, between a personal care claim and the independent living claim. There are no additional questioned costs because the overlapping hours for independent living were questioned as potential fraud as they overlapped with the provider’s outside employment. See the table below: See Schedule of Findings and Questioned Costs for chart/table. The Agency has been aware of the provider’s billing issue and continued to allow the provider to bill for services. On June 21, 2025, the Agency established Accounts Receivables for overbilling for PAS and AD Waiver services. The PAS overpayment totaled $17,008, and it included services provided from December 28, 2023, through May 2, 2025. The first PAS service date billed by the provider was December 28, 2023. One recoupment of $68 was applied towards the balance on August 2, 2025, and no other payments have been made. The AD Waiver overpayment totaled $4,078 and included weeks billed from March 17, 2024, through March 20, 2025, prior to the services we reviewed. As of October 20, 2025, $781 has been recouped from payments made to the provider, leaving a balance due of $3,297. The overpayments for both programs did not account for the potentially fraudulent payments made due to the provider having outside employment. Finally, we noted the provider and her husband were foster parents to an Agency ward during the period reviewed beginning on June 7, 2025. The PAS and personal care clients were also residing in the home. Per narratives, the personal assistance client, the provider’s daughter, was renting a room from the provider for $200 per month for rent and utilities. The personal care client was also a relative of the provider and was on the sex offender registry. Per the sex offender registry, he was convicted of felony sex trafficking of children in 2014. The provider’s address listed on the sex offender registry was the same as that for the personal care client. This address was first reported on September 20, 2024, and was last verified as of July 10, 2025. According to the case file, the personal care client first moved to the provider’s residence on February 11, 2025, and he lived in his mother-in-law’s cabin in the provider’s backyard with no separate entrance, utilities, or address. The Agency was told the client had his own kitchenette, bathroom, and living area. He paid $400 per month for rent and utilities. The following is a picture of the cabin in which the client was residing: See Schedule of Findings and Questioned Costs for chart/table. The provider and her husband completed a home study through APEX Foster Care (APEX) on June 16, 2025, in order to be foster parents to a 14 year old girl. The home study did not disclose the personal care client as residing at the residence. The home study also noted that the PAS client was sleeping on the couch in order for the foster youth to have a room in which to sleep. Additionally, the home study noted that there were no outbuildings. The foster care regulations require the applicant and household members 18 years of age and older to submit background checks prior to licensing. Since the personal care client was not disclosed as a household member, he did not have a background check completed. On July 9, 2025, APEX sent a “Closure of Support Letter” to the provider, stating they would no longer be supporting the foster home effective July 23, 2025. The letter noted the provider’s husband did not disclose an assault and battery charge from June 26, 2024, and there were concerns about the accuracy and honesty of reported household information. The new agency supporting the foster family, Saint Francis Ministries, completed a home study on August 29, 2025. Again, the home study did not disclose the personal care client as residing at the residence. The home study noted that the PAS client now lived in Hastings, Nebraska. The home study also noted that there was a shed in the backyard where they kept their lawn equipment and four-wheeler. The shed is kept locked, and only the provider and her husband have a key. Based on this information, the personal care client must live in the home. The provider’s husband disclosed the assault charge from 2024 where he broke a man’s jaw in a fight after a hit and run incident. He was found guilty of misdemeanor assault and battery on June 26, 2024. Although a misdemeanor assault conviction does not prevent a prospective foster parent from being eligible to provide care, the Agency has the discretion to review convictions to determine eligibility. The background check also noted four Driving Under the Influence convictions prior to August 2013, two resisting arrest misdemeanor convictions, and three possession of marijuana convictions prior to September 22, 2005. Not only was there a safety risk for having a registered sex offender living with the foster youth, but also the provider appeared to be purposefully deceitful in failing to disclose this information to the foster care agencies, knowing that doing so would result in the placement being denied. Once the Agency was aware of the situation, the foster youth was removed from the home on October 6, 2025. The provider and personal care client were also deceitful when they obtained services through the AD Waiver as well. The personal care client did not live in a cabin in the backyard with a separate kitchen, living area, and bathroom, but cleaning of these areas was authorized for the provider even though the living area, kitchen, and bathroom would have been shared with the provider’s other family members, and these services should not have been authorized. Provider #2 The provider was authorized 39.25 hours of service per week for one client and 26.75 hours of service per week for a second client. For the initial week tested of January 12, 2025, through January 18, 2025, the provider billed 40.5 hours and 27 hours of service, respectively. Additionally, none of the visits were completed through a device using GPS to track the location of the service, and no signatures were obtained from the clients. We also noted that the provider was employed with a public school as a student bus driver. We obtained the provider’s employment records and compared the PAS billings to the employment records for a three-month period from October 28, 2024, through January 31, 2025. The provider generally worked for the other employer between 6:00 a.m. to 5:30 p.m., Monday through Friday, which conflicted with hours being billed for personal assistance services. We identified 28 days during which PAS hours billed overlapped with times that the provider was working for the other employer. We questioned as potential fraud any PAS hours billed that overlapped with the provider’s employment hours. In determining these overlapped hours, we did not factor in any travel time that may have occurred between the client’s homes and the provider’s place of employment; therefore, the possibility exists of additional fraudulent payments. We questioned 142.5 hours as potential fraud, totaling $2,138 (Federal share $1,230 and State share $908). The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. The PAS claims for the additional weeks tested also did not use GPS to track the location; therefore, any hours that were not questioned due to potential fraud were questioned for not complying with the GPS location verification requirement. Federal questioned costs for not complying with the GPS requirements totaled $837. On February 19, 2025, the Agency implemented system enhancements to the EVV system, including the required use of GPS or Interactive Voice Response (IVR) verification. The last large payment issued to the provider was on July 25, 2025, for service dates from February 1, 2025, through February 19, 2025. From July 26, 2025, through October 28, 2025, the provider has received only $338 in payments. It appears the EVV system enhancement may have prevented the provider from manually entering times into the EVV system for PAS services while performing outside employment. Providers #3 – #5 Provider #3 was an individual who provided services to 3 clients. Provider #4 was an individual who provided services to 2 clients, and Provider #5 was an agency that provided services to 10 clients during the period we reviewed. For each provider, we noted that the hours billed did not follow the SNA. For example, the SNA included tasks that were to be provided every day of the week, but the provider provided the services less than seven days a week. Another example is that the provider would bill for services multiple times a week when the service was authorized only once per week. Additionally, Provider #5 billed for hours that exceeded the service authorizations. See the table below for a summary of the hours overbilled: See Schedule of Findings and Questioned Costs for chart/table. Additionally, we noted the following issues for Provider #3: • The provider was authorized 39.75 hours per week for one client, 40 hours per week for another, and 38.25 hours per week for the third client, for a total of 118 hours. It is not reasonable to authorize 118 hours of service to be performed in a week. This would require the provider to perform services for more than 16 hours every day of the week. • We also noted that two of the clients that Provider #3 served were the parents of the provider. These clients did not live with the provider; however, the provider stated that the start and end address for these two clients was that of the provider. Both of these clients were authorized services for cleaning the bathroom, kitchen, bedroom, and living room at the client’s home. Services were not allowed and would not be reasonable at the provider’s home. Per the Agency, “Since the two clients do not live with the provider none of the visits should have been scheduled nor can services be performed at the provider’s address.” All services billed for these two clients were questioned. It should be noted that we reviewed only one week, and there may be additional claims billed for services at the provider’s home that would not be allowed. Federal share questioned costs were $656. Random Sample Testing We selected five PAS payments randomly for testing. We noted issues with all five PAS claims tested. The Federal payment errors for PAS claims totaled $78 for the sample. The total sample tested was $884, and the total population for the Federal share of PAS claims for the fiscal year totaled $6,212,765. Based on the sample tested, the dollar error rate for the sample was 8.82% ($78/$884), which estimates the potential dollars at risk for fiscal year 2025 to be $547,966 (dollar error rate multiplied by the population). For three of the five providers, the hours billed by the provider exceeded the SNA. Additionally, for four of the five providers, the provider did not follow the SNA when billing for tasks provided. For example, the SNA included tasks that were to be provided every day of the week, but the provider performed the services fewer than seven days a week. Another example is that the provider would bill for services multiple times a week when the service was authorized for only once per week. See the table below for a summary of the hours overbilled: See Schedule of Findings and Questioned Costs for chart/table. Additionally, for Provider #7 we noted that there were three visits during the week tested that were not completed through a device using GPS. Two of these visits were services claimed from 5:15 a.m. to 6:15 a.m., and the third was from 7:30 p.m. to 8:35 p.m. The provider stated that GPS was not used due to a scheduling error and forgetting to clock in or clock out. The three non-GPS utilized visits exceeded the Agency’s 10% allowance at the time of service for non-use of GPS. Additionally, we noted that the provider changed the service end date for one visit from 6:48 p.m. to 7:48 p.m., which appears unreasonable. Cause: Procedures were not adequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with recipient needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Nebraska Department of Health and Human Services (DHHS) appreciates the work of the auditor’s office and the opportunity to respond to this early management letter. DHHS agrees with the recommendations articulated in the early management letter.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. 477 NAC 3-007 states, in part, “A redetermination of eligibility for continued Medicaid benefits must be completed every 12 months.”   477 NAC 3-007.01, states the following: A renewal of modified adjusted gross income (MAGI)-based eligibility shall be completed on the basis of information available to the Department without requiring information from the individual. Information will only be required from the individual when not available through other sources. If information is not available to complete a renewal, a prepopulated renewal form shall be sent by the Department to the applicant or authorized representative. The completed renewal form and necessary verifications shall be returned within 30 days of the date the renewal form was sent. 477 NAC 9-002 requires the Agency to provide the applicant or client a 10-day notice prior to an adverse action against the applicant or client. 477 NAC 16-001.02 states “Current monthly household income and family size shall be used for individuals who have been determined financially eligible for Medicaid.” 477 NAC 15-005 states that the household for an individual who is under 19 years old includes the individual’s natural, adopted, and stepparents if the parent is living in the household. Good internal control requires policies and procedures to ensure that recipients meet eligibility requirements, and reviews are completed in accordance with State and Federal regulations. Condition: The Agency’s procedures were inadequate to ensure managed care payments were allowable, and recipients were eligible. Repeat Finding: 2024-058 Questioned Costs: $5,358 known ($592, 2405NE5MAP; $4,766, 2505NE5MAP) Statistical Sample: No Context: We tested 40 managed care payments and noted the following issues: • For one client, the household income reported was $0. Per the Agency’s case management system, the client’s father was living in the household; however, the Agency inappropriately did not include the father in the client’s budget when determining eligibility. Since the Agency did not include the father in the budget, the Agency did not verify whether the father had income or not. As a result, we questioned $530 for the payment tested and additional questioned costs of $4,236 for payments made for October 2024 to June 2025. • For four clients tested, the Agency did not redetermine eligibility in a timely manner. For one of these clients, this resulted in the client remaining on Medicaid after the client was no longer eligible. The renewal for this client was due on December 31, 2023. A renewal form was mailed to the client on December 26, 2023, and was due on January 25, 2024. The renewal form was not received by the Agency, so the case should have been closed in February 2024 after a 10-day notice was provided to the client. The case was not closed until July 13, 2024, resulting in managed care payments being made from March 2024 to July 2024. We questioned costs of $592 for the July 2024 payment tested. Federal payment errors for the sample tested were $1,122. The total sample tested was $17,952, and the total Federal Managed Care expenditures during the fiscal year were $1,611,236,276. Based on the sample tested, the dollar error rate for the sample was 6.25% ($1,122/$17,952), which estimates the potential dollars at risk for fiscal year 2025 to be $100,702,267 (dollar error rate multiplied by the population). Out-of-sample questioned costs total $4,236. Cause: Worker error and inadequate review. Effect: An inadequate review of recipient eligibility increases the risk of benefits paid not being in accordance with State and Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure recipients are eligible, and payments are proper. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” Per 45 CFR § 75.403 (October 1, 2024), costs must be necessary, reasonable, and adequately documented. Per the Application for a § 1915(c) Home and Community-Based Services Waiver, effective March 1, 2022: • “The Community Integration provider is primarily in the community, providing a combination of habilitation, supports, protective oversight, and supervision to bill in hourly units.” • “Day Supports is a habilitative service offering habilitative activities in a provider-owned or controlled nonresidential setting when not delivered virtually.” • “Supported Family Living cannot exceed a weekly amount of 70 hours.” A good internal control plan requires procedures to ensure that services provided agree to the individual support plan and service authorization. Condition: We tested 15 claims paid from the Comprehensive Developmental Disability (CDD) Waiver and noted three payments tested did not have adequate documentation. Repeat Finding: No Questioned Costs: $887 known ($644, 2405NE5MAP; $243, 2505NE5MAP) Statistical Sample: No Context: For three claims tested, adequate supporting documentation was not on file, as detailed below: • For one claim, the provider billed 33 hours for Community Integration Services. Upon review of the documentation on file, only 30 hours should have been billed. Additionally, of those 30 hours, 24.5 should have been billed as Day Support and 5.5 hours as Community Integration. As a result, we questioned $243 on the claim tested. • During review of another claim, we noted that two providers were approved to provide Support Family Living services for one client for a total of 300 hours during September 2024. However, the providers billed for 330.75 hours during the month, exceeding the authorization by 30.75 hours. Additionally, the providers billed for more than the allowed 70 hours a week for three different weeks during September 2024. Hours for these three weeks ranged from 79.75 to 84.5 hours. Lastly, one of the providers billed for 0.25 hours of Community Integration at the same time as Supported Family Living. As a result, we questioned $562, which is out-of-sample. • During review of one claim, we noted that the provider billed for 0.75 hours of Community Integration and for Supported Family Living at the same time. Additionally, the provider billed for the same day twice. As a result, we questioned $82, which is out-of-sample. Federal payment errors noted in the sample were $243. The Federal sample tested was $10,919, and the total Federal CDD expenditures during the fiscal year were $271,944,685. Based on the sample tested, the dollar error rate for the sample was 2.23% ($243/$10,919), which estimates the potential dollars at risk for fiscal year 2025 to be $6,064,366 (dollar error rate multiplied by the population). Out-of-sample questioned costs totaled $644. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of CDD claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2024): 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. Per 45 CFR § 75.302(a) (October 1, 2024), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. 477 NAC 22-005.03(b) states the following, in relevant part, “The amount paid for private health insurance premiums is deducted from countable income in determining eligibility. . . . This disregard does not apply to individuals eligible as medically needy. For medically needy individuals, the amount of health insurance premiums is deducted from any share of cost due.” A good internal control plan requires procedures to ensure that income is updated for changes timely and adequately, and such updates are documented and verified. Condition: The Agency did not adequately verify the deductions of individuals residing in long-term care facilities to ensure that limits were not exceeded, and the individuals were eligible. Repeat Finding: No Questioned Costs: $47 known Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: • For two recipients, the wrong medical deduction amount was used, causing the share of cost to be understated. o For one recipient, the budget included premiums for dental and vision insurance of $47 and $16, respectively. However, the documentation on file did not support the amounts used. Per the documentation on file, the dental insurance premium should have been $46, and no documentation was on file for the vision insurance premium. This resulted in questioned costs of $10 for the payment tested. o For the other recipient, the budget included a health insurance premium of $378. However, the documentation on file supported an amount of $327. This resulted in questioned costs of $37 for the payment tested. Federal payment errors noted in the sample were $47. The Federal sample tested was $81,558, and the total Federal long-term care facility expenditures during the fiscal year were $311,735,268. Based on the sample tested, the dollar error rate for the sample was 0.06% ($47/$81,558), which estimates the potential dollars at risk for fiscal year 2025 to be $187,041 (dollar error rate multiplied by the population). Cause: Worker error and inadequate review. Effect: If income, including deductions, are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all income and deductions identified are verified and adequately documented. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to State for Medicaid – Allowability Grant Number & Year: 2405NE5MAP, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 45 CFR § 75.303 (October 1, 2024) states, in part, the following: 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. Good internal control requires procedures to ensure journal entries are proper and coded correctly. Condition: The Agency did not have adequate procedures to ensure the journal entry tested was proper and coded correctly. Repeat Finding: No Questioned Costs: $1,597,253 known Statistical Sample: No Context: We tested a journal entry to adjust the Federal Medical Assistance Percentages (FMAP) rates for managed care payments made during the period October 1, 2022, to December 31, 2022. When the Agency prepared the journal entry, it used calendar year 2023 managed care rates to calculate the adjustment. However, since the managed care payments were during calendar year 2022, the Agency should have used the calendar year 2022 managed care rates to calculate the adjustment. This resulted in $1,597,253 being overcharged to the Medicaid grant. Cause: The Agency used the incorrect rates when calculating the adjustment. Effect: When adequate procedures are not in place to ensure journal entries are coded correctly, there is an increased risk for errors to occur. Recommendation: We recommend the Agency improve procedures to ensure journal entries are prepared and coded properly. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid – Allowability & Eligibility Grant Number & Year: 2405NE5MAP, FFY 2024; 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2024) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Good internal controls require procedures to ensure the following: 1) all payments are proper and allowable, which necessarily precludes disbursements to MCOs for deceased individuals; 2) when identified, errors and overpayments are corrected and, as necessary, recouped in a timely manner; and 3) records are updated promptly to include accurate dates of death. Such procedures could include also setting up effective interfaces with systems containing accurate dates of death or other information used to determine eligibility end dates. Condition: The Agency’s procedures did not prevent payments made for deceased individuals and did not identify the unreasonable payments in a timely manner. Repeat Finding: No Questioned Costs: $32,545 known ($493, 2405NE5MAP; $32,052, 2505NE5MAP) Statistical Sample: No Context: We obtained a listing of all Medicaid capitation payments, with the corresponding Medicaid recipient details, made to Managed Care Organizations (MCOs) in March 2025. We then compared the claims paid in March 2025 to the Vital Statistics records, including death information, maintained by the Office of Vital Records to determine whether any MCOs were receiving capitation payments for deceased individuals. Based on our analysis, we identified that the Agency made capitation payments to the MCOs for 13 deceased individuals in March 2025. For these 13 deceased individuals, we then determined whether additional payments were made after their dates of death. Based on that review, we identified $65,554 in overpayments from both State and Federal funds. In State fiscal year 2025, $32,545 was spent from Federal funds, which are considered questioned costs for State fiscal year 2025. See Schedule of Findings and Questioned Costs for chart/table. Cause: The eligibility system did not receive an automated notice from Vital Records regarding the recipients’ deaths. Identification and verification of recipients’ deaths by staff were untimely. Medicaid eligibility end dates were established after the recipients’ dates of deaths. Effect: Without adequate procedures to identify and prevent payments for deceased individuals, there is an increased risk for fraud or misuse of funds. Recommendation: We recommend the Agency strengthen its procedures to ensure the following: 1) all payments are proper and allowable, which necessarily precludes disbursements to MCOs for deceased individuals; 2) errors or overpayments are corrected and, as necessary, recouped in a timely manner; and 3) records are updated promptly to include accurate dates of death. Such procedures could include also setting up effective interfaces with systems containing accurate dates of death or other information used to determine eligibility end dates. Management Response: The Agency partially agrees. The Agency agrees with the cases identified. However, the Agency has had processes in place that have largely been effective to identify, take eligibility action, and recoup payments made after the date of death for Medicaid recipients, this review highlights opportunities to strengthen established controls.

Program: AL 93.778 – Grants to States for Medicaid – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2024) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2024), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medicaid. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states: If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management’s responses and b. performing other audit procedures as necessary in the circumstances. A good internal control plan requires desk audits to include a testing sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2024-054 Questioned Costs: Unknown Statistical Sample: No Context: The APA selected 20 of 192 facilities to review desk audits of the fiscal year 2024 cost reports. One State-owned facility did not have a desk audit performed, and 9 of the 19 desk audits tested did not have adequate support to verify large variances. The contractor compared costs from the prior year to the current year and did request verbal explanations; however, appropriate audit evidence was not obtained to verify the explanations. For example: • For one facility, Direct Care Staff and Aides Costs increased by $1,067,965 (31%). The provider explanation was that Staff and Aides increased due to a shift away from using Purchased Services for care staff. However, Purchased Services – Direct Care only decreased $187,461, leaving over $800,000 unexplained. • For another facility, Insurance Costs increased by $82,639 (99%). The facility explained that two separate facilities’ flood insurance policies were split 50/50 in 2023, and they were updated in 2024 to reflect appropriately only one facility. The insurance policies were not obtained to verify the explanation provided. Generally, invoices or other documentation were not obtained to determine if increases or decreases in supplies, services, or direct care costs were accurate. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that nursing facility cost reports are accurate. Management Response: The Agency partially agrees. The Agency agrees with the recommendation to include the state-owned facility in the desk review process. The Agency disagrees that requiring voucher documentation in every instance of noted material variance is necessary and is considered excessive for the parameters of the desk review. The Agency completes both desk reviews and field audit examinations. The desk review process is not designed to examine every invoice but rather to inspect variances for both increases and decreases and obtain supporting documentation for various inquiries, when warranted. If the explanation from facilities is adequately explained, no documentation is deemed necessary. If there is reason to believe that the information is not accurate, the Agency can either make an adjustment or flag facility as a high risk and include the facility for a more comprehensive review with a field audit examination. When facilities are selected for field audit examinations, additional scrutiny is applied, resulting in additional procedures – particularly documentation review. APA Response: Obtaining only verbal explanations to support significant variances is inadequate to ensure that errors did not occur. Additionally, in the first example noted above, the explanation provided addressed less than 20% of the variance, leaving more than 80% with no explanation.

Program: AL 93.778 – Grants to States for Medicaid; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025; 2505NE5021, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2024), the State Medicaid Agency must require the disclosing entity to provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2024): Managing employee means – (1) A general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency[.] Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under §455.101, their information is required to be disclosed. Further, MPEC Section 1.4.1C states the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2024), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303(a) (October 1, 2024) requires the Agency to “[e]stablish 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.” Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-055 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted two providers failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The enrollment system was updated on July 1, 2024, which now requires that an owner (when applicable) and managing employee be reported on the application to move forward with the enrollment. This requirement would apply to providers enrolling or completing the revalidation process after this date. A provider who did not disclose a managing employee enrolled on June 1, 2024, would not complete the revalidation process for five years, so such employer would not be required to update this disclosure until June 1, 2029. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers, as required by Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Grants to States for Medicaid; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2505NE5MAP, FFY 2025; 2505NE5021, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR§ 438.3(m) (October 1, 2024): The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards. Amendment One of the contract between the Agency and the MCOs under Section V.P.1.g. states, “The MCO must audit financial reports in accordance with generally accepted accounting principles (GAAP).” A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: One of three managed care organizations’ (MCO) audited financial reports for the year ended December 31, 2024, was not in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2024-056 Questioned Costs: Unknown Statistical Sample: No Context: One MCO had an audit performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statement for the MCO was prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The audited financial reports for one MCO was completed for the Nebraska Department of Insurance, which did not require the financial statements to be in accordance with GAAP. Effect: When the financial audits completed by the MCOs are not presented in accordance with GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO financial statements to be presented in accordance with GAAP. Management Response: The Agency partially agrees. MCO contracts have been amended to require financial audits on the basis of GAAP (generally accepted accounting principles). The requirement has been reiterated to the MCO who did not do a separate GAAP audit and instead completed the audit in a manner that has been determined sufficient with Medicare and in other state Medicaid programs.

Program: AL 93.778 – Grants to States for Medicaid – Special Tests and Provisions Grant Number & Year: 2505NE5MAP, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2024) sets forth requirements for a State fraud detection and investigation program, including having a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2024): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. Per 42 CFR § 455.16 (October 1, 2024): A full investigation must continue until— (a) Appropriate legal action is initiated; (b) The case is closed or dropped because of insufficient evidence to support the allegations of fraud or abuse; or (c) The matter is resolved between the agency and the provider or beneficiary. This resolution may include but is not limited to— (1) Sending a warning letter to the provider or beneficiary, giving notice that continuation of the activity in question will result in further action; (2) Suspending or terminating the provider from participation in the Medicaid program; (3) Seeking recovery of payments made to the provider; or (4) Imposing other sanctions provided under the State plan. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under PI’s Policies and Procedures: Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority PI’s Policies and Procedures also include the following under SURS [Surveillance and Utilization Review System] Quarterly Sample Selection & Review Procedures: At the end of each calendar quarter, [a contractor] runs the Advantage Suite SURS reports. . . Effective with the reports received in January 2008, a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports sometime during the calendar quarter of January 1, 2008 – March 31, 2008 and for each quarter thereafter unless notified otherwise. A good internal control plan requires procedures to ensure that cases are not only reviewed and adequately collected on, but also appropriate dispositions are made in a timely manner. Title 42 CFR § 433.320(a) (October 1, 2024) states, in relevant part, the following: (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). (2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of— (i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or (ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with § 433.316, ends. Condition: For one of five SIU cases tested, there was a lack of documentation to support that the case was fully reviewed. For 4 of 20 Program Integrity cases tested, the cases were not worked timely. Two of five overpayments were not reported properly. Additionally, policies and procedures to identify potential cases were not being followed. Repeat Finding: 2024-057 Questioned Costs: Unknown Statistical Sample: No Context: PI is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred to and accepted by the MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. In the fiscal year ended June 30, 2025, PI opened 372 new cases and worked another 327 cases that had been opened prior to fiscal year 2025. Open cases may include those no longer being investigated, but seeking repayment, and cases that are currently with MFPAU. SIU investigates allegations of suspected recipient fraud. In the fiscal year ended June 30, 2025, SIU opened 76 new cases and worked another 31 cases that had been opened prior to fiscal year 2025. We tested 20 PI cases and 5 SIU cases and noted the following: • One SIU case was opened on September 18, 2024, after an allegation that a Medicaid recipient was working a full-time job and a part-time job, all the while receiving SNAP and Medicaid benefits. Per the investigator’s notes, the case was identified as “not fraud” and closed on October 30, 2024. The recipient in question averaged over $4,000 per month in income during calendar year 2024, while the Medicaid income limit for a single adult was only $1,670 per month; therefore, the recipient was clearly over the income limit. Additionally, per Title 477 NAC 3-004(B)(viii)(2)(a), a “client must report new employment within 10 days of receipt of the first paycheck . . . .” However, the recipient failed to report new employment on at least three occasions during calendar year 2024. After this was brought to the Agency’s attention, the Agency calculated $6,390 in overpayments. • Four PI cases were not worked timely: o One PI case was opened in April 2023 for a caregiver working for a Personal Care provider that was billing more hours through EVV (electronic visit verification) than what was authorized. The investigator on the case pulled the EVV data for the caregiver and noted potential overbilling; however, the investigator soon left the Agency, and the case was reassigned in November 2023. From November 2023 through May 2025, monthly notes were added to the case indicating the new investigator needed assistance on the case, but no investigative actions were taken. Additionally, a second referral for the Personal Care provider was received in November 2024, alleging that one of the clients was not receiving the work that was “needed, authorized, and billed,” yet still no investigative action was taken. As of December 2025, at the time of field work, the investigator was still waiting for guidance on how the case should be worked, over 2.5 years after it was opened. The Personal Care provider received $588,135 in Medicaid payments during fiscal year 2025. In addition, the case above was linked to a related case that was noted to have “credible allegation of fraud” and had been referred to the MFPAU in October 2019. The related case appears to have involved the same provider, but under a different name. Payments were suspended to the related provider in August 2022. Coincidentally, the new provider in the case above began submitting claims to the State in September 2022. Both providers have the same physical location and mailing address. Although the connections between the two providers appear obvious, there was no documentation to support that PI had referred the new provider’s case to the MFPAU. o One PI case was opened in December 2022 when PI received a referral from a Developmental Disabilities (DD) Service provider from the MFPAU that another DD Service Provider was double billing Medicaid. PI was requesting and reviewing records from the provider and one of the managed care organizations through September 2024. Then, from October 2024 until July 2025, no investigative actions were taken on the PI case. The case was closed in October 2025 after a review of claims in the State’s DD claim system, and the managed care organization confirmed receipt of overpayment. o One PI case was opened in December 2023 when a managed care organization flagged a provider for potential overbilling and identified an overpayment totaling $15,491. We reported a finding on this same case in the prior year audit, as there was little investigative work done since January 2024. As of November 2025, no work has still been done over 17 months after the case was opened. o One PI case was opened in March 2024, when PI received a referral that a caregiver working for a Personal Care provider was working excessive hours. The investigator ran EVV claim reports in May 2024, October 2024, and February 2025; however, no other significant action appears to have been taken on the case as of November 2025, at the time of field work. The caregiver claimed $163,223 in services provided during fiscal year 2025. We also noted that the provider received a total of $3,263,963 in fiscal year 2025 for the claimed services of all its caregivers combined. Furthermore, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the Statewide SURS report quarterly, and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” This would equate to at least 24 cases a year. Since at least July 2021, the number of cases sampled from the SURS reports has been less than 13 annually, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. The Agency noted during the prior audit that the SURS reporting mechanism was not functioning as designed, and it would be searching for a replacement fraud abuse detection system and would be updating its policies and procedures. However, there were no updates as of field work in October 2025. In addition, we noted that three overpayments tested were not properly reported: • In June 2022, MFPAU notified PI of having reached a settlement with a developmental disabilities service provider for $300,000. PI opened a case in its ICM to track the overpayments. The first payment was received in June 2022, and the second payment was received in October 2022. However, the receipt of the overpayments was not reported on the CMS-64 report as of the quarter ended September 30, 2025. The Agency has not determined the Federal portion of the $300,000; therefore, Federal questioned costs are unknown. • In March 2024, Centers for Medicaid Services (CMS) sent PI a final findings report, which showed unallowable claims of $332,645 for services provided by a medical provider during the period of December 2018 through February 2023. The accompanying letter also directed PI to report on the CMS-64 report the amount of $332,645 ($223,165 Federal portion) in overpayments. However, the overpayments were not reported until the quarter ended September 30, 2025. As the overpayments were identified in March 2024, the Federal share was required to be refunded on the CMS-64 report for the quarter ended March 31, 2025, if not received sooner. The amount was eventually reported on the CMS-64 report for the quarter ended September 30, 2025. • One PI case, opened in January 2017, resulted in the individual being convicted of a Class 4 Felony for “Fraud to obtain assistance $1,500+.” Restitution was ordered on March 8, 2021, for $10,536, including a $5,954 Medicaid overpayment. The Medicaid overpayment was established in the Agency’s case management system on August 2, 2021. Per Federal regulations, the overpayment should be reported on the CMS-64 report no later than one year after the overpayment has been identified, which would be the quarter ending September 30, 2022, report. However, the overpayment has not been reported as of the quarter ended September 30, 2025, report. The Agency has not determined the Federal portion of the overpayment; therefore, Federal questioned costs are unknown. Cause: The Agency did not follow proper procedures, including supervisor reviews, to ensure Medicaid cases were worked properly and timely. The PI unit is understaffed. Clerical errors by staff resulted in overpayments not being reported. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. We further recommend the Agency strengthen procedures to ensure overpayments are accurately reported. Management Response: The Agency agrees.

Program: AL 93.959 – Block Grants for Prevention and Treatment of Substance Abuse – Level of Effort Grant Number & Year: B08TI085820, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure Maintenance of Effort (MOE) requirements are met. 45 CFR § 96.30(a) (October 1, 2024) requires the following: Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. 45 CFR § 96.134(a) (October 1, 2024) states the following: With respect to the principal agency of a State for carrying out authorized activities, the agency shall for each fiscal year maintain aggregate State expenditures by the principal agency for authorized activities at a level that is not less than the average level of such expenditures maintained by the State for the two year period preceding the fiscal year for which the State is applying for the grant. The Block Grant shall not be used to supplant State funding of alcohol and other drug prevention and treatment programs. 45 CFR § 96.124(c) (October 1, 2024) requires the State to expend the Block Grant on treatment services for pregnant women and women with dependent children no less than an amount equal to the amount expended by the State for fiscal year 1994. “A Primer on Maintenance of Effort Requirements” (2020), issued by the Substance Abuse and Mental Health Services Administration (SAMHSA), states the following, as is relevant: A state MUST provide accurate MOE figures every year. Otherwise, it risks a reduction in its award following the period of noncompliance. * * * * States must use a consistent methodology to calculate spending in base and subsequent years so that the expenditure data reflect the same fund sources from year to year. States must use generally accepted accounting principles. * * * * Examples of state fund sources that can be included in the SABG state MOE calculations are: * * * * Medicaid match funds (the state’s share of covered services in state Medicaid programs; this does not include the federal share of covered services) Title 45 CFR § 75.511(a) (October 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency lacked adequate documentation to support that Maintenance of Effort (MOE) requirements were met. The Summary Schedule of Prior Audit Findings lists the status as complete. A similar finding was noted in the prior audit. Repeat Finding: 2024-059 Questioned Costs: None Statistical Sample: No Context: We tested the State MOE and the MOE for Expenditures for Services to Pregnant Women and Women with Dependent Children (Women’s Set-Aside) for State fiscal year 2024, which was reported on December 2, 2024. The required State MOE was $25,520,679, and the Agency reported $28,532,246 of expenditures. However, per review of supporting detail, we noted only $18,141,434 of MOE expenditures, including $7,206,213 of Medicaid Matching funds as well as $10,935,221 in other State expenditures to prevent and treat substance use disorders. We inquired with the Agency regarding the $10,390,812 variance between the amount it reported and the amount per support. The Agency agreed it should have reported $18,141,434 in MOE expenditures. It noted that $10 million of the variance was due to it improperly including opioid settlement payments in the reported amount. The required Women’s Set-Aside was $753,713, and the Agency reported $918,287. The expenditures reported included $48,757 in Federal Medicaid funds, but Federal Medicaid funds are not an allowable source of funds to include. Cause: Inadequate procedures. Effect: Without adequate procedures, there is an increased risk for errors or unallowable expenditures to be reported. Recommendation: We recommend the Agency ensure that MOE requirements are both met and accurately reported, and only allowable categories of expenditures are utilized. Management Response: The Agency agrees. The incorrect data error was discovered prior to the audit by the Division of Behavioral Health (DBH). DBH is currently working with SAMHSA to correct the issue. DBH has already created and implemented another method to pull fiscal data to double-check the substance abuse expenditures for MOE purposes.

Program: AL 17.225 – Unemployment Insurance – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2024-061 Questioned Costs: $45,708 known Statistical Sample: No Summary: Audit Finding 2025-011, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total tested was $18,372, and questioned costs for payments tested were $1,320. Total benefit payments for the fiscal year ended June 30, 2025, were $107,466,760. Based on the sample tested, the dollar error rate for the sample was 7.18% ($1,320/$18,372), which estimates the potential dollars at risk for fiscal year 2025 to be $7,716,113 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $44,388. A similar finding was noted in the prior audit. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper Unemployment Insurance (UI) benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: As part of our ongoing commitment to the accuracy of benefit payments, the Department will continue to take steps to reduce improper payments. The Department will further refine its processes to minimize errors and acknowledges that continued improvement is necessary in certain areas. NDOL is committed to addressing these issues through ongoing evaluation, monitoring of performance, staff training and refresher instruction, and timely adjustments as needed.

Program: AL 17.225 – Unemployment Insurance – State – Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024, and January 1, 2025), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR § 200.302(a) (January 1, 2024, and January 1, 2025), the State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and terms and conditions of the Federal award, must be sufficient to permit the preparation of required reports and tracing of funds to an adequate level of expenditures to establish that such funds have been used according to Federal statutes, regulations, and the terms and conditions of the Federal award. Per ETA Handbook 401 (5th Edition) (August 16, 2017): The data used in preparing the ETA 2112 must be obtained from the books of the state. A properly completed ETA 2112 will accurately show the net result of all transactions in the three accounts comprising the state unemployment fund as they appear in each state’s records. Good internal control requires adequate procedures to ensure reports are complete and accurate. Condition: During testing of the ETA 2112 reports, we noted the following: • For three reports tested, a reconciliation of the ending balance per the report to the bank statement for each account was not properly completed. • For two reports tested, amounts reported either could not be traced to supporting documentation or used the inaccurate amounts from the supporting documentation provided. Repeat Finding: 2024-062 Questioned Costs: None Statistical Sample: No Context: The ETA 2112 Report is a monthly summary of transactions in a State unemployment fund which consists of the Clearing Account, Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. Agency controls over the ETA 2112 report include completing a reconciliation of the ending balance per the report to the bank statement for each account. For the three months we tested, a reconciliation was completed by the Agency; however, the ending balances per the report did not agree to the reconciled bank account balances. See the table below for a summary of the variances noted. Upon inquiry, it was noted that these variances had been occurring since the April 2024 monthly report. After this issue was brought to the Agency’s attention, the Agency restated all 12 reports for fiscal year 2025. See Schedule of Findings and Questioned Costs for chart/table. In addition to testing the Agency’s reconciliations, we performed detailed testing of two monthly ETA 2112 reports. During this review, the following issues were noted: November 2024 • The beginning benefit account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • The beginning clearing account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $1,666. This also resulted in the ending account balance being overstated by the same amount. • The beginning trust account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The three errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. April 2025 • The beginning benefit account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • Net UI contributions reported in the Clearing account were originally understated by $1,854 due to the Agency improperly adjusting for a correction made by the bank for a check that originally cleared for an incorrect amount. • The beginning clearing account balance agreed to the ending balance from the March 2025 report; however, due to the reconciliation issues noted above and the bank correction issue, the beginning balance was overstated by $5,648. This issue, along with the understatement due to the improper adjustment for the bank correction noted above, then resulted in the ending balance being overstated by $3,794. • The beginning trust account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. Additionally, for both months tested, it was noted that the Daily Payment Register Summary was used to report the amount of disbursements by program. In prior years, it was noted that the Daily Payment Register Summary does not account for cancellations, which causes certain program disbursements to be overstated, such as UCFE, and Net UI Benefits to be understated. Upon inquiry of the Department, it was noted that this issue still existed during the fiscal year ended June 30, 2025. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of misrepresented amounts being reported for Federal unemployment insurance programs. Recommendation: We recommend the Agency implement procedures to ensure that amounts reported for Federal unemployment programs are accurate. These procedures should include the following: 1) accurate reconciliations between the ending balances on the reports and supporting documentation are completed; 2) duplicate payments for the various programs are accounted for to ensure proper reporting; 3) amounts reported on the 2112 report can be traced to supporting documentation; and 4) amounts reported on the 2112 report are in line with Federal and State guidelines. Management Response: NDOL agrees that the agency should establish and enforce procedures to ensure the accuracy and reliability of amounts reported for Federal unemployment programs. At a minimum, these procedures should include accurate reconciliation, traceability to source documents, and adherence to guidelines.

Program: AL 17.225 – Unemployment Insurance – State – Special Tests and Provisions Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Neb. Rev. Stat. § 48-652 (Supp. 2024) states, in relevant part, the following: (3)(a) Each experience account shall be charged only for benefits based upon wages paid by such employer. No benefits shall be charged to the experience account of any employer if: (i) Such benefits were paid on the basis of a period of employment from which the claimant (A) left work voluntarily without good cause, (B) left work voluntarily due to a nonwork-connected illness or injury, (C) left work voluntarily with good cause to escape abuse as defined in section 42-903 between household members as provided in subdivision (1) of section 48-628.13, (D) left work from which he or she was discharged for misconduct connected with his or her work, (E) left work voluntarily and is entitled to unemployment benefits without disqualification in accordance with subdivision (3), (5), or (11) of section 48-628.13, or (F) was involuntarily separated from employment and such benefits were paid pursuant to section 48-628.17; and (ii) The employer has filed timely notice of the facts on which such exemption is claimed in accordance with rules and regulations adopted and promulgated by the commissioner. * * * * (d) Benefits paid to an eligible individual shall be charged against the account of his or her most recent employers within his or her base period[.] (Emphasis added) Neb. Rev. Stat. § 48-664 (Reissue 2021) provides the following: Any employer, whether or not subject to the Employment Security Law, or any officer or agent of such an employer or any other person who makes a false statement or representation knowing it to be false, or who knowingly fails to disclose a material fact, to prevent or reduce the payment of benefits to any individual entitled thereto, to obtain benefits for an individual not entitled thereto, to avoid becoming or remaining subject to such law, or to avoid or reduce any contribution or other payment required from an employer under sections 48-648 and 48-649 to 48-649.04, or who willfully fails or refuses to make any such contributions or other payment or to furnish any reports required under the Employment Security Law or to produce or permit the inspection or copying of records as required under such law, shall be guilty of a Class III misdemeanor. . . . When an unemployment benefit overpayment occurs, in whole or in part, as the result of a violation of this section by an employer, the amount of the overpayment recovered shall not be credited back to such employer’s experience account. Title 221 NAC Chapter 3-004 provides that employers have 10 days to respond to the Separation Information Request. Title 219 NAC Chapter 15-001 provides the following: Pursuant to Neb. Rev. Stat. §48-631 and §48-607, the Commissioner or the Commissioner’s designee may redetermine a previous monetary or non-monetary determination if (1) there is an error in computation or identity, (2) pertinent wages not previously considered have been newly discovered, or (3) benefits have been allowed or denied or the amount fixed based upon misrepresentations of fact. When deciding if a redetermination should be made, the following definitions shall provide guidelines: A. “Error in computation”. Erroneous information based on omission, misconception, or mathematical error with a resultant consequence of altering claimant eligibility. B. “Error in identity”. The identity of a specific individual or employer as claimed or asserted which does not meet the condition of being the same as described. C. “Newly discovered wages”. Wages for an individual relevant to their eligibility which have not been previously known or incorrectly reported and documented. D. “Misrepresentation of fact”. An indication by words or other conduct by a person(s) to another that, under the circumstances, amounts to an assertion by words or other conduct not in accordance with the facts, and that if accepted leads the mind of the person relying thereon to an understanding other and different from that which actually exists. Misrepresentation can occur either ignorantly or intentionally[.] Good internal controls require procedures to ensure the following: 1) employers are properly charged, or credited, for unemployment benefits; and 2) adjudicators properly establish overpayments according to statutes and regulations. Condition: During our testing, we noted the following issues regarding overpayments: • For five overpayments established, the employers on the claim were not properly charged or relieved of charging for benefits overpaid to claimants. • One overpayment was identified by the Agency’s Benefit Accuracy Measurement (BAM) staff; however, it was not properly applied to the claim. Repeat Finding: 2024-065 Questioned Costs: None Statistical Sample: No Context: The table below outlines the overpayments tested, the amounts of the overpayments, the weeks ended during which the overpayments occurred, the amount each employer was charged for these weeks, and the amounts credited to their accounts after the overpayments were established. In each case, we noted that the amount credited to the employer’s account was not correct based on the amount overpaid and State statute. See Schedule of Findings and Questioned Costs for chart/table. For overpayments #1, #2, #3, and #5, the overpayment amounts should have been credited to the employers’ accounts. However, the credits were not appropriately applied to the employers’ accounts due to both system errors and employee errors when applying the credits. For overpayment #4, the Pool Account should not have been credited because the overpayment was cancelled. However, the Agency still credited the Pool Account. Additionally, we noted the following regarding BAM Investigations. An additional error was found regarding the Agency not properly establishing an overpayment after being discovered by a BAM Investigator. The overpayment was identified by the BAM Investigator on October 21, 2024, due to late wage reporting by an employer, which affected the base period wages used to determine the benefit amount and resulted in a reduction in the maximum benefit amount (MBA) allowable for the claim. However, the overpayment was not properly established in the benefit payment system. When we inquired about the overpayment, the Agency stated that the system should have created an overpayment. The MBA was adjusted from $7,181 to $4,038. The overpayment should have been established at the point the MBA was exhausted. The total overpayment that should have been established was $2,412. Cause: Inconsistency in staff review/adjudication of claim issues. System not properly set up to charge employers correctly. Effect: Without adequate procedures to ensure employers are properly credited for charges against them, there is an increased risk of noncompliance with Federal and State regulations. Without adequate procedures to ensure claimants are properly rewarded benefits, there is an increased risk of noncompliance with Federal and State regulations. Recommendation: We recommend the Agency review procedures for applying credits to employers for overpayments to ensure the system is working properly. Having an employee review the system’s work will help to ensure proper compliance with regulations. We recommend the Agency review procedures for establishing overpayments with employees to ensure proper compliance with regulations. Management Response: The Nebraska Department of Labor agrees with the recommendation. NDOL recognizes the importance of accurate employer charging and the proper application of credits and overpayments to ensure compliance with applicable State and Federal regulations. NDOL is committed to reviewing and strengthening procedures related to employer charging and overpayment establishment to promote effective internal controls.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-23-2-1001, FFY 2023; W91243-24-2-1001, FFY 2024; W91243-25-2-1024, FFY 2025; W91243-25-2-1001, FFY 2025; W91243-25-2-1021, FFY 2025 Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2024, and January 1, 2025), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2024, and January 1, 2025), a non-Federal entity must establish and maintain effective internal control over the Federal award to provide 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. Title 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State be sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Per Title 2 CFR § 200.305(a) (January 1, 2024, and January 1, 2025), payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205. National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. The instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a: Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients. A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements is minimized and in compliance with National Guard Regulations. Condition: The Agency was noncompliant with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2024-066 Questioned Costs: None Statistical Sample: No Context: We tested five drawdowns of Federal funds to support the Agency’s operations. We tested to determine whether the Agency had expended the cumulative amounts drawn down for the awards tested within the required timeframe and noted the following: • Three drawdowns were noncompliant with NG Policy 5-1. Cumulative drawdowns for one of the draws were expended 63 days after the drawdown of the Federal funds. Cumulative draws for the other draws had yet to be fully expended as of January 8, 2026. The table below provides a summary of the three draws: See Schedule of Findings and Questioned Costs for chart/table. • For 5 of 5 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an overreporting of $2,764 to an overreporting of $3,530,797, with a net total overreporting of expenditures by $4,074,284 for the five reports tested. Cause: Inadequate procedures for estimating fund needs for the upcoming month. Regarding SF-270 reporting, the Agency has stated it agrees with the finding; however, it has yet to implement corrective action. Effect: The Agency is noncompliant with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and the advance state requirement function. Program obligations and liquidations are reconciled and reported on at least a quarterly basis with federal constituents.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Allowability & Eligibility Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Title III, Subtitle B, Section 3201(f)(2), of the American Rescue Plan Act, 2021, Pub. L. No. 117-2 (March 11, 2021) states, in relevant part the following: ELIGIBLE HOUSEHOLD. - The term ‘‘eligible household’’ means a household of 1 or more individuals who are obligated to pay rent on a residential dwelling and with respect to which the eligible grantee involved determines that— * * * * (C) the household is a low-income family (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)). Low-income family is defined in 42 U.S.C § 1437a(b)(2)(A) as follows: [F]amilies whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families . . . . Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2024): 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. Question 4 of the Frequently Asked Questions (FAQ) guidance document (Revised December 4, 2024), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states, in relevant part, the following: If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. Question 7 of the FAQ guidance document states that other expenses that can be paid for include “reasonable accrued late fees.” Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Documentation to support the eligibility and the amount paid for 5 of 40 payments/households tested was not adequate. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-067 Questioned Costs: $1,580 known Statistical Sample: No Context: We tested 40 assistance payments. We noted the following: • For one payment, adequate income verification was not performed. The applicant attested that the household did not have income. Subsequent payments were made for rent over three months after the attestation. The Agency neither reassessed the household’s income nor obtained a new self-attestation, as required per the FAQ. This resulted in questioned costs of $1,277. • For four payments, the payment amount was incorrect. o For three payments, we did not agree with the amount paid for late fees. For rent paid for future months, it was the Agency’s policy to pay the late fee if the payment was approved after the 15th of the previous month. For example, if the Agency approved a rental payment for the month of October 2024 on September 16, 2024, the Agency would also pay a late fee for October 2024. However, per review of the actual date paid, the late fees paid were either excessive or should not have been paid at all. In total, we questioned $146 in excessive late fees. o For one payment, the Agency calculated a payment amount of $1,342; however, after reviewing the lease, we calculated an amount of $1,185, a difference of $157. Federal payment errors for the sample tested were $1,580. The total sample tested was $64,938, and assistance payments for the year totaled $18,220,684. Based on the sample tested, the dollar error rate for the sample was 2.43% ($1,580/$64,938), which estimated the potential dollars at risk for fiscal year 2025 to be $442,763 (dollar error rate multiplied by the population). Cause: Inadequate procedures to ensure that self-attestations of income were obtained every three months. Inadequate procedures to ensure the payment amount was correct, and late fees were reasonable. Effect: Increased risk of loss or misuse of funds and noncompliance with Federal guidelines. Recommendation: We recommend the Agency strengthen policies and procedures to ensure applicants are eligible for assistance, and payment amounts are reasonable and proper. Management Response: Management agrees with the finding presented.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Reporting Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. The Emergency Rental Assistance Program (ERA2) Reporting Guidance (Revised June 16, 2025) issued by the U.S. Department of the Treasury states, in part, the following: Each ERA2 Recipient must report the cumulative obligations and cumulative expenditures for the Recipient’s Rental Assistance Project between date of receipt of the ERA2 award through the end of the current reporting period. This includes all amounts obligated and expended by the ERA2 Recipient and its subrecipients and contractors, as applicable. * * * * iv. Total Cumulative Dollar Amount of the ERA2 Funds Paid (Expended) for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. * * * * v. Total Cumulative Dollar Amount of the ERA2 Funds Obligated for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. A good internal control plan requires procedures to ensure that all required information is reported accurately and supported by underlying data. Condition: For two of two quarterly reports tested, expenditures reported as administrative costs were not accurately categorized as housing stability services costs. Repeat Finding: 2024-068 Questioned Costs: None Statistical Sample: No Context: For the quarters ended December 31, 2024, and June 30, 2025, $1,727,607 and $2,371,862 in ERA2 expenditures, respectively, were reported under the category of administrative costs instead of housing stability services costs. We noted during testing that payments made to two vendors, explicitly for housing stability services per their contracts with the Agency, were not properly categorized in data submitted to the U.S. Department of the Treasury. Upon inquiry, the Department confirmed that the amounts were miscategorized. Cause: Inadequate procedures to compile the reporting data. Effect: Without adequate procedures to ensure reports contain accurate information, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency implement procedures to ensure that figures reported in the ERA2 quarterly compliance report are accurately categorized. Management Response: We agree with the finding.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2024) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in the case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) Enumerated eligible uses: responses presumed reasonably proportional. A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (D) Assistance to tourism, travel, hospitality, and other impacted industries for programs, services, or capital expenditures, including support for payroll costs and covered benefits for employees, compensating returning employees, support for operations and maintenance of existing equipment and facilities, and technical assistance[.] 31 CFR § 35.6(c) (July 1, 2024) states the following: Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID-19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID-19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID-19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID-19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2024) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. H.J. Res 7 (2023) states the following: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, pursuant to section 202 of the National Emergencies Act (50 U.S.C. 1622), the national emergency declared by the finding of the President on March 13, 2020, in Proclamation 9994 (85 Fed. Reg. 15337) is hereby terminated. Approved April 10, 2023. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designated to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2024), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.303 (January 1, 2024) states, in relevant part, the following: 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. Per 2 CFR § 200.403 (January 1, 2024), costs must be necessary and reasonable for the performance of the Federal award. Costs must also be adequately documented. Good internal control and sound business practices require procedures for ensuring that: 1) premium pay is paid to only eligible individuals; 2) expenditures are adequately supported; and 3) all expenditures are for allowable purposes. Condition: The State lacked procedures to ensure that: • Grants issued to beneficiaries for worker retention and incentives were used for such purposes. • Premium pay paid to eligible individuals was for work performed during the COVID-19 public health emergency. Repeat Finding: 2024-069 Questioned Costs: $2,619,690 known Statistical Sample: No Context: We randomly selected 40 payments to test. We also judgmentally selected 12 payments and 7 journal entries to test. We noted the following: Payments to Nursing Facilities & Assisted Living Centers for Employee Retention and Recruitment LB 1014 (2022), section 28, appropriated $12,500,000 from the CSLFRF grant to the Department of Health and Human Services (DHHS) for State fiscal year 2025 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $12,500,000 to Medicaid-certified nursing facilities during State fiscal year 2025. During testing of 40 randomly selected CSLFRF payments, we tested five payments, totaling $452,690, made to Medicaid-certified nursing facilities. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014 (2022). Additionally, during June and July 2024, DHHS obtained signed attestations from all entities that had previously received funds in fiscal years 2023 and 2024, attesting that the entity was aware that funds provided could be used only to enhance employee recruitment and retention and that funds were used for such purpose. These forms applied only to funds already received at the time and did not include language referencing that they would apply to those payments issued in the State fiscal year 2025. DHHS claimed to have performed additional monitoring procedures in response to our finding in fiscal year 2024, which consisted of reviewing four entities that received funds in fiscal year 2024. The APA noted that this review consisted of only 4 of the 181 entities that received payments in fiscal year 2025, and the review considered only the use of funds disbursed prior to fiscal year 2025. Lastly, the APA noted that the documentation on file for DHHS’ review did not contain any analysis to support that funds were allowed for allowable retention and recruitment. Because no documentation was provided to support that funds were used for allowable employee retention and recruitment programs, we questioned all costs for the five payments tested, totaling $452,690, and noted that all $12,500,000 disbursed are dollars at risk. Premium Pay LB 1412 (2024), section 112, allowed the Governor to reallocate previously appropriated CSLFRF dollars that could not otherwise be obligated by the December 31, 2024, obligation deadline. Under this authority, the Office of the Governor authorized $3,007,058 to be used for premium pay to State employees. In December 2024, May 2025, and June 2025, DHHS posted three journal entries to move payroll costs of $2,167,000 to the CSLFRF grant. During our review of these entries, totaling $2,167,000, we noted that DHHS had determined the allowability of the entry by calculating the total amount of allowable premium pay during the grant period. DHHS had identified premium pay, totaling $10,537,975, paid to employees providing mental health services as part of the Lincoln Regional Center and Norfolk Regional Center Sex Offender Treatment Program for work dates from December 23, 2019, through April 30, 2023, and stated that this was more than the $9,760,287 in premium pay coded to the grant as of June 30, 2025, including the $2,167,000 tested; therefore, the entry was allowable. However, during our review, we noted the following deficiencies in DHHS’ review: • DHHS included $5,054,478 of payroll costs associated with work performed prior to the implementation of any premium pay on November 1, 2021, and after the end of the public health emergency on April 10, 2023, which is not allowable. • DHHS projections did not include any review of employee exemption status or total wages to support that moving payroll costs to the grant was responsive to employees performing essential work. Further, DHHS had no written justification on file to support the responsiveness of premium pay for any employees. We noted 28 employees who were exempt with wages over 150% of the State average. • DHHS did not properly cap the amount of premium pay at $25,000 per person for the life of the grant. Rather, DHHS capped premium pay at $25,000 per employee per each fiscal year during the grant. • Despite attempting to cap premium pay at $13 per hour for all employees, DHHS did not properly calculate the amount of premium pay earned by each employee. Employees were afforded a 20-30% pay increase for premium pay; however, DHHS calculated the premium pay as 20-30% of the new rate (including premium pay) instead of the employees’ original pay rate, resulting in overstatements of 3-7%. • In determining the amount of premium pay, DHHS erroneously included duplicate payroll lines, totaling $709,206, of gross pay. Taking all of the deficiencies into consideration, the APA calculated total allowable premium pay for the grant period to be only $5,001,281, which was $4,759,005 less than the amount of premium pay coded to the grant. The APA observed that, prior to fiscal year 2025, the agency had moved $7,593,287 of payroll costs to the grant. Therefore, all $2,167,000 of these journal entries tested are questioned costs. Cause: Inadequate procedures to ensure: 1) grants to nursing and assisted-living facilities were used for allowable purposes; and 2) premium pay was paid only to individuals who performed work during the COVID-19 public health emergency and at allowable rates. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. Management Response: Department of Health and Human Services Agency disagrees with this finding. The methods utilized to calculate claims over the $25k per person cap and the max $13/hour increase cap were erroneous. DHHS was able to consolidate the entire data set for the appropriation periods between State fiscal year 2022 and State fiscal year 2025 and showed that, based on allowable claims for each period, there was a total of $10,537,974.76 possible to be claimed, and $9,760,286.67 actually claimed. APA Response: As noted above, 31 CFR § 35.3 (July 1, 2024) defines “premium pay” as an additional amount up to $13 per hour that is paid to an eligible worker for all work performed by the eligible worker during the COVID-19 public health emergency and states that it “may not exceed $25,000 in total over the period of performance with respect to any single eligible worker.” Review of DHHS’s analysis of $10,537,974.76 noted that it includes premium pay in excess of the $25,000 per person total limit for the period of performance for 138 individuals, totaling $4,208,829.04.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.332 (January 1, 2024) states, in relevant part, the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. * * * * (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date . . . . * * * * (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient’s records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (6) Appropriate terms and conditions concerning the closeout of the subaward. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the passthrough entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward . . . . * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501.   2 CFR § 200.318 (January 1, 2024) states, in relevant part, the following: (a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in §§200.317 through 200.327. * * * * (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 2 CFR § 180.300 (January 1, 2024) requires that the pass-through entity take specific steps to document that subrecipients are not suspended or debarred, as outlined below: When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR § 200.430(i) (January 1, 2024) states the following in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards[.] Good internal controls and sound business practices require policies and procedures to ensure that adequate monitoring is performed to verify that subrecipients are using funds in accordance with all Federal and grant requirements. Condition: The State lacked procedures to ensure that: • Subrecipient use of funds was monitored to ensure compliance with all Federal and grant requirements. • Subrecipients obtained audits required by Federal requirements, and those audits were obtained and reviewed in a timely manner. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The State paid $172,943,444 to subrecipients for 143 subawards during the fiscal year ended June 30, 2025. We selected 17 subrecipients to test. Additionally, we reviewed the single audit tracking procedures for all State agencies acting as pass-through entities. We noted the following: Insufficient Subrecipient Monitoring Procedures For 5 of 17 subawards tested, the APA noted that subrecipient monitoring was insufficient to ensure that the subrecipient complied with all Federal and grant requirements. Additionally, for one of the subawards tested, the APA noted that the pass-through entity did not have documentation on file to support it verified the subrecipient was not suspended or otherwise debarred. Deficiencies noted included the following: • One $86,650,000 subaward tested was issued by the Military Department (Military) to the University of Nebraska Board of Regents (University). During testing, the APA noted that the only monitoring performed by the Military was a review of the University’s single audit for fiscal year ended June 30, 2024. A total of $47,533,117 was paid to the University for the fiscal year ended June 30, 2025. • During our audit, we observed that for two subawards, one issued by the Department of Natural Resources (DNR) and one by the Department of Health and Human Services (DHHS), each valued at $2,000,000 for capital riverfront improvements and the construction of a youth activity center, respectively, significant disbursements were used to cover construction costs. However, neither pass-through entity could provide documentation supporting that subrecipient monitoring performed or planned included adequate procedures to ensure that the subrecipient had followed its written procurement policies, and procurement procedures were adequately documented. These subrecipients were paid $1,362,909 and $841,446, respectively, during the fiscal year ended June 30, 2025. • For one subaward tested, issued by the Department of Correctional Services (Corrections) for $1,505,826 to implement a transitional living and vocational skills program for former inmates, the APA did not observe any documentation supporting that Corrections had verified the subrecipient was not suspended or otherwise debarred from receiving Federal funds. Additionally, the APA noted that the subaward included significant costs for subrecipient payroll and benefit costs. For those salaried employees who had only a portion of their payroll coded to the grant, Corrections relied on budget estimates submitted at the beginning of the subaward to ensure the cost allocation was proper. The APA observed that six salaried employees had payroll costs coded to the grant, ranging from 2% - 98% of their total salaries. During the fiscal year ended June 30, 2025, the total paid to the subrecipient for this subaward was $204,302. • For one subaward issued by DHHS for $4,000,000 to be used towards increasing childcare license capacity, the APA noted that DHHS failed to perform the subrecipient monitoring procedures outlined in their monitoring policy. The monitoring policy for the subaward indicated that 10% of all expenses would be reviewed. DHHS claimed to have reviewed 10% of all reimbursements between July 2023 – April 2024; however, the APA observed $628,610 of reimbursed costs after April 2024, all of which was disbursed in August 2024 for which no review was performed. Additionally, the APA noted DHHS did not obtain appropriate documentation to support $387 of payroll costs coded to the grant. A total of $627,110 was paid to this subrecipient during the fiscal year ended June 30, 2025. Failure to Communicate all Required Subaward Information During our review of subrecipient monitoring, the APA noted that, for 4 of 17 subawards tested, the subaward did not contain all required information or contained erroneous information, as follows: • In two instances of subawards issued by DHHS, the subaward listed the Federal Award Identification Number (FAIN) as SLFRP3145; however, the primary CLSFRF award to the State of Nebraska was SLFRP1965, while the SLFRP3145 award merely passed through the State to various Non-Entitlement Units (NEU’s) in the State that were the primary recipients. • One subaward issued by DNR and one subaward issued by Corrections lacked required information, as noted below. Neither department could provide documentation showing that this information had otherwise been communicated to the subrecipient. See Schedule of Findings and Questioned Costs for chart/table. Single Audit Tracking Procedures During our review of single audit tracking procedures implemented by the State, we noted the following: • DNR and the Department of Labor (DOL) lacked procedures for determining if subrecipients were required to have a single audit or obtain and review such audits. DOL had 10 subrecipients who had received cumulative payments as of June 30, 2025, ranging from $1,000 to $318,669. DNR had 13 subrecipients that received cumulative payments as of June 30, 2025, ranging from $12,557 to $32,256,022. Three of DNR’s subrecipients have received payments over $750,000 as of June 30, 2025. In reviewing the Federal Audit Clearinghouse (FAC), two of these subrecipients had single audits for the subrecipients’ fiscal year 2024, which listed CSLFRF (ALN 21.027) as a major program and reported no findings. • During testing, the APA identified three instances of DHHS failing to obtain and review subrecipient single audits due to errors in that agency’s tracking procedures. The three subrecipients had received $2,209,137 in CSLFRF funds as of June 30, 2025. The APA obtained the fiscal year 2024 single audits for all three subrecipients from the FAC and noted that ALN 21.027 was listed as a major program on all three audits. None of the audits noted any program-related findings. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements or to ensure that subrecipients obtained single audits when required. Effect: Without adequate monitoring and review procedures, there is an increased risk of Federal awards being used for unallowable costs. Recommendation: We recommend the State strengthen procedures to ensure that subrecipient monitoring is designed properly to ensure compliance with all Federal and grant requirements. We also recommend the State strengthen procedures to ensure that subrecipient single audit requirements are tracked properly, and all single audits are reviewed in a timely manner. Management Response: Military Department The Department of Military disagrees with this finding. The subrecipient submitted an independent audit on 4/1/2025. The independent auditor employed auditing standards generally accepted in the United States (GAAS). Major federal programs included COVID-19, Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027. The independent auditor concluded there were no significant deficiencies or material weaknesses. The auditee was deemed “low risk.” In NEMA’s risk evaluation, it considers two separate University of Nebraska offices whose responsibility includes work to monitor and ensure compliance with Federal regulations. When determining risk appetite and risk tolerance, the “…cost of internal control should never exceed anticipated benefits. Thus, an entity must accept a certain level of risk.” Findings by the independent auditor and Auditor of Public Accounts exceed any benefit that might have been gained by additional subrecipient monitoring. In October 2025, the Agency formally adopted the Subrecipient Monitoring policy and procedure it has informally used the last several years. APA Response: 2 CFR § 200.332(d)(4) (January 1, 2024) requires pass-through entities to perform subrecipient monitoring, which includes obtaining and reviewing subrecipient Single Audit reports. Subsection (d)(4) of this regulation states: If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up . . . . Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Department of Natural Resources While DNR conducted general subrecipient monitoring activities, documentation did not sufficiently demonstrate that monitoring procedures included a review of subrecipient procurement practices for compliance. DNR communicated the required federal award information to the subrecipient through other means, it was not consistently incorporated into the formal subaward agreement as required. While DNR does require Single Audits per their contracts, they did not have formalized, written procedures to consistently determine whether subrecipients met the Single Audit threshold, to ensure timely receipt and review of Single Audit reports when required. The Department acknowledges that documented procedures are necessary to ensure compliance with applicable federal regulations and to strengthen subrecipient oversight. Department of Health and Human Services Agency agrees with finding. Department of Correctional Services Management agrees with the finding.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.3 (July 1, 2024) defines “obligation” to include the following: [A]n order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. 31 CFR § 35.6(b)(4) (July 1, 2024) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions[.] 2 CFR § 200.511(b) (January 1, 2024) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million and that written justification is submitted to the Treasury, as required, for projects with expected capital expenditures of $10 million or more. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations and expenditures were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was submitted accurately or on file for projects with expected capital expenditures. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2024-070 Questioned Costs: None Statistical Sample: No Context: We tested the quarters ended December 31, 2024, and June 30, 2025, Project and Expenditure Reports. We selected 11 of 106 projects from the quarter ended December 31, 2024, report and 11 of 109 projects from the quarter ended June 30, 2025, report to test. We noted the following: Cumulative Expenditures Reported Four of the projects tested did not have cumulative expenditures reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative expenditures for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Cumulative Obligations Reported One of the projects tested did not have cumulative obligations reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative obligations for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Capital Expenditures We noted 10 projects that either did not properly report expected capital expenditures, or a proper required written justification was not on file. • NE Rural Healthcare – The State reported $50,000,000 in expected capital expenditures for this project as of December 31, 2024, which uses CSLFRF funds to build a rural health complex in Kearney, Nebraska. The quarterly report included written justification which identified the harm to be addressed and an explanation for why the capital expenditure is appropriate but did not compare the proposed capital expenditure to at least two alternatives and a demonstration of why the proposed expenditure was superior. The APA noted that documentation on file did support that a comparison had been performed. • PH EMS Equipment – The State reported $0 of expected capital expenditures for the project as of December 31, 2024. However, the project uses CSLFRF funds to purchase equipment for emergency medical services and, therefore, it appears that all $6,539,617 of obligated funds would be considered as expected capital expenditures. The Department of Health and Human Services (DHHS), which is administering the program, did have the required written justification on file for this project. • Long-Term Housing Security – Affordable Housing – the State reported the project as having $750,000 of expected capital expenditures as of June 30, 2025. However, the Department of Economic Development (DED), which is the State agency responsible for administering the project, informed the APA that all $36,467,838 of funds obligated for the project are expected to be used for capital expenditures associated with the development of affordable housing. Therefore, expected capital expenditures were underreported by $35,717,838. Additionally, because the project was erroneously reported as having less than $1 million in expected capital expenditures, written justification was not reported to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • PH EMS Ambulance – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that all funds obligated under the project were for purchasing ambulances for rural emergency services. Therefore, all $18,460,383 of funds obligated for the project should be considered expected capital expenditures. Additionally, because the project was erroneously reported as having no expected capital expenditures, written justification was not submitted to the Treasury. The APA noted that written justification was on file and included all required elements. • HVAC – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $5,000,000 obligated for the project was to be used for construction costs related to HVAC improvements at a rehabilitation hospital. Therefore, expected capital expenditures should have been reported as $5,000,000. Written justification was on file and appeared to contain all required elements. • Strong Healthy Communities – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $10,000,000 obligated for the project was to be used for rehabilitation and adaptive reuse of vacant and abandoned property. Per DED, the State agency responsible for administering the project, all funds obligated were expected to be used for capital expenditures. Therefore, expected capital expenditures should have been reported as $10,000,000. Additionally, because the State erroneously reported the project as having no expected capital expenditure, written justification was not included in the report to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • Hastings Automotive – The State reported the project as having $4,700,000 of expected capital expenditures. However, this did not take into consideration that in quarter ended March 31, 2025, an award amendment was issued that transferred $2,875,500 from the Hastings Automotive project to the Grand Island Welding Center project. Therefore, expected capital expenditures were overreported for the Hastings Automotive project and underreported for the Grand Island Welding Center project. For the projects below, the APA noted that written justification was on file but did not include a comparison to at least two alternatives or demonstrate why the proposed expenditure was superior. See Schedule of Findings and Questioned Costs for chart/table. Lastly, during testing of allowability, the APA identified two additional projects that did not have written justification on file, as follows: • NIFA – The State reported the project as having $20,500,000 in expected capital expenditures. The APA observed that the written justification submitted to the Treasury did not include a comparison to at least two alternative expenditures or a demonstration of why the proposed expenditure was superior. DHHS was unable to provide any additional documentation supporting that such a comparison had been completed. • City of Norfolk Water Projects – The State reported the project as having $2,000,000 of expected capital expenditures. However, the Department of Natural Resources could not provide any documentation to support that a written justification was completed. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report, and DAS did not perform adequate procedures to verify the information reported. Not all information reported by the agencies was accurate, and the agencies had a poor understanding of written justification requirements. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file or submitted to the Treasury, as required. Management Response: Agency agrees with finding.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Subrecipient Monitoring Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.201(b)(1) (January 1, 2024) states the following, in relevant part: The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. The U.S. Department of the Treasury issued the SLFRF and CPF Supplementary Broadband Guidance on May 17, 2023, which states the following, in relevant part: Treasury further clarifies that a subaward that otherwise meets the requirements of 2 CFR 200.201(b) may be considered a fixed amount subaward even if: 1) the recipient uses its discretion to impose a cost-sharing or match requirement on the subrecipient; or 2) the recipient requires ISPs to submit evidence of costs. More specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs. Good internal controls require procedures to ensure that fixed amount subawards are based on a reasonable estimate of actual costs. This would include tracing budgeted costs to historical costs for similar projects, unit pricing data, or other documentation. Condition: For all four subrecipients tested, the Agency did not obtain adequate documentation to support that the subrecipients’ fixed amount subawards were based on a reasonable estimate of actual costs. Repeat Finding: 2024-072 Questioned Costs: Unknown Statistical Sample: No Context: The Agency awarded a total of $92,266,720 to 19 subrecipients for 93 separate broadband infrastructure projects. The Agency considered the subawards to be fixed amount subawards. We tested subawards issued to four subrecipients, which totaled $6,121,549. The Agency did not have adequate documentation on file to support that the fixed amount of the subaward was based on a reasonable estimate of actual costs. Documentation on file included a project budget, business plan, technical capability, and a funding breakdown. However, none of the costs included in this documentation was traced to historical costs for similar projects, unit pricing data, or other documentation. The Agency’s procedures include obtaining documentation for all costs actually incurred by the subrecipients when the project is completed. As of June 30, 2025, only 5 of the 93 projects were completed. We tested two subawards for completed projects and noted that the Agency had obtained additional documentation to support the costs incurred by the subrecipient. Total payments to the Agency’s subrecipients during the fiscal year ended June 30, 2025, were $20,289,827. Cause: Inadequate procedures to verify the amount of the subaward was based on a reasonable estimate of actual costs. Effect: Without procedures to ensure the fixed amount of the subaward is based on a reasonable estimate of actual costs, there is an increased risk of disbursed Federal funds exceeding a justifiable amount. Recommendation: We recommend the Agency improve its procedures to include tracing estimated costs of a project to historical costs for similar projects, unit pricing data, or other documentation. Management Response: The Treasury’s May 17, 2023, supplemental guidance that classified these awards as fixed-price awards, even where actual costs are reviewed prior to full reimbursement, was issued after the first application round had already been submitted, reviewed, and cured. Both CPF-1 awards, issued on June 27, 2023, and CPF-2 awards, issued on June 4, 2024, were established well before the initial audit finding dated March 25, 2025. The agency has implemented modified procedures and adopted a corrective action plan, prospective in nature, to strengthen documentation requirements and cost-reasonableness determinations for any potential future awards, rather than to retroactively alter previously issued awards. However, no new CPF awards have been issued since the initial audit finding. We acknowledge that traditional fixed-price awards do not require reconciliation to actual costs and, absent appropriate safeguards, may present a risk of unjust enrichment. That risk has been fully mitigated by the additional requirement capping final reimbursement at actual costs incurred, thereby eliminating any exposure to inflated award amounts or improper financial benefit to subrecipients. Reimbursements to CPF-1 and CPF-2 subrecipients for the remainder of the federal grant period will be strictly for actual costs incurred.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid) – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2024) and 45 CFR § 75.403 (October 1, 2023) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2024) and 45 CFR § 75.405(b) (October 1, 2023) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, Subsection (G)(2) (January 1, 2024) and 45 CFR § 75, Appendix V, Subsection (G)(2) (October 1, 2023) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, Subsection (G)(4) (January 1, 2024) and 45 CFR § 75, Appendix V, Subsection (G)(4) (October 1, 2023) state, in relevant part, the following: Billing rates used to change Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) provides the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2024) and 45 CFR § 75.444(a) (October 1, 2023) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . [.] (2) Salaries and other expenses of a state legislature . . . [.] A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Maintenance of adequate documentation to support both rates charged and the approval of those rates. • Periodic review of internal service fund balances to ensure revenues are not in excess of expenses. Condition: The Agency lacked adequate documentation to support the rates charged by the Office of the Chief Information Office (OCIO). Additionally, the Agency’s Material Division lacked adequate documentation to support service rates charges for the Print Shop. Furthermore, we noted also that the Agency lacked adequate documentation to support the allocation of security costs in developing building rental rates. Lastly, the OCIO Internal Service Fund Balance was greater than 60 calendar days for cash expenses for normal operations incurred. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2023-021 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) As noted in prior audits, the OCIO lacked adequate support for service rates charged. The Agency was in the process of updating its rates through a new methodology, but no changes were made for fiscal year 2024. In that year, the OCIO receipted $26,824,419 in Federal dollars for services performed for Federal programs. Of this amount, $12,871,044 was charged to Medicaid. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of updating its rates through a new methodology, but no changes were made for fiscal year 2024. Receipts from sales for that year totaled $3,254,109. Building Division The rental rate charged to agencies for building space includes an allocation for security costs. We noted that neither the State Capitol Building (Capitol) nor the Governor’s residence was allocated any costs for security, even though both locations have security. Because these locations were not allocated any security costs, Federal programs could be overcharged. Moreover, security costs to the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2024 indirect allocations for security totaled $1,083,488. OCIO Internal Service Fund Balance Per the Agency’s calculation, as of June 30, 2023, the OCIO Internal Service Fund Balance for allowable costs was $27.922 million; however, the allowable reserve was only $20.048 million, a difference of $7.874 million. The Agency has not completed its calculation for June 30, 2024; however, per the APA’s review of the State accounting system, the fund balance has increased by over $40 million during State fiscal year 2024 and was significantly larger than the allowable reserve at June 30, 2024. Cause: Inadequate procedures to ensure that rates are adequately supported, and the Internal Service Fund Balances do not exceed allowable thresholds. Effect: Without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services, and the Agency’s internal service funds will exceed the allowable threshold per Federal regulations. When security costs are not allocated to all buildings in an equitable manner, moreover, the risk of Federal programs not being charged in accordance with Federal cost principles is increased. Recommendation: We recommend the Agency review its allocation of security costs to ensure that such costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. Lastly, we recommend the Agency implement procedures to ensure fund balances do not exceed the allowable threshold. Management Response: OCIO - The OCIO agrees with the finding as it is the result of rates calculated 18 months in advance of the period under review. DAS Materiel – Print Shop continues to work with software that was purchased to assist with developing rates. Work continues to capture costs and actual historical units sold. DAS Building - The methodology for the allocation for security (an Indirect Cost) is a management decision and there have been no changes in the allocation methodology. APA Response: Regardless of any management business decision, security costs to both the Capitol and the Governor’s residence remain, as noted above, general costs of government and, therefore, not allowable.

Program: Various, including AL 10.542 – COVID-19 Pandemic EBT Food Benefits; AL 10.551 – Supplemental Nutrition Assistance Program; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Reporting Grant Number & Year: Various, including 2401NERCMA, FFY 2024 Federal Grantor Agency: Various, including U.S. Department of Agriculture and U.S. Department of Health and Human Services Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is presented properly. Title 45 CFR § 75.510(b) (October 1, 2023) and Title 2 CFR § 200.510(b) (January 1, 2024) state, in part, the following: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state’s central system. EnterpriseOne is the official accounting system of the State. Condition: Several programs did not have expenditures or the amount provided to subrecipients reported accurately on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. A similar finding was noted in the prior audit. Repeat Finding: 2023-022 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including overreporting AL 93.566 by $1,154,638. DHHS also reported $20,605,059 under AL 10.551 that should have been under AL 10.542. If the latter adjustment had not been made, this would have resulted in a major program not being reported on the SEFA. Sixteen programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients, as both originally reported and per the final SEFA, were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services lacked adequate procedures for ensuring the accuracy of amounts not obtained directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue agency training, review of chart of accounts setup, review of object account usage, and working with State employees to help ensure the SEFA is accurate and complete.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 243NE308N1199, FFY 2024; and 243NE377L1603, FFY 2024 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. 2 CFR § 200.511 (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of that same regulation states, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020 as of January 13, 2025. A similar finding was noted in the prior audit. The Schedule of Prior Audit Findings states, “Required report should be submitted within the next 45 days.” Repeat Finding: 2023-024 Questioned Costs: None Statistical Sample: No Context: Per the Summary Schedule, the Agency stated that it would have the reporting completed within “45 days.” We received the Summary Schedule from the Department of Administrative Services on July 31, 2024. However, when we reached out to the Agency on November 27, 2024, the Agency stated that it had not completed the reporting but planned to complete it by January 8, 2025. As of January 13, 2025, the reporting still had not been completed. For the fiscal year ended June 30, 2024, the Agency paid subrecipients from the Child Nutrition programs $144,225,430. Cause: The Agency had not developed adequate procedures to complete the reporting requirements. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not complying with Federal regulations. Recommendation: We recommend the Agency update its procedures and complete the FFATA reporting as soon as possible. Management Response: NDE submitted the required reports on time but the reports were rejected as the system noted errors with the report. NDE reached out to the Federal agency numerous times but was unable to get any assistance on how to correct the issue. Since NDE has been unable to get assistance from the Federal agency we have been working with others to identify solutions to the reporting errors.

Program: AL 84.048 – Career and Technical Education – Basic Grants to States – Allowability Grant Number & Year: V048A220027, FFY 2023 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2024), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.430(i)(1) (January 1, 2024) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Enclosure A of the “Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success” (September 7, 2012) provides guidelines for local educational agencies (LEAs), using a substitute system for time-and-effort reporting. Enclosure A states, in relevant part, the following: (2) Under the substitute system, in lieu of personnel activity reports, eligible employees may support a distribution of their salaries and wages through documentation of an established work schedule that meets the standards under section (3). An acceptable work schedule may be in a style and format already used by an LEA. (3) Employee schedules must: a. Indicate the specific activity or cost objective that the employee worked on for each segment of the employee’s schedule; b. Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule; and c. Be certified at least semiannually and signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee. Good internal control requires adequate supporting documentation to ensure that expenditures are correct and allowable. Condition: The Agency lacked documentation to support 3 of 11 aid payments tested. Repeat Finding: No Questioned Costs: $34,983 known Statistical Sample: No Context: We randomly selected 11 reimbursement payments to subrecipients for testing. We noted the following: • One reimbursement to a community college included salaries and benefits for two employees for $23,583. Documentation to support the salaries and benefits was inadequate. The Agency provided time and effort certifications, stating that the employees worked 50% on the Career and Technical Federal program and 50% on a different program. However, no other documentation – such as an employee work schedule – was provided to support that this distribution was correct. The $23,583 paid for salaries and benefits are considered questioned costs. • One reimbursement was to an Educational Service Unit (ESU). The ESU made payments to schools in order for the schools to reimburse its teachers for their costs for attending a conference and also paying the teachers a stipend for attending the conference. The payments to teachers were to include $120/night for hotels, $300 for registration fees, $265 for mileage, and $125/day as a stipend for each day the teachers attended the conference. However, documentation was not provided to support that the reimbursements/stipends went to all the teachers, or if the school should have kept the reimbursement if it paid for the hotels and registration fees. Additionally, documentation was lacking to support that all the teachers actually stayed at the hotel or that the school paid for the hotel. Lastly, documentation was not provided to support that the stipend amount was reasonable and approved by appropriate personnel. This resulted in questioned costs of $11,192. • One reimbursement to a school included payments to teachers for attending a conference. One hundred and sixty dollars was paid to 13 teachers based on the U.S. General Services Administration per diem rates for meals and incidental expenses. However, per the conference agenda, lunch was provided for one of the days, so the amount paid per teacher should have been reduced to $144, but it was not. This resulted in questioned costs of $208. Federal payment errors for the sample tested were $34,983. The total sample tested was $1,910,166, and aid payments for the fiscal year totaled $7,485,494. Based on the sample tested, the dollar error rate for the sample was 1.83% ($34,983/$1,910,166), which estimates the potential dollars at risk for fiscal year 2024 to be $136,985 (dollar error rate multiplied by population). Cause: Lack of procedures to ensure all costs were adequately documented. Effect: Without adequate supporting documentation, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to ensure that payments are supported by adequate documentation. Management Response: The Nebraska Department of Education’s Office of Career, Technical, and Adult Education provided emails which detailed the purpose for Sharri’s work within the CTE program. The college provided the time and effort certification for the time period in question for the employee but the documentation from the college did not provide the actual work performed information. The Nebraska Department of Education’s Office of Career, Technical, and Adult Education was able to provide most of this documentation related to the reimbursement for teachers attending the conference but was unable to collect the documentation from some of the schools within the ESU 4 Perkins consortium. ESU 4 was not able to provide a stipend policy, though they were able to provide meeting notes where the stipend policy was outlined ahead of time.

Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Reporting Grant Number & Year: H126A220039, FFY 2022; H126A240039, FFY 2024 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.302 (January 1, 2024) states, in part, the following: (a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State’s own funds. In addition, the state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. 34 CFR § 361.60(a)(1) (July 1, 2023) states the following: Except as provided in paragraph (a)(2) of this section, the Federal share for expenditures made by the State under the vocational rehabilitation services portion of the Unified or Combined State Plan, including expenditures for the provision of vocational rehabilitation services and the administration of the vocational rehabilitation services portion of the Unified or Combined State Plan, is 78.7 percent. Per 34 CFR § 76.707 (July 1, 2023), personal services performed by an employee of the State are obligated when the services are performed. Good internal control and sound accounting practices require adequate policies and procedures to ensure that information included in Federal reports is correct and accurate. Condition: The Agency lacked procedures to ensure that the unliquidated obligations, indirect costs, and administrative costs were reported accurately on the RSA-17 reports. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested two RSA-17 reports submitted by the Agency. We noted the following: Grant H126A240039, Quarter Ended March 31, 2024 • The Federal and Non-Federal Share of Unliquidated Obligations reported on lines 18 and 29 were $2,905,268 and $786,305, respectively. The amounts reported were not correct due to the following: o The Agency included the unliquidated indirect costs for the month of March 2024 twice, resulting in the amount reported being overstated by $43,901 for the Federal Share and $11,882 for the Non-Federal Share. o The Agency did not include the payroll costs for time worked from March 11, 2024, to March 24, 2024. Additionally, the Agency erroneously included the payroll costs for time worked from April 1, 2024, to April 7, 2024. This resulted in the amount reported being overstated by $164,849 for the Federal Share and $44,616 for the Non-Federal Share. o Lastly, the Agency did not provide adequate documentation to support the unliquidated amounts for contracts. Per the Agency, the amount was taken from proposals submitted by possible contractors; however, the Agency did not provide documentation to support those written commitments existed as of March 31, 2024. • The amount reported on line 36g for Federal Share of Indirect Costs was not correct. The Agency reported that the Federal share of indirect costs was $484,844. However, this was 100% of the total indirect costs recorded. Only $381,573 should have been reported as the Federal share based on the 78.7% matching rate. Therefore, the amount reported was overstated by $103,271. Grant H126A220039, Quarter Ended September 30, 2023 • Line 37 Federal and Non-Federal Administrative Expenses was not adequately supported. The Agency reported $1,606,807 of Federal and non-Federal administrative costs. The Agency did not set up business units or other accounts in the State’s financial accounting system (EnterpriseOne) sufficiently to identify the administrative costs recorded for the vocational rehabilitation program. To determine the amount of administrative costs to report, the Agency ran a general ledger of all expenditures and manually identified the administrative costs based off the payee description and prior knowledge of transactions. However, transactions appear to have been excluded that should have been included as administrative expenses. Therefore, we were unable to verify that the amount reported was correct. Cause: Inadequate review and documentation of amounts reported. Additionally, the Agency stated that there was an error in the quarter ended March 31, 2024, report that prevented the Agency from inputting the correct value for the Federal share of indirect costs. However, no documentation was provided to support this was the case. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that obligations and expenditures are being properly reported in accordance with reporting requirements. Management Response: Federal and Non-Federal Share of Unliquidated Obligations - The incorrect amounts reported for unliquidated cost March indirect costs, payroll, and contracts were due to an error when completing the report. An additional review from NDE Budget and Grant Management staff of unliquidated obligations will be included in future reports to ensure accuracy. Federal and Non-Federal Administrative Expenses was not adequately supported - The agency does set up business units or other accounts (subledgers, subsidiaries) in the State’s financial accounting system (EnterpriseOne) to sufficiently identify administrative costs. Sub ledgers ERSO, ERTRANSI and subsidiaries 110, TRYLN, SRC, TRANSI were specifically set up separate administrative costs. These will be used to identify administrative costs for future reports. APA Response: The subledgers and subsidiaries identified in the management’s response were not used to identify administrative expenses when the Agency completed the RSA-17 report. The administrative expenses reported did not agree to the amount recorded in EnterpriseOne to these subledgers and subsidiaries for the grant.

Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Period of Performance Grant Number & Year: H126A220039, FFY 2022 Federal Grantor Agency: U.S. Department of Education Criteria: Per 34 CFR § 76.707 (July 1, 2023), work performed by a contractor is obligated on the date the State “makes a binding written commitment to obtain the services.” Per 2 CFR § 3474.1 (January 1, 2024), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403(h) (January 1, 2024), costs “must be incurred during the approved budget period.” The Rehabilitation Service Administration Period of Performance for Formula Grant Awards FAQs (published March 21, 2017) states the following: 8. Can the total cost of a contract be obligated to a grant award if some of the contract services will be performed after the period of performance ends? Yes. If a contract is entered into during a period of performance, but some of the services will be performed after the period of performance ends (in other words, some services would be performed after the FFY of appropriation and the carryover year, if applicable, has ended), the contract would still constitute a valid obligation, as established by 34 CFR 76.707, for purposes of the period of performance in which it was incurred. Good internal control and sound accounting procedures require adequate policies and procedures to ensure that only those expenditures obligated within the period of performance are charged to the grant. Condition: One of 25 expenditures tested was not obligated within the period of performance. Repeat Finding: No Questioned Costs: $2,586 known Statistical Sample: No Context: The Agency paid $2,586 to a provider for job search and placement services that occurred between August 15, 2023, to November 22, 2023. The Agency charged the payment to grant H126A220039, and costs were to be obligated by September 30, 2023, for this grant. The State did not make any written commitment to obtain or pay for these services until October 17, 2023, when the Agency signed an authorization form for said services. As the written commitment was not issued until after September 30, 2023, the payment was not allowed to be charged to the grant. Total questioned costs from the random sample were $2,586. The total sample tested was $39,530, and the total sample population was $5,495,235. Based on the sample tested, the dollar error rate for the sample was 6.54% ($2,586/$39,530), which estimates the potential dollars at risk for fiscal year 2024 to be $359,388 (dollar error rate multiplied by the population). Cause: The Agency lacked proper understanding of when costs should be considered obligated. The Agency reported that it completed the Plan for Job Development on September 3, 2023, and considered it obligated at that time. However, the authorization for the plan was not signed until October 17, 2023. Effect: Without adequate procedures, there is increased risk that the Agency will improperly charge expenditures to the grant outside of its period of performance, resulting in noncompliance. Recommendation: We recommend the Agency strengthen procedures to ensure that expenditures are charged to its grants within the period of performance. Management Response: The agency understands costs are considered obligated at the time of authorization. The case management system is programmed to assign the cost to the grant based on the start date of the service at the time of the obligation (authorization). The programming did not account for a situation when the obligation is created in a different federal fiscal year then the start date of the service. The obligation in question was made on 10/17/23 (FFY23) for a service that started on 8/15/23 (FFY22). The obligation is allowed to be charged to grant H126A220039, but should have been reported as an obligation to the carryover year (FY23) business unit for grant H126A220039, rather than an obligation to the year of appropriation (FFY22) business unit for grant H126A220039. The obligation cannot be charged to the H126A2300390 (FFY23) grant due to service being provided in FFY22. APA Response: Grant H126A220039 had a period of performance end date of September 30, 2023. Any obligation made after this date, including the obligation made on October 17, 2023, would not be allowable to charge to this grant.

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2024) state, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of seven subawards/amendments tested. Repeat Finding: 2023-028 Questioned Costs: None Statistical Sample: No Context: Per the usaspending.gov website, the Agency had reported 117 subawards/amendments obligated during the fiscal year ended June 30, 2024. We tested seven subawards/amendments. One of the amendments to a subaward was not reported in the FFATA Subaward Reporting Systems (FSRS) as of December 9, 2024. The Agency subsequently reported the amendment to FSRS on December 10, 2024, after we brought to its attention, which was 406 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal requirements. Management Response: NDE missed reporting this subaward which was corrected and submitted immediately after NDE became aware of the oversight.

Program: AL 15.611 – Wildlife Restoration and Basic Hunter Education and Safety – Allowability & Subrecipient Monitoring Grant Number & Year: F22AF01344-00, July 1, 2022, through June 30, 2025 Federal Grantor Agency: U.S. Department of the Interior Criteria: For the Wildlife Restoration program, Title 50 CFR § 80.50(a)(6)(iii) (October 1, 2023) states, in part, “Grantees and subgrantees must follow the requirements at 2 CFR part 200 when acquiring equipment, goods, and services under an award[.]” 2 CFR § 200.332(d) (January 1, 2024) requires a pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] 2 CFR § 200.403 (January 1, 2024) requires costs to be necessary, reasonable, and adequately documented. 2 CFR § 200.430(i) (January 1, 2024) provides the following, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: * * * * (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 2 CFR § 200.431(b) (January 1, 2024) states, in relevant part: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies; (2) The costs are equitably allocated to all related activities, including Federal awards; and, (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. (i) When a non-Federal entity uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Payments for unused leave when an employee retires or terminates employment are allowable in the year of payment. (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 2 CFR § 200.431(c) (January 1, 2024) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance (except as indicated in §200.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. A good internal control plan requires procedures to ensure that salaries and wages, as well as other costs charged to subawards, are documented properly. Condition: Adequate documentation was not on file to support a payment to a subrecipient. Repeat Finding: No Questioned Costs: $1,697 known Statistical Sample: No Context: We randomly selected 16 non-payroll documents to test. Our sample population included operating expenditures, capital outlay expenditures, and subrecipient reimbursements. One of 16 documents tested lacked adequate documentation to support that the costs were in accordance with Federal cost principles. The Agency paid $17,268 to a subrecipient that submitted an invoice for lodging and travel costs, payroll, and indirect costs for one employee. The employee’s base rate of $35.82 per hour for 378.5 hours worked on the grant was calculated according to the following: a pay rate of $24.76 per hour; a charge of 18% for paid time off; 22.6% for employer taxes and benefits; and 26.2% for indirect costs. However, the subrecipient provided no documentation, such as payroll records or bank statements, to support the payroll costs, totaling $17,110. After the APA requested support, the Agency provided paystubs and detailed payroll records from the subrecipient’s accounting system; however, based on the support provided, the wages, benefits, taxes, and indirect costs allocable to the grant totaled $15,413. As a result, we questioned the variance of $1,697 between the support provided and the amount charged to the grant for the payroll costs. Federal payment errors noted for the sample tested were $1,697. The total Federal sample tested was $300,860, and the total sample population was $10,649,122. Based on the sample tested, the case error rate was 6.25% (1/16). The dollar error rate was 0.56% ($1,697/$300,860), which estimates the potential dollars at risk for fiscal year 2024 to be $59,635 (dollar error rate multiplied by the population). Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate subrecipient monitoring procedures and supporting documentation on file, there is an increased risk for not only misuse of Federal funds but also payments not complying with State and Federal requirements. Recommendation: We recommend the Agency improve subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: NGPC disagrees with the questioned costs identified by the APA. Our subrecipient policy includes the ability to ask for detailed records for any expense at any time. Accounting records, invoices, and paystubs were provided to substantiate the total invoice amount. The subrecipient has been audited and there were no issues with their financial systems. Explanations and calculations were provided to include the benefits and taxes paid out by the subrecipient, which matched the accounting records. Per their latest audit, these expenses are allocated on the basis of time and effort which complies with 2 CFR § 200.431(c). Performance reports were received and activity monitored by NGPC staff. NGPC works closely with the subrecipient which is considered a low-risk entity as demonstrated by the information provided for the audit. APA Response: Documentation provided to the auditors was inadequate to support the full amount charged to the grant. Documentation was not provided to support that the paid time off charged to the grant was reasonable, and no support was provided for Federal and State unemployment taxes, workers’ compensation costs, retirement plan fees, and other benefit costs.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2301NERCMA, FFY 2023; 2401NERCMA, FFY 2024; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2301NESOSR, FFY 2023; 2401NESOSR, FFY 2024; 2405NE5ADM, FFY 2024; 202323S251443, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. Title 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020), states, in part: • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs; • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. • The administrative costs incurred by DHHS to administer the School Based Admin program are: salaries, benefits, operating costs, and allocated costs (per the Nebraska Cost Allocation Plan). These costs are reported on the CMS-64.10 Base Line 29. • DHHS will refund 50% of that fee to CMS and will be reported on form CMS 64-10 Base, Line 19. • DHHS will subtract the amount received for the 3% fee from the total paid to the schools as a cost allocation adjustment and report the net amount CMS 64.10 Base form, Line 19. This will occur each quarter as part of the normal cost allocation adjustment process prior to running the final cost allocation module (distribution) in Enterprise One (NIS). Similar wording is found in the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”): Certain revenues must offset allocation costs in order to reduce the total amount of costs in which the federal government will participate. To the extent the funding sources have paid or would pay for the costs at issue, federal Medicaid funding is not available and the costs must be removed from total costs . . . . The following include some of the revenue offset categories which must be applied in developing the net costs: * * * * • All applicable credits must be offset against claims for Medicaid funds. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs. • A program may not claim any federal match for administrative activities if its total cost has already been paid by the revenue sources above. A government program may not be reimbursed in excess of its actual costs, i.e., make a profit. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. According to 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) (January 1, 2024), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b) and 2 CFR § 200.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) and 2 CFR § 200.511(b)(1), adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) and 2 CFR § 200.511(b)(2), provide, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-029 Questioned Costs: $1,405,085 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 10 journal entries related to the PACAP. We noted the following: • One journal entry to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP did not properly account for $54,344 paid to Equifax Workforce Solutions for employment verification and credit reporting services utilized by the SNAP. As a result, Federal funds were overcharged by $27,172 and are considered questioned costs. • One journal entry moved $2,900,000 in expenses from cost center 25C20990 to cost center 25C21960 and 25C23001. Cost center 25C20990 is allocated to numerous Federal and State programs using program recipient counts to split up the costs. Meanwhile, cost center 25C23001 allocates 50% of the costs directly to Medicaid, and cost center 25C21960 is allocated to Economic Assistance programs using random moment time study (RMTS) results. Moving expenses between these cost centers caused amounts considered unallowable, or unsubstantiated, to be charged to Federal programs. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. We also selected five adjustments made to the PACAP and noted the following: • One adjustment was related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district. The Agency then makes payment to the schools for the Federal share of expenses. Schools are responsible for providing matching funds. However, the Agency does not make payment for the entire Federal share due. The Agency subtracts a 3% fee for administration. The Agency then essentially pays itself through a reconciliation journal entry. Below is the adjustment performed for the quarter ended December 31, 2023: See Schedule of Findings and Questioned Costs for chart/table. Administrative costs of the Agency are distributed through the PACAP to benefitting programs, and would include charges to Medicaid; therefore, the Federal portion of the 3% administration fee should be credited back to Medicaid; but was not. Therefore, we question the Federal share of $20,407 for the quarter tested. • One adjustment was done to fix allocation errors made on the PACAP for the quarter ended September 30, 2023. There are 42 cost centers on the PACAP that are allocated each quarter based on various statistics. Of these 42 cost centers, 32 were allocated using incorrect statistics. When the Agency tried to correct these errors, multiple calculation errors were made, resulting in numerous undercharges and overcharges. As a result, the following programs were overcharged: See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: Journal Entry out of 25C20990: Agency agrees. The repeat finding relating to the $2.9m Journal Entry is a repeat due to the JE having occurred QE 9/30/23 which is prior to the FY23 Audit Exit being distributed and prior to the corrective action plan having been completed. Corrective Action for this item was completed as part of the FY23 Corrective Action Plan in April 2024. It should be noted that the impact of this, along with most Cost Allocation impacts, also includes undercharges to Federal Grants. Net overcharge to Federal grants is approximately $300,000. Allocation Errors in the PACAP: Agency agrees. There was a systemic issue with allocations in the 9/30/23 quarter caused by the vendor that used to process the Agency’s cost allocation plan. This was the last quarter that the vendor performed services for the Agency. DHHS was in tandem setting up the new cost allocation system, which caused more constraints on staff, resulting in inadequate review of the vendor’s work. It is noted that Federal undercharges also occurred, netting to an approximately $85,000 undercharge to Federal Grants. Since the new vendor was exclusively implemented, staff no longer have time constraints which affect their ability to perform adequate vendor reviews. School-Based Admin: Agency disagrees that the Administrative Fee is being handled incorrectly, as the current process has been vetted and approved through CMS. The current process has been in effect since 2017 and has not been flagged by CMS during that time. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program. The Agency was unable to provide any documentation to support the Federal grantor approved the handling of the administrative fee.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.667 – Social Services Block Grant; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2101NETANF, FFY 2021; 2401NESCSS, FFY 2024; 2401NERCMA, FFY 2024; 2401NELIEA, FFY 2024; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2401NEADPT, FFY 2024; 2401NESOSR, FFY 2024; 2305NE3002, FFY 2023; 2405NE5ADM, FFY 2024; 202424S251443, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024) state, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2023) and 2 CFR § 200.302 (January 1, 2024) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405(a) (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) state, in relevant part, the following: (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (i)(1) of this section if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, “rolling” time studies, case counts, or other quantifiable measures of work performed. (i) Substitute systems which use sampling methods (primarily for Temporary Assistance for Needy Families (TANF), the Supplemental Nutrition Assistance Program (SNAP), Medicaid, and other public assistance programs) must meet acceptable statistical sampling standards including: (A) The sampling universe must include all of the employees whose salaries and wages are to be allocated based on sample results except as provided in paragraph (i)(5)(iii) of this section; (B) The entire time period involved must be covered by the sample; and (C) The results must be statistically valid and applied to the period being sampled. Per the Public Assistance Cost Allocation Plan (PACAP), “Time and Effort Reporting means employee reporting of the amount of time they expend on specific programs and activities. Reporting is accomplished by coding time to specific programs or activities on the employee’s time card.” Per the State of Nebraska’s Work Instruction Document for Cost Allocation, Quarterly Statistics Gathering and Compilation, formatting the Time and Pay report used for labor hour allocations, includes, “Sort through the ‘Hours’ column removing any negative and 0 hours.” Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for 21 of 28 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2023-030 Questioned Costs: $3,403,410 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 28 PACAP allocations. We noted errors for 21 of 28 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharges to be questioned costs. We noted the following: Time and Effort Report Allocations Three of three cost allocations tested based on Time and Effort reporting were incorrect, resulting in questioned costs of $904,248. • We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended December 31, 2023, which allocated $1,266,933 of administrative costs, based on Time & Effort reports. The statistics used to calculate this allocation were not calculated correctly by the Agency. Negative hours should have been removed, and the percentage of costs split between Medicaid and CHIP was incorrect. Additionally, the payroll costs for 74 employees were charged to the cost center; however, three of the employees’ payroll costs should not have been charged to the cost center. The three employees included two Child and Family Services Specialist Supervisors (CFSSS) and a Program Specialist. The two CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Two of the employees were noted as incorrect in the prior audit, but the Agency failed to update the system. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly. Because of the error in allocation and the error in employee time coding, we questioned $27,988 costs for Foster Care. • We tested the allocation of cost center 25C20680 LS [Legal and Regulatory Services] General Teams for the quarter ended June 30, 2024, which allocated $1,275,286 of administrative costs, based on Time & Effort reports. Because of the issues detailed below, we question all Federal share of costs for cost center 25C20680 and 25C20710 for the quarter, totaling $608,069. o The cost center was not allocated using the Federally approved Time and Effort method. The Agency provided, “Unfortunately, we didn't get a chance to update our PCAP to reflect the change on this allocation method. For this group, we have change [sic] the method from Time and Effort to Time Study.” o The Agency’s time study consisted of hours worked for 11 of the 52 employees coded to the cost center. The hours used were from three weeks (July 24, 2023, to August 11, 2023). This does not appear adequate, as only 11 employees for three weeks were included, and this method was not approved by the Federal grantor. A similar time study was used for cost center 25C20710 (LS Hearing Team) to allocate $263,134. o The allocation statistics the Agency calculated for cost center 25C20680 were used on cost center 25C20710, and the allocation statistics calculated for cost center 25C20710 were used on cost center 25C20680, causing major variances in how the costs were allocated. o A business unit included in cost center 25C20680 should have been coded to cost center 25C20710. o Two employees paid from cost center 25C20680 (an Internal Auditor and Office Technician) were not involved in the LS General Teams and should not have been paid from the cost center. • We tested the allocation of cost center 25C20945 IST Fiscal Projects Administration for the quarter ended December 31, 2023, which was to allocate $524,480 of administrative costs, based on “a statistical analysis activity benefiting specific programs that IST Finance is responsible for processing.” The PACAP contradicts itself, later listing the allocation method of this cost center as a “Time and Effort” statistic. During testing, we noted the cost center was using a statistic prepared by “analysis” prior to December 31, 2020, and the same numbers have been used since then. Because the statistic used is clearly outdated, we question the Federal share of the entire allocation, totaling $268,191. Questioned costs by Program for Time and Effort Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. RMTS Allocations For five of five allocations tested based on Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs, resulting in $104,074 in Federal questioned costs. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The December quarter allocation included 3,613 activity observations, and the June quarter included 4,382 observations. We noted the following: o 23 RMTS observations were “reassigned” and coded to a response that was different from the original response. The original observation would have been charged to State funding; however, reassigning resulted in the observations being allocated to various Federal programs. o Five observations were not included on the quarterly reports because these reports were created before all observations for the quarter were submitted. o Two observations were validated by a supervisor; however, they were reassigned to a different activity. The Agency was unable to provide an explanation for why these observations were reassigned after being validated. o One observation was not included on the quarterly report. The Agency was unable to identify which response was not included or why it was not included. • The Agency did not properly allocate observations in accordance with the PACAP for 2 of the 83 activities in the quarter ended December 31, 2023, and 3 of the 76 activities in the quarter ended June 30, 2024: o One RMTS observation for the December quarter and 13 June quarter observations were to SNAP and AABD, which, per the PACAP, should be coded half to SNAP and half to State. The Agency incorrectly coded one-third to SNAP, one-third to State, and one-third to SSBG. o One June quarter observation was for TANF, Employment First, and SNAP. As this is coded to three activities, it should be split three ways, but the Agency allocated half to TANF and half to SNAP. o Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. For both quarters tested, there was an observation not split between all applicable programs. • The P&S IV-E and Non-IV-E allocation for the quarter ending December 31, 2023, included expenses from two business units, totaling $2,466,426, that should have been included in the cost center for Case Management Training. As a result, Foster Care was undercharged, and Adoption and Guardianship were overcharged. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 38 cost centers allocated to State and Federal programs through labor hours. Over $65 million in costs were allocated by labor hours during the 2024 State fiscal year. We tested six of these allocations, and all six allocations had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following issues: • The PACAP defines various labor hour (LH) statistics to be used to allocate costs. Labor hour statistics used were incorrect. o LH1 statistics should include all Agency hours worked (i.e., does not include paid leave) and exclude two-thirds of the labor hours from 24-hour facilities. The Agency did not remove negative hours and did not exclude two-thirds of the hours in the 24-hour facilities. LH1 also excluded hours from numerous cost centers that should have been included. o The LH2 statistic (LH1 hours excluding all hours worked in field offices and 24-hour facilities) incorrectly included hours from five field office cost centers, totaling 627,646 hours. Additionally, hours from two cost centers, totaling 119 hours, were improperly excluded. o The LH4 statistic (which is based on hours paid, including leave hours) did not remove negative hours and did not include leave pay type codes (such as civil leave, injury leave, and holiday leave). In addition, for one quarter tested, the Agency incorrectly applied the Medicaid match rate to the Medicaid hours, thus undercharging Medicaid and overcharging multiple Federal programs. o One cost center tested should have included labor hours for the division. The total hours used should have been 857,278, but the Agency failed to include three cost centers, totaling 10,065 hours. Additionally, one cost center with 1,036 hours was included twice. • The Agency implemented new allocation software starting with the quarter ended December 31, 2023. Two of six allocations tested were not set up properly. o Human Resource Development costs should have been allocated to 169 benefiting cost centers but were only allocated to four cost centers. o LH4 statistics were not applied properly in the cost allocation software, resulting in three unrelated cost centers being overcharged, while not charging any costs to six of the cost centers that should have been included. The errors noted above resulted in numerous misallocations, with many programs having undercharges and/or overcharges. Due to the intricacies of the PACAP allocations, we were unable to determine total questioned costs. However, we were able to identify the following overcharges that we consider to be questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Direct Allocations For 1 of 10 direct allocations tested, the amount directly allocated to a final cost center or method of allocation was incorrect, based on the Federally approved Public Assistance Cost Allocation Plan (PACAP). We tested the allocation of cost center 25C21795 (Protection and Safety New Worker training) for the quarter ending December 31, 2023, in the amount of $484,991, which is directly (i.e., 100%) allocated to Foster Care. We noted four business units mapped to the wrong cost center, which resulted in $26,802 questioned costs for Adoption Assistance. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $28 million in costs were allocated using these counts during the State fiscal year 2024. We tested the allocations for three quarters and noted all three were incorrect because the recipient counts used in the allocations did not agree to support. We noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for all three allocations tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for all three quarters tested and overcharging all other programs included in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP for December 2023, March 2024, and June 2024, as of September 2024. The detailed report did not agree to the summary spreadsheets. • One cost center for the Expansion Call Center used outdated counts, dating back to at least the quarter ending December 31, 2020. • Multiple other recipient counts were off due to clerical errors: o The counts for TANF Solely State Funded Plan were wrong for each quarter tested. The December, March, and June quarter counts included 0, 1,623, and 2,072 recipients when the supported number was 1,623, 1,832, and 1,985, respectively. o The March quarter counts for SNAP included 2,000 fewer recipients than what was supported. o The March quarter counts included an additional 26 recipients in AABD – State Supplement. o The June quarter counts included an additional 19 recipients for “DD SERVICE COORDINATION – State Only” and 1 additional recipient for Child Welfare that were unsupported. We recalculated each quarter’s allocation, based on the supported recipient counts available, and have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $13,523,554 in project costs. The iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021, and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs to only the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The SSBG program began implementation October 1, 2023, and went live April 1, 2024, but no costs were allocated to the program. • The Refugee Assistance program began implementation on March 1, 2024, but no costs were allocated to the program. • The allocation method had been updated by the Federal grantor as of October 1, 2023; however, the Budget Team was unaware of this update until our inquiry. The allocation now includes Child Care and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program and State Disability Program. The new allocation was approved for the quarter ended December 31, 2023, and the Agency made adjustments to allocate those costs. However, the implementation date began in 2021 and, as noted in the prior audit, the Agency did not allocate any implementation costs to these programs. This does not agree with “APPENDIX D – Benefit Programs Associated With iServe Portal and iServe IBEEM Projects,” which includes more benefitting programs than the allocation method used. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2024 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: Time and Effort: Agency partially agrees. A retroactive PACAP amendment has been submitted for the Legal cost center allocation method changes (from Time and Effort to Time Study). Note the change in allocation method is not materially different in that both methods are calculating hours spent in support of programs/activities. The time study consists of the hours of the Attorneys in each cost center (the referenced 11 staff). The additional staff that were not part of the time study are the support staff (Paralegals and admins) to the Attorneys, whose hours would be indicative of the hours spent on projects and activities by the Attorneys. The approved PACAP had already stated that the Time and Effort reporting was from the Attorneys (for Legal Hearings cost center, they are referred to as “Hearing Officers”). Federal undercharges did occur and incorporating them into the finding changes it from an overcharge of $608,000 to a net Federal overcharge of $41,000. Regarding the IST Fiscal Projects Admin cost center, Agency agrees that method was outdated and agrees to the questioned cost. RMTS Allocations: Agency agrees. It should be noted that the Agency reassigned the cases due to having the knowledge that staff incorrectly selected the state-only response “Non-DHHS Activities”, which is used for staff members who are temporarily reassigned off their current caseworker role and are performing activity unrelated to any of the work covered under the RMTS system vs. the intended “General Administration” activity. Labor Hours Statistics: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Recipient Counts: Agency Agrees. Significant Federal undercharges also occurred and will be netted with the Federal overcharges. Other: Agency will continue to update the allocation of iServe in accordance with the most recent CMS approved Advanced Planning Documents. APA Response: While the APA acknowledges that some undercharges may have occurred, it would not be appropriate to net undercharges of one program with overcharges to another program.

Program: AL 93.778 - Medical Assistance Program; AL 93.959 - Block Grants for Prevention and Treatment of Substance Abuse; AL 93.767 - Children’s Health Insurance Program; AL 93.575 – Child Care and Development Block Grant; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2405NE5ADM, FFY 2024; 2305NE5ADM, FFY 2023; 23B1NESAPT, FFY 2023; 20242S251443, FFY 2024; 2301NECCDD; FFY 2023; 52305NE3002; FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2023) and 2 CFR § 200.405 (January 1, 2024) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) and 2 CFR § 200.403 (January 1, 2024) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023) and 2 CFR § 200.303 (January 1, 2024): 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. 45 CFR § 75.430(i) (October 1, 2023) and 2 CFR § 200.430(i) (January 1, 2024) require payroll expenses charged to Federal awards to be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State accounting system and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. We also noted no attempt was made to recover apparently fraudulent payroll expenses. Repeat Finding: 2023-031 Questioned Costs: $11,866 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 employee paychecks paid with Federal funds. Five of the 25 employees tested had payroll charged to the Substance Abuse and Prevention Block Grant (SAPTBG). We tested the May 1, 2024, paycheck for an Administrator. Payroll expenses were allocated 100% to the SAPTBG. However, the Agency could not provide documentation to show that 100% of the Administrator’s time was working on projects related to the SAPTBG. Based on some of the job duties of the employee, it appeared some time could have been coded to the Community Mental Health Services grant. All payroll for the period was questioned. Federal SAPTBG payroll charges tested totaled $6,908, and we noted $2,963 in sampled questioned costs. Federal payroll charges for SAPTBG totaled $473,739. We tested the January 24, 2024, paycheck for an IT Business Systems Analyst and noted the initial payroll expenses were split among several Economic and Assistance programs based on a time study that was effective during fiscal year 2022. Per the Fiscal Project Analyst, an updated study had not been done and should be done annually. The payroll expenses charged to the cost center were then allocated based on a time and effort study that had not been updated since at least September 2020. Payroll expenses charged to the Federal programs were questioned, and potential dollars at risk totaled over $5,000,000. See Schedule of Findings and Questioned Costs for chart/table. Additionally, we reviewed the disciplinary actions against employees during the fiscal year. One employee tested was terminated on September 26, 2023, for falsifying the number of overtime hours worked. While working remotely on Saturday and Sundays, the employee would work only 30-60 minutes; however, he would then claim 10 hours of overtime for both of those days. The Agency reviewed the employee’s overtime hours reported to the supervisor, the KRONOS timecards, and time stamps of the work completed outside the employee’s scheduled shifts for the timeframe of May 7, 2023, through August 11, 2023. The employee reported and was paid for 469.5 overtime hours; however, the Agency determined the employee worked only 34.5 hours of overtime, a difference of 435 hours. The employee was paid $17,052 for overtime hours that were never worked in just a three-month timeframe. During fiscal year 2024, the Medicaid grant was overcharged $7,780 in apparently fraudulent payroll expenses for this employee. The employee was terminated, but no further action was taken against him. Moreover, no attempt was made to recover the amounts paid to the employee for the falsification of hours worked. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State accounting system, and those costs are properly allocated and charged. Management Response: Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowable Costs/Cost Principles Grant Number & Year: 2401NEFOST, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2023) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2023) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2023): 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. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Title 45 CFR § 75.511(a) (October 1, 2023) and 2 CFR § 200.511(a) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2023-032 Questioned Costs: $25,554 known Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 40 validated RMTS surveys and noted that inadequate documentation was provided on 5 of 6 surveys charged to Foster Care IV-E (Federally funded). Due to findings noted for the Foster Care program, we tested four additional RMTS surveys coded to Foster Care IV-E cases. We noted inadequate documentation was available for two Foster Care IV-E surveys. For 7 of 10 surveys tested, the workers erroneously reported working on a Foster Care IV-E case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Subrecipient Monitoring Grant Number & Year: 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2023) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. 45 CFR § 75.403 (October 1, 2023) requires costs to be reasonable, necessary, determined in accordance with generally accepted accounting principles (GAAP), and adequately documented. Per 45 CFR § 75.430(i), standards for documentation of personnel expenses: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] Per 45 CFR § 75.431(c): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. Per the subaward agreement, “Under this Subaward, DHHS shall only pay for actual and allowable costs.” Good internal control requires procedures to ensure State and Federal requirements are met. Condition: Subrecipient monitoring procedures should be improved. Repeat Finding: 2023-039 Questioned Costs: $1,701 known Statistical Sample: No Context: There were 17 subrecipients paid a total of $18,122,989 during the fiscal year. We tested one payment to one subrecipient. When the desk review did not maintain adequate documentation, we provided the Agency with the opportunity to obtain additional support from the subrecipient. The payment did not have adequate support for salaries and benefits. Time records did not reflect the total activity for employees, and fringe benefits were based on budgeted amounts instead of actual costs. After considering subsequent documentation received, $1,701 remained unsupported. The payment tested was $132,711, and we question $1,701. The subrecipient was paid $1,871,251 during the fiscal year. We also noted this subrecipient should have had a Single audit submitted for the fiscal year ended June 30, 2022, by March 31, 2023, and a Single audit for the fiscal year ended June 30, 2023, submitted by March 31, 2024; however, neither had been submitted at the time of fieldwork on November 1, 2024. Cause: Inadequate review procedures. Effect: Noncompliance with Federal regulations and an increased risk for fraud or errors to occur. Recommendation: We recommend the Agency improve procedures to ensure compliance with Federal regulations, including cost principles. We further recommend the Agency improve procedures to ensure that subrecipients have a Single audit completed and submitted as required. Management Response: The agency agrees with the finding.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2401NERCMA, FFY 2024; 2301NERCMA, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services   Criteria: Per 45 CFR § 75.303 (October 1, 2023): 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. Title 45 CFR § 400.53 (October 1, 2023) states the following: (a) Eligibility for refugee cash assistance is limited to those who— (1) Are new arrivals who have resided in the U.S. less than the RCA eligibility period determined by the ORR Director in accordance with § 400.211; (2) Are ineligible for TANF, SSI, OAA, AB, APTD, and AABD programs; (3) Meet immigration status and identification requirements in subpart D of this part or are the dependent children of, and part of the same family unit as, individuals who meet the requirements in subpart D, subject to the limitation in § 400.208 with respect to nonrefugee children; and (4) Are not full-time students in institutions of higher education, as defined by the Director. (b) A refugee may be eligible for refugee cash assistance under this subpart during a period to be determined by the Director in accordance with § 400.211. Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. 45 CFR § 400.43 (October 1, 2023) states, in part, the following: (a) An applicant for assistance under title IV of the Act must provide proof, in the form of documentation issued by the Immigration and Naturalization Service (INS), of one of the following statuses under the Act as a condition of eligibility: (1) Paroled as a refugee or asylee under section 212(d)(5) of the Act; (2) Admitted as a refugee under section 207 of the Act; (3) Granted asylum under section 208 of the Act; (4) Cuban and Haitian entrants, in accordance with requirements in 45 CFR part 401; (5) Certain Amerasians from Vietnam who are admitted to the U.S. as immigrants pursuant to section 584 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1988 (as contained in section 101(e) of Public Law 100–202 and amended by the 9th proviso under Migration and Refugee Assistance in title II of the Foreign Operations, Export Financing, and Related Programs Appropriations Acts, 1989 (Public Law 100–461 as amended)); or (6) Admitted for permanent residence, provided the individual previously held one of the statuses identified above. Per 45 CFR § 400.66(e) (October 1, 2023), “The State agency may use the date of application as the date refugee cash assistance begins in order to provide payments quickly to newly arrived refugees.” Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Per Title 470 NAC 1-010, “Eligibility is redetermined at six months. Eligibility may be redetermined in less than six months to coordinate review dates for more than one program. An application is required as part of the eligibility review and to establish a new eligibility period.” Title 45 CFR § 400.2 (October 1, 2023) defines “refugee cash assistance” (RCA) as “cash assistance provided under section 412(e) of the Act to refugees who are ineligible for TANF [Temporary Assistance for Needy Families], OAA [Old Age Assistance], AB [Aid to the Blind], APTD [Aid to the Permanently and Totally Disabled], AABD [Aid to the Aged, Blind, and Disabled], or SSI [Supplemental Security Income].” Title 45 CFR § 400.2 defines “refugee medical assistance” (RMA) as “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program . . . .” Title 468 NAC 2-001 explains the eligibility requirements for Nebraska’s TANF program, including, “(B) United States citizenship or alien status; (C) Nebraska residence; . . . (F) Age requirement for a dependent child; . . .” Title 45 CFR § 401.2 (October 1, 2023) states the following: For purposes of this part a Cuban and Haitian entrant or entrant is defined as: (a) Any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and (b) Any other national of Cuba or Haiti (1) Who: (i) Was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act; (ii) Is the subject of exclusion or deportation proceedings under the Immigration and Nationality Act; or (iii) Has an application for asylum pending with the Immigration and Naturalization Service; and (2) With respect to whom a final, nonappealable, and legally enforceable order of deportation or exclusion has not been entered. The Agency utilizes SAVE (Systematic Alien Verification for Entitlements) to determine an applicant’s status. SAVE is an online service that allows Federal, State, and local benefit-granting agencies to verify a benefit applicant’s immigration status or naturalized/derived citizenship. SAVE is administered by U.S. Citizenship and Immigration Services, a component of the U.S. Department of Homeland Security. Good internal control requires procedures for maintaining SAVE documentation used to verify an applicant’s status and ensure the applicant is not under an active order of deportation. Condition: Refugee assistance payments were not in compliance with State and Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2023-040 Questioned Costs: $33,258 known ($16,281, 2301NERCMA; $16,977, 2401NERCMA) Statistical Sample: No Context: The Refugee Resettlement Program (RRP) helps refugees and other eligible newcomers achieve economic self-sufficiency, well-being, and successful integration in the United States. The RRP provides aid payments both directly to individuals who are deemed eligible for cash assistance (RCA) and medical assistance (RMA) through the managed care program. We randomly tested 25 aid payments: 15 to individuals who received RCA payments and 10 for RMA payments. We noted the following: • For eight recipients tested, adequate documentation was not on file to support that the Agency had verified, using the SAVE system, that the individual was not under an active order of deportation prior to starting benefit payments. Verification was performed 2 to 30 months after benefits started. Additionally, one of these recipients was also missing proper immigration documentation to support eligibility for any RRP benefits and, as a result, we question costs of $1,712. • One recipient tested, who was part of a family unit of four, received both RCA and RMA benefits, but qualified for Temporary Assistance for Needy Families (TANF). Therefore, the recipient should have been receiving benefits from TANF, not RRP benefits. For this recipient, we question costs of $7,557. • Seven of 10 RMA recipients tested appear to have been eligible for Medicaid; however, their monthly capitation payments were paid by RRP. As a result, we question costs of $9,715. • One recipient was enrolled in college courses at the time of her six-month renewal application in February 2024. We question payments, totaling $1,880, made to the recipient after declaration of student status. • Four recipients tested received benefits after their 12-month eligibility period had ended, resulting in additional questioned costs of $825. • We also tested 25 recipients to determine if the six-month benefit determination review was completed. o One recipient tested did not have a six-month review completed to redetermine eligibility. Additionally, the recipient should have been found ineligible to received RMA benefits, due to being past the 12-month eligibility period. The recipient entered the country on September 5, 2021. Therefore, her eligibility period would have expired August 31, 2022; however, she received RMA benefits from April 1, 2023, through March 1, 2024. Had an eligibility review been properly completed, it should have caught that this recipient was ineligible. Furthermore, the recipient’s six family members also received benefits within these dates. One family member’s RMA benefits ran from January 1, 2023, through March 1, 2024. As a result, we question costs of $8,918. o One recipient received RMA benefits when she should have been eligible for Medicaid. We question costs of $2,651 for capitation payments paid by the Refugee grant instead of the Medicaid grant. RRP aid expenditures for the fiscal year totaled $10,554,171. The Federal sample tested was $8,542, and Federal payment errors noted for the random sample tested were $3,191. The dollar error rate for the sample was 37.36% ($3,191/$8,542), which estimates the potential dollar risk for fiscal year 2024 to be $3,943,038 (dollar error rate multiplied by the population). In addition to the $3,191 Federal questioned costs noted on the sample items tested, we also noted $30,067 of Federal questioned costs on other assistance payments on behalf of these recipients. Cause: Ineffective controls. Written procedures are in place but not consistently followed. Effect: Increased risk for loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. We further recommend the Agency ensure that SAVE documentation is maintained on file. Management Response: The agency agrees with the finding.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Subrecipient Monitoring Grant Number & Year: 2401NERSSS, FFY 2024; 2301NERSSS, FFY 2023; 2201NERSSS, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2023) requires a pass-through entity to “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2023) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2023) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2023) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2023) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(c) (October 1, 2023) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker’s compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity’s accounting practices. 45 CFR § 75.459 (October 1, 2023) states, in part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 75.435. (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. (2) The necessity of contracting for the service, considering the non-Federal entity’s capability in the particular area. (3) The past pattern of such costs, particularly in the years prior to Federal awards. (4) The impact of Federal awards on the non-Federal entity’s business (i.e., what new problems have arisen). (5) Whether the proportion of Federal work to the non-Federal entity’s total business is such as to influence the non-Federal entity in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal awards. (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). A good internal control plan requires procedures to ensure subrecipient expenditures are properly documented in accordance with Federal regulations, and payments apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. A similar finding was noted in the prior audit. Repeat Finding: 2023-041 Questioned Costs: $196,067 known ($154,992, 2201NERSSS; $21,296, 2301NERSSS; $19,779, 2401NERSSS) Statistical Sample: No Context: The Agency paid 15 subrecipients a total of $4,833,486 during the fiscal year ended June 30, 2024, for the program. Subrecipient reimbursement requests are submitted quarterly with a summarized invoice of costs incurred and a Budget Workbook showing expenses by category. However, for the audit period under review, the program did not have procedures to require source documentation, such as invoices and timesheets, at the time of reimbursement. We randomly selected 12 payments to subrecipients for testing. The Agency stated that it was performing desk audits of all subrecipient invoices for Federal fiscal year 2024 reimbursements. However, we noted that 11 of 12 payments tested did not have adequate documentation on file to support costs were allowable and in accordance with Federal regulations. When Agency reviews were not sufficient, we gave the Agency the opportunity to obtain additional support from the subrecipient. We allowed the Agency three weeks to obtain support; however, adequate support was not always obtained. We noted the following: • Eight payments did not have adequate support for personnel costs. o For two payments, the subrecipient did not provide timesheets or time records. o For two payments, the subrecipient indicated it did not keep timesheets but had a spreadsheet of allocations. There was not adequate documentation to support these allocations were accurate or in accordance with Federal cost principles. o For one payment, the timesheets showed only the total hours worked for each day, failing to specify the program/activity upon which the employee was working. o For one payment, the timesheets were provided and noted the “Employee Name” and “Employee Signature” on the timesheet; but, per the subrecipient, these individuals were contractors and not employees. The subrecipient did not have any contractual agreements with the individuals that detailed the description of services, estimate of time required, or rate of compensation. o For one payment, the subrecipient did not provide a timesheet or certification to support the Executive Director’s salary and benefits that were being charged to the grant. o For one payment, the subrecipient did not provide timesheets and was allocating payroll based on a budget estimate. This subrecipient also passed funding to its partners for payrolls costs, without obtaining timesheets and paystubs, even though the written Memorandums of Understanding (MOUs) required such documentation prior to fund distribution. Per the MOUs, “Invoices for expenses incurred each month should be submitted . . . with expenses summarized by line item (personnel, program expenses, etc.) . . . . Include itemized receipts, payroll reports, timesheets, and any other documentation necessary to show how funds were spent.” • Four payments did not have adequate support for non-personnel costs. o For three payments, documentation was inadequate to support the percentage of non-payroll expenses charged to the program, such as rent and utilities. Numerous charges were based on allocations that are allowable only if distributed using reasonable methods in accordance with relative benefits received. Support was inadequate to determine that the allocations were proper. o For one payment, training costs were paid for an employee of another subrecipient, and the charges were invoiced to the other subrecipient. Paying costs of another entity appears unreasonable. • We also noted the following items, for which we did not question the costs. o For one payment, the subaward was for improving academic performance, improving the level of English language acquisition, and increasing parent participation; however, the subrecipient charged $20,513 for mental health therapists for refugee families. These costs were not in accordance with the purpose of the subaward; however, being allowable under the Federal grant, the costs are not questioned. o For one payment, printing and cleaning supplies were purchased by the subrecipient’s Coordinator using his personal credit card and were sent to his personal residence. We did not question these costs; however, there is a greater risk for loss or fraud when purchases are not shipped directly to the business. Federal payment errors for the sample tested were $196,067. The total sample tested was $465,546, and subrecipient payments for the fiscal year totaled $4,833,486. Based on the sample tested, the dollar error rate for the sample was 42.12% (196,067/$465,546), which estimates the potential dollars at risk for fiscal year 2024 to be $2,035,864 (dollar error rate multiplied by the population). Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: The agency agrees with the finding.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Reporting Grant Number & Year: 2301NERSSS, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 2 CFR § 170, Appendix A I. (January 1, 2024) states, in relevant part, the following: (a) Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for 1 of 11 subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 27 subawards obligated to 16 subrecipients during the fiscal year ended June 30, 2024. We tested 11 of the subawards (to three subrecipients), and one of those subawards was not reported as of January 6, 2025. The subaward should have been reported by June 30, 2024. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: The agency agrees with this finding. The additional funds added in May did not get reported into the FFATA system. Furthermore, Renewal 4 signed in September reflected incorrect award information. The department has spoken with the grant manager and confirmed that the totals for the award listed in the state accounting system (E1) are correct.

Program: AL 93.575 and 93.596 – CCDF Cluster; AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability & Eligibility & Matching Grant Number & Year: 2301NETANF, FFY 2023; 2101NECDC6, FFY 2021; 2201NECCDD, FFY 2022; 2401NECCDF, FFY 2024; 2401NECCDM, FFY 2024; 2101NECCDF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2023) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. 42 USC § 9858k(b) (1992) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.55 (October 1, 2023) states the following: (a) Federal matching funds are available for expenditures in a State based upon the formula specified at § 98.63(a). (b) Expenditures in a State under paragraph (a) of this section will be matched at the Federal medical assistance rate for the applicable fiscal year for allowable activities, as described in the approved State Plan, that meet the goals and purposes of the Act. To be eligible for services, 45 CFR § 98.20 (October 1, 2023) requires a child to be under 13 years of age, a citizen, and reside with a family whose income does not exceed 85% of the State’s median income.   Title 391 NAC 1-002 defines “infant” and “toddler” for child care subsidies, as follows: Ages of children: 1. Infant means a child age 6 weeks to 18 months; 2. Toddler means a child age 18 months to 3 years; 3. Preschool-age means a child age 3 or older who has not attended kindergarten; and 4. School-age means a child who attends kindergarten or above. Title 392 NAC 2-004, states, in part, the following: In order to receive Child Care Subsidy, the family must: * * * * (E) Have a child within the age limit. Child care is available for children age 12 or younger. Children who turn age 13 during their eligibility period remain eligible through the end of their eligibility period. Children age 18 or younger with special needs are eligible. The child’s age must be verified in order to qualify for assistance[.] Per Title 392 NAC 2-013.05, “If the individual is requesting child care for employment, the employment must have the potential to allow the individual to achieve or maintain economic self-sufficiency.” Title 392 NAC 3-001.02(D) requires the recipient and child care provider to ensure that the services are delivered as authorized. Title 392 NAC 3-004.01(A) states the following: The Department pays by attendance, not enrollment. Providers do not receive payment when the provider is on vacation, is ill, or is not providing care for some reason unrelated to the child or recipient. Title 392 NAC 3-004.01(A)(i) states the following: The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month. Title 392 NAC 4-002 states, in relevant part, the following: Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; * * * * (E) To accept a rate which is reasonable, necessary, and does not exceed the amount charged to private-paying persons; * * * * (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims; The Child Care Subsidy Provider Handbook (June 2023 revision), Section 5 (“Financial Matters”), states, in relevant part, the following: You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided. You should mark “A” on the calendars for children who are absent. Up to five absent days can be billed per child per month. Nebraska Department of Health and Human Services’ Guidance Document for the Child Care Subsidy Program provides guidance for 392 NAC Chapter 3-004.01(A)(i) Payment for Absences as follows, “Absent days must be billed as 1 day unit per occurrence up to the maximum of 5 occurrences per month.” Nebraska Department of Health and Human Services’ Guidance Document for the Child Care Subsidy Program has the following guidance for Title 392 NAC Chapter 2-011, Categories of Eligibility Based on Income: The total amount of the sliding fee assessed will be based on 7% of the household’s gross income for all of their children enrolled in the subsidy program. It will not vary with the number of children in care, the amount of care they need, or the type of care they choose to use. The sliding fee must be paid each month to the provider before the provider bills the Department, it covers the first dollars of payment, regardless of when service begins or ends. The Child Care Subsidy Provider Handbook (June 2023 revision) requires that, for providers other than child care centers, “[P]arents/caregivers must sign the calendar at the end of the billing period.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2023-043 Questioned Costs: $605,874 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below.   Random Sample We tested 25 child care claims paid with Federal funds. We noted 12 claims with errors. Some payments had more than one type of error. • For two claims tested, there was a family fee co-pay required of $192 and $149 per month, respectively, but no such co-pay was deducted. • For four claims tested, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet: o One provider billed for 8 days and 2 partial days of child care, while the attendance sheet showed 5 days and 5 partial days of care. o One provider claimed 7 full days of care during the claim period; however, the attendance sheet provided did not detail the hours that the child was in the care of the provider. As such, the APA could not determine whether the claim was correct. o One provider billed 10 partial-days services; however, the attendance sheet showed only 4 partial-days and one full-day for this period. o One provider billed for 21 days, but the attendance sheet supported only 20 days. • For two claims tested, the providers billed for services over the authorized amount. o One provider was authorized to provide child care during the time that both the mother and father were working. The provider claimed numerous days for care provided overnight; however, no documentation was on file to support that both parents were working overnight. o One provider was authorized 20 hours of child care a week; however, per the attendance sheet, two weeks during the month had 23 service hours per week. • For six claims tested, the child care payment was incorrect because the rate was in excess of the private rates. Providers must accept a rate that is reasonable, necessary, and does not exceed the amount charged to private-paying persons. o One provider claimed $25/partial day but was only authorized to claim $18.33/partial day. o For two claims, the provider reported private rates of $75/week effective May 27, 2022, and $90/week effective May 2, 2024. Using an Agency-provided conversion table, this would result in a partial rate of $8.33-$10/partial day and $15-18/day. However, the provider was claiming $13.33/partial day and $24/day. o One provider reported a private rate of $40/day but was claiming $40.55/day, exceeding the private rate. o One provider reported its private weekly rate at $83. Using a DHHS-provided conversion table, this would result in $9.22/partial day. However, the provider was charging for $20.56/partial day. o One provider reported on its website a partial day private rate of $47 a week, which would result in a rate of $9.40/partial day. However, the provider was claiming $18 for a partial day. Federal payment errors noted for the sample tested were $1,356. The total Federal sample tested was $10,518, and total child care Federal assistance claims for the fiscal year were $83,226,143. Based on the sample tested, the case error rate was 48% (12/25). The dollar error rate for the sample was 12.89% ($1,356/10,518), which estimates the potential dollars at risk for fiscal year 2024 to be $10,727,850 (dollar error rate multiplied by the population). In addition to the $1,356 questioned costs noted on the sample items tested, we noted $2,027 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation. Excessive Units The Nebraska Family Online Client User System (NFOCUS) application was used to automate benefit/service delivery and claim processing and payments for the Child Care program. Due to the volume of claims processed by the NFOCUS application, the Agency did not perform a review of each claim paid. Therefore, the Agency relied on edit checks within the system to review claims and deny or suspend claims that did not meet the criteria determined by the Agency. As noted in Finding 2024-015, during testing of significant edit checks within the NFOCUS application, it was noted that the “UN” edit check (“Units too high for service dates and frequency”) was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal. Instead of applying a logical edit check to these claims, such as not exceeding the regular number days in one month (e.g., 31 days), the system only compared the claim to the service authorization to determine if adequate units were authorized. We identified 642 claim lines paid with Federal funds, totaling $286,079, where the number of days or partial days billed exceeded the number of days in the service period. We selected 24 claim lines, totaling $33,709, for review and noted 23 claim lines with errors as follows: • The claims charged to Federal funds were “Version 1” of the claim. Sometimes an error is detected and a “Version 2” of the claim is created with an underpayment or overpayment. We noted 11 of the claim lines tested had a Version 2 and 10 of those had overpayments received or recouped. However, the overpayments collected and recouped are credited to the State General Fund, not Federal funds. The 11 claim lines totaled $16,420 and are considered Federal questioned costs. Errors noted included a claim that had 199 days billed for the month of July 2022, the overpayment was collected in December 2022 and credited to the State General Fund. In February 2024 the Agency moved the Version 1 claim to Federal funds, resulting in the Federal grant being overcharged. We also noted a claim that billed 100 partial days for a 19-day period. The error was discovered, and a Version 2 was created in December 2023, but in April 2024, the Agency moved the Version 1 claim to Federal funds, resulting in the Federal grant being overcharged. • Twelve claim lines did not agree to the attendance records. One provider billed 25 to 64 partial days for 15-day service periods. Two providers billed 40 to 95 partial days for one month service periods. Per review of the attendance records, providers were overpaid $9,182 for these 12 claim lines, which are considered questioned costs. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries completed on September 28, 2023. Both entries included 594 identical claims, totaling $141,165. These claims were charged to Federal funds twice, and $141,165 is considered questioned costs. Additionally, we compared the detail claim listing to the claims charged to Federal funds in the prior fiscal year and found 1,144 claims that were used in both fiscal year 2023 and fiscal year 2024 journal entries, totaling $297,553, which are questioned costs. Attestation Examination The APA performed an attestation examination of the Nebraska Department of Health and Human Services Child Care NFOCUS Aid Payments for the period July 1, 2023, through March 31, 2024. All claims were initially paid with State General Funds. The APA reviewed the claims with findings to determine if the claims had been transferred and charged to Federal funds. We noted numerous issues with Federal questioned costs, totaling $138,171. We noted the following related to claims paid with Federal funds: Unusual Claims and Duplicate Billings We tested a family in-home care provider that billed a high number of hours for the month. The provider did not provide the requested attendance calendar for January 2024 services. The provider billed 260 hours at a rate of $12 per hour for a total of $3,120. Child care was authorized for the client’s self-employment, up to 60 hours per week. We were unable to determine if the payment was correct because no attendance calendar was provided; therefore, the entire claim was questioned. We also noted the 60 hours per week was authorized based on the client’s declaration of working 12 hours a day, seven days a week. The client’s reported income for this timeframe was $1,500 per month, which calculates to only $4.12 per hour, which is much less than the Nebraska minimum wage rate of $12 per hour. The client’s income does not appear to meet the self-sufficiency requirement. Federal questioned costs totaled $3,120. We noted overlapping of services as follows: Three children were authorized child care for a maximum of 50 hours per week while the parent was working at U-Stop and participating with Employment First. Child care was authorized with two providers. The attendance calendars for both providers showed no overlapping hours; however, the providers exceeded the authorized 50 hours per week for four weeks in September 2023. The secondary provider billed times from 8:30 a.m. to 3:00 p.m. or 4:00 p.m., and the primary provider billed evening and some overnight hours. A comparison of attendance calendars revealed that the total hours between the two providers exceeded the authorization by 6 to 23.5 hours each week. Federal questioned costs totaled $1,027. See the following chart: See Schedule of Findings and Questioned Costs for chart/table. We analyzed the NFOCUS claims paid during the period from July 1, 2023, through March 31, 2024. During this analysis, we identified several claims where the provider appeared to double bill child care services for the same child during the same time period. The providers were able to double bill when two service authorizations for the child were open at the same time and by changing the rate of the service. There were also multiple instances where the provider billed for duplicate services by changing the rate billed. For example, one provider, Tender Loving Tots, billed services three times for the same child for the same time period. A child was authorized for preschool care at the daily rate of $46.51. Tender Loving Tots billed four daily units at the authorized daily rate of $46.51 for service dates of July 11, 2023, through July 14, 2023, for this child on claim 32347682. The provider also billed four daily units at $46.50 per daily unit on claim 83255070, line 2. Tender Loving Tots billed a third time for this child for the same period on the same claim. On line 5 of claim 83255070, the provider billed four days at $45 per daily unit. As long as the billed rate was lower than the authorized rate, NFOCUS did not reject the claim for double billing. See Schedule of Findings and Questioned Costs for chart/table. The following chart shows the number of duplicate claims reviewed and Federal questioned costs by provider: See Schedule of Findings and Questioned Costs for chart/table. Incorrect Age Group We reviewed the claims for family home providers and child care centers for infant care services for children over the age of 18 months. We noted children over the age of 18 months with services paid at the infant rate. We also reviewed the claims for child care centers for toddler care services for children over the age of 36 months. We noted children over the age of 36 months with services paid at the toddler rate. As the rates for infants are higher than toddler rates, and toddler rates are higher than preschool rates, it is important that services be paid at the proper rate based on a child’s age. The following are a few examples that we noted: • A child who turned 19 months on September 18, 2023, continued to be paid at the infant rate for services through February 2024, resulting in questioned costs of $574. • A child who turned 36 months on March 8, 2023, was paid at the infant rate for services from August 16, 2023, through December 2, 2023, and should have been paid at the preschool rate, resulting in overpayments of $538. • A child over age five was paid at the toddler rate for services from June 16, 2023, through November 30, 2023, and should have been paid at the preschool rate, resulting in overpayments of $349. • A child who turned 36 months on October 5, 2023, was paid at the toddler rate for February 2024 services and should have been paid at the preschool rate, resulting in an overpayment of $105. Other Issues We selected six licensed family home providers and six child care centers and requested all attendance records for one month. We noted claims not agreeing with attendance records; attendance records not being provided; billings at an improper rate; services billed in excess of services authorized; overlapping services; and parents’ employment that did not appear to meet the requirement for self-sufficiency. 1. One family home provider billed full days for one child but should have billed partial days because the attendance record showed services from 4:00 p.m. to 6:00 p.m. (2 hours) each day, resulting in $66 questioned costs. 2. Next Generation Child Care and Preschool was paid $94,405 for February 2024 services. For one child, the attendance record showed service from 6:15 a.m. to 8:30 a.m. Per the parent, however, school began at 7:40 a.m., so it appears the time out of 8:30 a.m. is not accurate, resulting in $48 questioned costs. 3. Little Blazers Academy, located on North 61st Street in Omaha, Nebraska, and Little Blazers Academy II, located on West Dodge in Omaha, Nebraska, have the same owner. We question Federal costs of $2,703 for December 2023 services. • Services were billed for 18 children at both locations. For six of these children, the centers were billing partial days at each location when the total hours were less than five hours. For example, on multiple days, one child was claimed from 4:00 p.m. to 5:00 p.m. at one location and then from 5:30 p.m. to 6:30 p.m. at the second location. Each location billed for a partial day; however, only two hours of service were provided each day; therefore, it does not appear reasonable to bill for more than one partial day each day. • The attendance records for December, the month tested, were not provided for eight children, four of whom were paid with Federal funds. The attendance records provided were for September, not December, and were signed September 30, 2023. Also, the service authorization was exceeded for one child; for two children, the claim did not agree to the attendance records. 4. Sprouting Minds Childcare was paid $41,053 for November 2023 services, and we questioned costs of $14,133 – of which $4,309 was paid with Federal funds. We noted the following: • 19 children were billed and paid as an “absent” day on Thanksgiving and the Friday after Thanksgiving, even though the center was closed, and no children attended. • Attendance records were not provided for five children, and time records did not agree to the services billed for an additional five children. • Services claimed exceeded service authorizations for 13 children. • One child was billed both as a toddler and an infant for the same period and should have been billed only as a toddler. 5. International Day Care was paid $173,260 for November 2023 services – of which $132,328 was charged to Federal funds – and we question $111,609, an 84% dollar error rate. We noted the following: • 191 children were billed and paid as an “absent” day on Thanksgiving even though the center was closed, and no children attended. • One child billed was over age 13 and not eligible for services. • One child was billed as a toddler but was over the age of three at the time of service and should have been billed at the preschool rate. • One child was billed as an infant but was 35 months old at the time of service and should have been billed as a toddler. • Four families authorized for child care while a parent was working at the center billed for days after the parent was no longer working at the center. During our review of service authorizations, moreover, we noted that several children had a parent working at the daycare while the children attended. This is allowable if the parent is not working in the same room. However, of the 222 children paid for the month tested, 201 had a parent working at the daycare, and only 21 children did not. The 222 children were from 53 families, and 44 of those families had a parent working at the daycare. We asked the daycare to provide us with employment records for those parents. Most of the parents had income from International Day Care that was far less than the subsidies paid for child care services. For example, for one family, the parent earned $1,452 for the month, but child care payments totaled $6,353. Title 392 NAC 2-013.05 provides, “If the individual is requesting child care for employment, the employment must have the potential to allow the individual to achieve or maintain economic self-sufficiency.” Based on a comparison of wages to child care subsidies, however, the employment with the daycare does not appear to have that potential. For the families with a parent working at the daycare, there was a total of $154,326 in child care payments, but the parents’ gross salary from the daycare totaled only $64,163 – a discrepancy hardly reflective of employment arrangements conducive to economic autonomy. Many of these families had additional income from sources other than the daycare; however, child care subsidies still appeared unreasonable. In these cases, as illustrated by the examples below, parents working at the daycare in a capacity that failed to produce even the potential to “achieve or maintain economic self-sufficiency,” contrary to the explicit regulatory language cited above, actually resulted in far greater child care costs than would have occurred had those working parents stayed at home and cared for the children themselves. The following cases are representative of why subsidies are not available for jobs that prove ultimately counterproductive in terms of the relatively low wages received in comparison to the resultant child care expenses to the State: • One family with seven children had child care subsidies for the month of $5,945 plus paid a family fee of $465 per month, for total daycare costs of $6,410. This was a two-parent household, and one parent worked at the daycare and earned $1,386 for the month. The total gross income for the household was $6,647.97, which exceeds the cost of child care, but if the family was responsible for all daycare costs, it would leave less than $250 per month for rent, food, utilities, and other expenses. It would cost the family over $5,000 each month to have a parent working at the daycare; therefore, the employment does not appear to have the potential for self-sufficiency. • Another family had child care subsidies for the month of $5,610, and the parent who worked at the daycare earned $1,323. The family had total gross monthly income of $4,192.16, which is still $1,417.84 less than child care costs, and if the family was responsible for all child care costs, it would cost the family $4,287 each month to have the parent working at the daycare. Therefore, the employment does not appear to have the potential for self-sufficiency. It was also noted that seven families were receiving Temporary Assistance to Needy Families (TANF) and were required to work as a condition of that assistance. These seven families received child care subsidies of $24,850 for the month and were paid wages of $10,456 by the daycare. However, we did not question these costs because the individuals were required to work as a condition of receiving TANF. Excluding the TANF recipients, we questioned all other child care payments for families whose parents’ wages from the child care center were less than the child care payments. Market Rate Survey and Subsidy Rates The 2023 child care subsidy rates, which became effective July 1, 2023, were established following a Market Rate Survey issued in June 2022 by the Buffet Institute at the University of Nebraska (Institute). This market rate survey was commissioned by the Agency pursuant to Neb. Rev. Stat. § 43-536 (Cum. Supp. 2022). The results of the survey were based on a provider response rate of 32.9% (946 providers); however, in calculating the half-day and full-day rates, the Institute used rate information from only 21% of respondents who indicated that they had a part-time and full-time rate schedule similar to the guidelines set by the Agency (partial day for 0 to 4 hours and 59 minutes and full-time for 5 hours to 9 hours and 59 minutes). As such, the rates were established based on rate information provided by only 6.9% of Nebraska’s child care providers. The percentage of providers factored into the benefit calculation is so low because many providers responded that they did not have an equivalent half-day or full-day rate structure. Therefore, we question the reasonableness of the rates established pursuant to the market rate survey and whether it provides a clear picture of private market rates in the State. Additionally, Nebraska regulations require that providers have an established private rate prior to receiving any subsidy payments. This is because the subsidy payment is not allowed to exceed the provider’s private rate. However, as shown in the market survey results, many providers do not have such a rate structure and, therefore, do not have established half-day and full-day rates. In many cases, providers have a weekly rate. The Agency stated that it utilizes a weekly rate to daily/partial day rate conversion table, which was provided by the Institute. However, while this table is used to determine the equivalent rates, there is no written policy or guidance on when or how the table should be implemented, and no mention is made of these conversion tables in the market survey report. State Matching Claims States are required to match the Federal funds spent with the Federal Matching grant with State funded expenditures at the Federal Medical Assistance Percentage (FMAP) rate for the applicable fiscal year. Those State funding expenditures must be an eligible and allowable activity per the State Plan. The Agency periodically performs journal entries to move child care claims to the applicable business unit to identify and track the State matching expenditures. During the fiscal year, the Agency moved $10,737,243 of child care claims paid with State General funds to the business units for State matching expenditures. We tested 25 child care claims paid with State matching funds. We noted 10 claims with errors. Some payments had more than one type of error. • For one claim tested, there was a family fee co-pay required of $203, but no such co-pay was deducted. • For two claims tested, the attendance records were not provided. • For five claims tested, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet: o One provider billed for 4 full days and 25.25 hours of child care, while the attendance sheet showed 0 days and 18.75 hours of care. o One provider billed 13 partial days of service; however, the attendance sheet showed only 10 partial days. o Two providers billed an additional day compared to the attendance record. o One provider recorded full days of service from 6:00 a.m. to 9:00 a.m. and 4:00 p.m. to 6:00 p.m., for five hours of service. However, per the school calendar, classes began at 8:50 a.m. and ended at 4:05 p.m. The attendance sheet did not appear reasonable, as the child would still be at the child care provider when school started. If services were from 6:00 a.m. to 8:50 a.m. and 4:05 p.m. to 6:00 p.m., the provider would only be allowed partial days of service. • For one claim tested, the provider billed care over the authorized amount. The provider was authorized 39 hours of child care a week; however, per the attendance sheet, the child received 43 hours for one week tested. • For one claim tested, the attendance record was not signed by the parent, as required. Payment errors noted for the sample tested were $1,397. The total sample tested was $9,396, and total child care matching claims for the fiscal year were $10,737,243. Based on the sample tested, the case error rate was 40% (10/25). The dollar error rate for the sample was 14.87% ($1,397/9,396), which estimates the potential dollars at risk for fiscal year 2024 to be $1,596,628 (dollar error rate multiplied by the population). Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. The edit check “Units too high for service dates and frequency” was incorrectly bypassed on claims submitted and interfaced through the Child and Family Services Provider online claims portal. Effect: Ineffective review of claims increases the risk for errors, fraud, and misuse of State and Federal funds.   Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets, and services are only authorized as needed and only if the parents’ employment has the potential for economic self-sufficiency. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: Management agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2401NECCDF, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2023), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] 391 NAC 1-005.02 provides the following: The Department will conduct an unannounced inspection each year to assess compliance with licensing regulations. A good internal control plan requires adequate documentation to be maintained to support compliance with health and safety requirements. Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding has been noted in prior audits since 2017. Repeat Finding: 2023-044 Questioned Costs: Unknown Statistical Sample: No Context: Child care centers and family child care homes are subject to health and safety requirements. Each type of provider is subject to separate but similar State regulations. We tested 26 child care providers subject to health and safety requirements. We noted the following: • One family home child care provider did not have the required annual inspection completed. The last annual inspection was performed on February 25, 2022. The Agency attempted to conduct unannounced reviews on November 8, 2023, and November 11, 2023, but the child care provider was not home. In December 2023, the Agency emailed the provider and tried contacting the provider by phone twice; however, a response was not received. No annual inspection was completed in 2023, and no inspection for 2024 has been completed as of the end of fieldwork on November 8, 2024. No disciplinary actions have been taken against the provider. • One child care center tested did not have a sanitation inspection. The Agency made a referral for a sanitation inspection on December 5, 2023; however, as of November 8, 2024, no inspection was completed. • Five of 21 child care centers tested did not have a fire inspection within the last two years: See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. Management Response: Management partially agrees. APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2023): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. Per the Federal Notice of Award for 2101NECDC6, “ARP CCDF Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024.” According to 45 CFR § 75.511(a) (October 1, 2023), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) provides, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the American Rescue Plan Act (ARPA) grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2023-045 Questioned Costs: $9,321,777 known Statistical Sample: No Context: ARPA Child Care and Development Fund (CCDF) Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024. Expenditures for the ARPA grant included two journal entries for claims originally paid with State funds from October 2023 through March 2024, which is after the obligation period. See Schedule of Findings and Questioned Costs for chart/table. During our random sample of child care claims, we tested two claims charged to the ARPA grant per the Journal Entry dated June 3, 2024. The eligibility period, service dates, and original paid date for those two claims are as follows: See Schedule of Findings and Questioned Costs for chart/table. Clearly, there was no obligation to pay these claims as of September 30, 2023, as services had not been provided, and the family had not been determined eligible for those service dates. Cause: The Agency had verbal discussions with the Federal grantor and believed, based on those discussions, that the expenditures were allowable. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: Management partially agrees. The Agency has worked with Federal Partners on period of performance and were in agreeance with them on what is allowable. We understand that most conversations were verbal, however, the Federal Partners did not see any issues with our definition of obligations, which some of these claims fall into.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability & Period of Performance Grant Number & Year: 2101NECCC5, FFY 2021; 2101NECDC6, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67 (October 1, 2023) states, in part, the following: (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. * * * * (c) Fiscal control and accounting procedures shall be sufficient to permit: * * * * (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. The Frequently Asked Questions (FAQs) for the Business and Child Care Partnership Grant Program (https://dhhs.ne.gov/Documents/BCCG-FAQs.pdf ) includes, in part, the following: I. 1. The goal of the Business and Child Care Partnership grant program is to increase child care capacity throughout the state of Nebraska. * * * * II. 12. Applicants must expend grant funds by July 31, 2023. * * * * II. 14. [N]ew child care programs need to be licensed and operating by December 31, 2023. * * * * II. 15. Grant recipients are required to remain open and caring for children for three (3) years after their awarded date or from the date of license, whichever is later. Closing the business before three years have passed may require the grant recipient to pay back all or a prorated portion of their award. * * * * III. 4. To be eligible to apply, you will need to be increasing your license capacity . . . * * * * IV. 2. Note that projects must be completed by December 31, 2023. Per the Federal Notice of Award for 2101NECCC5, “CRRSA funds must be obligated by September 30, 2022, and liquidated by September 30, 2023.” Per the Federal Notice of Award for 2101NECDC6, “ARP CCDF Discretionary funds must be obligated by September 30, 2023, and liquidated by September 30, 2024.” The Child Care Stabilization Program Frequently Asked Questions (FAQs) for Round 3 (https://dhhs.ne.gov/Documents/CCSG-FAQ-English.pdf) includes, in part, the following: 4. A licensed child care provider (CCC, FCCHI, FCCHII, PRE, and SAOC) is considered eligible to apply if they became licensed between May 10, 2022 and April 21, 2023 OR has been funded in a previous stabilization grant round and has expanded their current license capacity since previous award . . . . Applicants who, at the time of submission of application, are not trained in Prepare to Care, certified in pediatric first aid and CPR . . . will have 60 days to submit proof of training[.] * * * * 34. Providers who accept the Stabilization Grant payment agree to stay licensed, opened, and actively watching children for a minimum of 12 months from the issue date of the payment. The Grant Payment Survey Frequently Asked Questions for the Inflation Remittance Support payments (https://dhhs.ne.gov/Child%20Care%20Documents/Grant%20Payment%20Survey%20FAQs_Aug_2023.pdf) states, in part, the following: 5. If you do not complete the Grant Payment Survey by September 30, 2023, you will not be eligible to receive the funding. * * * * 9. You agree to stay licensed, open, operational and actively caring for children for a minimum of 12 months from the issue date of the grant payment. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure that funds paid to child care providers were spent properly and complied with State and Federal requirements. In addition, payments were charged after the period of performance. A similar finding was noted in the prior audit. Repeat Finding: 2023-046 Questioned Costs: $5,185,690 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (Public Law 116-260), signed into law on December 27, 2020, and the American Rescue Plan Act (ARPA) of 2021 provided states with supplemental child care funds to build the supply of child care, retain a skilled work force, and support the stability of the child care sector. Business and Child Care Partnership Grants The Agency awarded various grants to child care providers, including the Business and Child Care Partnership Grant (BCC). The purpose of the BCC grants was to help individuals and organizations create new child care programs and enable existing licensed child care programs to increase their license capacity. During fiscal year 2023, a total of $23,303,985 in BCC grants were paid to 125 recipients. Payments were made to grant recipients beginning in March 2023. The Agency paid 19 additional facilities $3,397,763 in BCC grants during fiscal year 2024. Recipients had until December 31, 2023, to spend the funds. Additionally, new child care programs needed to be licensed and operating by December 31, 2023, and projects to increase capacity by existing child care programs were to be completed by December 31, 2023. On October 30, 2024, after our request, the Agency provided a listing of BCC grant recipients that had not increased their licensed capacity as of December 31, 2023. The Agency stated it was working with providers that did not meet the December 31, 2023, requirement on a case-by-case basis. The Agency had not requested any funds to be returned by noncompliant providers as of October 30, 2024. We reviewed the listing and identified 21 child care providers that had not increased their capacity or were not licensed and operating as of November 20, 2024. These providers were paid $3,892,270 in BCC grant payments. This included $2,646,489 in fiscal year 2023 payments made from March 2023 through June 2023 and $1,245,781 in payments made during fiscal year 2024 in August 2023. All of these payments are questioned. See Schedule of Findings and Questioned Costs for chart/table. Additionally, grant recipients were required to remain open for three years after the grant award date or from the date of the licenses, whichever was later. Three of these recipients closed their facilities well before the required three-year deadline. As stated above, the Agency has not requested the providers to return all or any portion of the BCC grant. Additional details on the three grant recipients are below: • J’s Nest Childcare is owned by Jordan Wintz. Wintz received a Provisional Family Child Care Home I license on November 1, 2022. Per court records, a complaint was filed on February 2, 2023, against Jordan Wintz for a Class IIA Felony of Theft by Deception. On January 1, 2024, the charge was amended to Unauthorized Use of a Financial Transaction Device, also a Class IIA Felony. On March 1, 2024, Wintz was found guilty of the amended charge and, on May 17, 2024, she was sentenced to 48 months of probation, 48 days in jail, and restitution of $27,217 to Midwest Bank, which was paid in full as of May 17, 2024. J’s Nest Childcare’s license was revoked on November 7, 2024. • Two providers requested their license be closed. Aleah’s Childcare’s license was closed on November 4, 2024, and the license for Blessed Are They Learning Center was closed on November 8, 2024. Additionally, we tested payments to five facilities, totaling $1,414,825, which received payments during fiscal year 2024. We requested the application, award notification, spending reports, and supporting documentation for expenditures. We noted the following: • Four of the facilities tested had the same owner. None of the four facilities increased capacity by December 31, 2023, and had still not increased capacity as of November 20, 2024. None of the spending reports provided agreed to the grant award. For example, the spending reports included thousands of dollars for staff wages even though the Agency did not award any funds for staff wages. We further noted only $27,585 expenditures of the $773,581 awarded were adequately supported. Copies of checks were provided for several expenditures, but no invoice or contract was provided to support what the expenditure was for, or that it was allowable for the grant. In addition, several amounts were not supported at all. All four facilities tested had an application dated in May 2023, which is after the period of performance for the Federal grant. The Federal grant was required to be obligated by September 30, 2022. All payments for these facilities are questioned in the table above, as obligated after the period of performance, capacity not increased, and inadequate support for expenditures. See Schedule of Findings and Questioned Costs for chart/table. • We also tested one facility that was paid $641,244. Sufficient documentation was on file to support the expenditures; however, the Agency was unable to provide the award notification. This was a new program that was not licensed by December 31, 2023; but a provisional license was issued on May 14, 2024. The recipient had an application that was dated May 4, 2023, which is after the period of performance for the Federal grant. The Federal grant was required to be obligated by September 30, 2022. Therefore, we question $641,244. We tested two additional providers listed as increased capacity and reviewed the applications and documentation of how the grant funds were spent. As a result, we question an additional $479,438, as follows: Kids Express LLC Kids Express LLC (Kids Express) received a BCC grant of $54,186 on August 14, 2023. The application for Kids Express was completed on July 8, 2023, which is after the period of performance for the Federal grant. The Federal grant was required to be obligated by September 30, 2022. The $54,186 payment is questioned. We also identified several additional issues with the application, grant award and expenditures, as follows. • The BCC application provided the address of 7410 Mercy Road in Omaha as the physical address for the new child care program. The center was projected to be licensed and operating by October 15, 2023. Kids Express did not receive a license for this location but received a provisional license at 5352 South 136th Street in Omaha. • The grant was awarded based on quotes and estimates provided for the location of 7410 Mercy Road; however, the expenses were for the 5352 South 136th Street location. Therefore, the expenses did not agree to the grant award notification, as follows. See Schedule of Findings and Questioned Costs for chart/table. • The Agency previously performed an audit of the expenses to support the full grant payment. Based on the audit, the Agency allowed $56,885 in expenses, which covered the full grant award amount. We also completed an analysis of the expenses identified above and determined that the invoices provided by Kids Express did not adequately support $27,046 of the grant funds spent. For example, a $10,490 invoice for playground equipment included the total only and no description of what equipment was purchased. Two invoices for a washer and dryer, and signage, totaling $7,714, did not include the vendor’s name, date purchased, or any payment information. Additional support for expenses appeared to be an estimate or quote and not the actual paid invoice. There were several Walmart receipts that did not include the date of purchase or payment method, and some of these receipts included the purchase of cat litter and groceries; however, the center was not operating when the groceries were purchased. • Kids Express was issued a Provisional Child Care Center license at the 5352 South 136th Street location on November 1, 2023. The center was licensed for 76 kids. Per a local news report from April 15, 2024, Kids Express was not yet open, but should begin accepting children in two weeks, April 29, 2024. Kids Express was not operational by the December 31, 2023, deadline. • Kids Express did not remain open for three years after the license was issued on November 1, 2023. Subsequent to the audit period on August 5, 2024, the property owner of the space leased by Kids Express filed a complaint in District Court. Per the complaint, the parties entered into a lease agreement on August 16, 2023, and Kids Express failed to pay monthly installments or rent and other amounts due under the lease. As of July 30, 2024, there was a total outstanding amount due of at least $65,421. Kids Express owed monthly rent and operating expenses for November 1, 2023, through August 1, 2024. On August 19, 2024, an Order of Restitution granted the property owner immediate possession and restitution of the premises at 5352 South 136th Street. On November 25, 2024, an Order for Default Judgment was filed in the sum of $78,754 plus interest. The Agency noted the provider closed due to not obtaining enough children to care for and other personal issues. The Agency did not request the center return all or a portion of the grant funds. Subsequent to the audit period, Kids Express was paid $37,422 on August 30, 2024, for a Targeted Workforce Supplemental (TWS) payment. Providers who received the BCC grant were eligible to apply for this subgrant and were required to complete a TWS survey by September 30, 2023. Grant amounts were determined based on the number of new child care slots the child care program created. Kids Express was no longer operating the center at the time of payment. Patty’s Child Care Center Inc. Patty’s Child Care Center received payments for two locations. One was an existing center at 4102 South 13th Street in Omaha (Patty’s Child Care Center 2) and the other was a new center to be opened at 4110 South 13th Street in Omaha. We requested support for the funds spent at both locations. We noted the following: 4102 South 13th Street: On May 5, 2023, Patty’s Child Care Center 2 was awarded $709,205 to increase the center’s capacity from 100 to 120 by December 31, 2023. The center did not increase capacity until June 28, 2024, when the license was increased to 110. We requested documentation of expenses made to support the $548,020 awarded for the funding category of minor repairs and renovations. Invoices provided did not support the full amount awarded. The center provided invoices for only $449,720 of the $548,020 grant award. Of the $449,720 expended for minor repairs and renovations, we determined only $122,768 of expenses were allowable, resulting in $425,252 in questioned costs. In addition to the $98,300 support not provided, see examples below of other questioned items: • The grant award allowed $24,200 for the repair of sidewalks and steps; however, the invoice for concrete totaled $100,045 and was for the playground area and did not include sidewalks or steps. • An estimate for updates to the inside of the daycare was provided by a vendor dated May 15, 2023. It included plumbing, electrical updates, patching drywall, painting, window replacement, floor replacement, updates to the HVAC system, replacement of tile in the bathroom and kitchen, door hardware, and ceiling tile replacement. However, the invoices provided for these items were from a different vendor. There was a total of 16 invoices, totaling, $186,475, from the vendor. The invoices included a total price for the service, but there was no itemized breakdown of materials or labor, and no cancelled check or proof of payment for the invoices was provided. • An estimate was provided by a vendor for purchasing and installing turf. The estimate was for $80,163, and the Agency approved this amount as part of the grant award. The invoice from the vendor dated July 1, 2023, was for $120,595. Not only did the square footage of the turf increase, but the costs to install also increased. 4110 South 13th Street: Patty’s Child Care Center owns a building at 4110 South 13th Street, where it wanted to open a new facility with a proposed license capacity of 186. Patty’s Child Care Center was awarded a BCC grant for this location, totaling $677,900. This included $450,000 awarded for the Program Supplies funding category. We requested documentation to support the expense made for this funding category. Patty’s Child Care Center provided invoices for program supplies, totaling $465,590. These invoices included $52,537 for concrete work and $30,356 for turf installation that were not included in the grant application and were not approved as part of the grant award. Additionally, a playground quote dated April 3, 2023, was from one vendor, and the invoice provided for the expense was from a different vendor. No license has been issued for this location, and the entire BCC grant award amount was questioned, as noted in the chart above. Stabilization Grants Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided states supplemental discretionary Federal funding to help more families afford child care and to improve the quality of child care for all children. The Agency paid $575,572 in Round 3 stabilization subgrants to eligible child care providers during fiscal year 2024. We tested one Round 3 payment, totaling $167,738, to Kiddie Academy of Gretna. To be eligible for the Round 3 payment, the provider had to have become licensed between May 10, 2022, and April 21, 2023, and had to be trained in the Agency’s Prepare to Care program and be certified in pediatric first aid and CPR. Additionally, the provider was obligated to stay licensed, open, and actively watching children for a minimum of 12 months from the issue date of the payment. The payment amount was determined by the Agency’s grant funding formula. The funding formula included a base amount awarded to providers based on their licensed capacity, as well as additional funding for those providers who served children from families with low incomes. We found several issues with this aid payment. • The Agency could not provide documentation to verify that the provider completed the Prepare to Care training and was certified in pediatric first aid and CPR. • We were unable to recalculate the payment amount using the Agency’s funding formula, and the Agency was unable to provide support on how the payment amount was determined. • Kiddie Academy of Gretna did not remain licensed and open for 12 months after the payment date. The payment was issued on July 5, 2023, and the provider’s license was closed on April 29, 2024. The payment of $167,738 is questioned. In response to our inquiry about the provider closing, the Agency stated it would send a letter to the provider asking how the funds were spent and the reason why it closed. Inflation Remittance Support The Agency also offered an Inflation Remittance Support Payment to child care providers who were previously awarded a child care stabilization grant. The Agency provided eligible providers instructions on how to apply and a link to complete the grant survey, which had to be completed by September 30, 2023. The providers certified that the program maintained the same license number submitted at the time of their initial application, and the program must have been open and actively caring for children at the time the survey was submitted and at the time of payment. Providers were also required to stay licensed, open, operational, and actively caring for children for a minimum of 12 months from the date of the grant payment. Two grant payments tested did not follow these requirements. • A Family Child Care Home II provider received a $2,500 grant payment on March 5, 2024; however, the program did not stay open for the required 12 months, as it closed on August 9, 2024. The $2,500 payment is questioned. Per the Agency, a letter was sent to the provider asking for a receipt of all expenses and an explanation for why the program closed. • For another payment, the survey was submitted by the provider on October 10, 2023, after the September 30, 2023, deadline. Per the Agency, the survey instructions and link were sent to the wrong address; therefore, it gave the provider extra time to complete the survey. The ARP CCDF Discretionary funds must be obligated by September 30, 2023. The $2,500 grant payment is questioned. Federal payment errors noted for the Inflation Remittance Support sample tested were $5,000. The total sample tested was $32,500, and the total Inflation payments for the fiscal year were $7,072,500. The Inflation payment dollar error rate for the sample was 15.38% ($5,000/$32,500), which estimates the potential dollars at risk for fiscal year 2024 to be $1,087,851 (dollar error rate multiplied by the population). Cause: Inadequate control procedures. Effect: Noncompliance with Federal regulations. Additionally, a lack of adequate supporting documentation increases risk of payments not being made in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure that payments are adequately supported and in accordance with State and Federal requirements. We further recommend the Agency take steps to recover funding that was not spent properly or granted to providers whose capacity did not increase or did not remain open, as required. Management Response: Management agrees.

Program: AL 93.658 – Foster Care Title IV-E – Allowability Grant Number & Year: 2201NEFOST, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure journal entries are reasonable, accurate, and not duplicated. 45 CFR § 75.403 (October 1, 2023) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 45 CFR § 75.303 (October 1, 2023) states, in part, the following: 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. Condition: The Agency did not have adequate procedures to ensure journal entries were proper. Repeat Finding: No Questioned Costs: $1,003,954 known Statistical Sample: No Context: During our review of journal entries, we tested a transaction dated June 21, 2024, that included $1,003,954 in Federal charges to the 2022 grant related to a prior-period adjustment. However, these costs had previously been charged to the grant on a journal entry dated September 22, 2022. As a result, the costs were charged twice, and we question the $1,003,954 in Federal charges. Cause: Inadequate review procedures. The Agency attempted to reconcile the grant costs reported to the accounting system but missed that a journal entry had already been completed for one of the adjustments. Effect: Increased risk for errors to occur and not be detected. Recommendation: We recommend the Agency improve procedures to ensure transactions are proper. Management Response: The agency agrees with the finding.

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Tile IV-E – Allowability & Eligibility Grant Number & Year: 2301NEFOST, FFY 2023; 2401NEFOST, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2023), costs must be necessary, reasonable, and adequately documented.   Per 45 CFR § 75.303(a) (October 1, 2023), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2023) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 42 USC § 671(a)(20)(A), for a state to be eligible for adoption assistance, the state must have a plan that “provides procedures for criminal records checks, including fingerprint-based checks of national crime information databases (as defined in section 534(f)(3)(A) of title 28), for any prospective foster or adoptive parent before the foster or adoptive parent may be finally approved for placement of a child[.]” Title 395 NAC 3-003.08(A)(iv) (Eff. 6/29/2022) states, in relevant part, the following: The applicant and all other members of the household 18 years of age and older will submit background checks prior to licensing. Each individual living in the home on whom a background check will be performed will sign the authorization form granting the Licensing Agent permission to perform the background checks and obtain the results. The authorization must include all previous known names, including maiden names and aliases . . . The following background checks will be conducted: * * * * (5) State-level criminal history; and (6) Fingerprint-based National Criminal History Check. Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Subsidy Provider Handbook (June 2023 revision), Section 5 (“Financial Matters”), states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” (pg. 32) Title 45 CFR § 75.511(a) (October 1, 2023) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate documentation on file to support that payments were in accordance with Federal and State regulations. The Summary Schedule of Prior Audit Findings states the corrective action is completed. Repeat Finding: 2023-048 Questioned Costs: $681 known (2301NEFOST, $352; 2301NEFOST-COVID-19, $9; 2401NEFOST, $319; 2401NEFOST-COVID-19, $1) Statistical Sample: No Context: We tested 25 Foster Care claims for maintenance. Foster Care maintenance payments include payments to foster parents and payments to licensed child care providers for child care when work responsibilities preclude foster parents from being at home. We noted the following: • For two claims tested, the Agency was unable to obtain the child care attendance calendars from the providers. With no attendance calendars, we were unable to verify that the payment amounts were accurate, resulting in questioned costs of $657. • For one claim tested, the provider billed 12 days of child care, while the attendance calendar for the child showed only 11 days of child care. Also, the provider was authorized to provide 40 hours of child care per week, but one week billed 55 hours of care. We questioned costs of $24. • For one claim, there was no documentation of a fingerprint-based background check performed for an adult residing in the foster care household. Federal payment errors noted in the sample were $681. The Federal sample tested was $10,391, and the total Federal maintenance payments during the year were $5,998,283. Based on the sample tested, the dollar error rate was 6.55% ($681/10,391), which estimates the potential dollars at risk for fiscal year 2024 to be $392,888 (dollar error rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The agency agrees with this finding. Bullet Point 3: The department reached out to the home to get a fingerprint check completed but learned that the individual in question had already moved out on 1/16/25. The department is unable to complete the check now.

Program: AL 93.659 – Adoption Assistance – Allowability & Eligibility Grant Number & Year: 2401NEADPT, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2023), costs must be necessary, reasonable, and adequately documented. Per 45 CFR § 75.303(a) (October 1, 2023), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2023) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Subsidy Provider Handbook (June 2023 revision), Section 5 (“Financial Matters”), states, in relevant part, “You must complete an attendance calendar to accurately reflect the dates on which child care services were provided, as well as the exact number of hours of service provided.” (pg. 32) Condition: The Agency did not have adequate documentation on file to support that Adoption Assistance payments were in accordance with Federal and State regulations. Repeat Finding: No Questioned Costs: $350 known Statistical Sample: No Context: We tested 25 assistance claims and noted the following: • For one claim, the Agency was unable to obtain the child care attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $105. • For one claim, the provider billed 22 days of child care, while the attendance calendar for the child showed only 11 days, resulting in questioned costs of $245. Federal payment errors noted in the sample were $350. The Federal sample tested was $9,968, and the total Federal assistance payments during the year were $27,200,378. The dollar error rate was 3.51% ($350/9,968), which estimates the potential dollars at risk for fiscal year 2024 to be $954,733 (dollar error rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both noncompliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation is maintained to support that expenditures are allowable and in accordance with State and Federal regulations. Management Response: The agency agrees with this finding.

Program: AL 93.659 – Adoption Assistance – Level-of-Effort & Reporting Grant Number & Year: 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2023) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state’s and the other non- Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per Instructions for Completion of Form CB – 496: Line 10. Reporting Period - Expenditures of Adoption Savings On Post-Adoption or Post-Guardianship Services (from line 8 amount) – This line consists of the actual title IV-E agency expenditures (without federal matching funds) of calculated cumulative adoption savings for the purposes of providing post-adoption or post-guardianship services. . . . Line 11. Reporting Period - Expenditures of Adoption Savings On Services for Children At Risk of Foster Care (from line 8 amount) – This line consists of the actual title IV-E agency expenditures (without federal matching funds) of calculated cumulative adoption savings for the purposes of providing services to support positive permanent outcomes for children at risk of entering foster care. . . . Line 12. Reporting Period - Expenditures of Adoption Savings On Other Title IV-B or Title IV-E Allowable Services (from line 8 amount) – This line consists of the actual title IV-E agency expenditures (without federal matching funds) of calculated cumulative adoption savings for the purposes of providing title IV-B or title IV-E allowable services other than those specified for reporting on lines 10 and 11 of this Part. . . . Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 USC § 673(a)(8)(D)(ii), “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Title 45 CFR § 75.511(a) (October 1, 2023) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not have adequate procedures to ensure Federal Financial Reports (FFRs) were accurate. Adoption Savings reported were not in accordance with Level-of-Effort requirements. The Summary Schedule of Prior Audit Findings states the corrective action is completed. Repeat Finding: 2023-049 Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended December 2023 and June 2024. We also tested Part 4 of the September 2023 report for the Annual Adoption Savings Calculation and Accounting Report. We noted the following: • Line 10 Expenditures of Adoption Savings on Post-Adoption or Post-Guardianship Services was reported as $9,684,007 but only had support for $9,555,098. • Line 12 Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services reported $638,161, but $470,913 of these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 11 Expenditures for Children at Risk of Foster Care was reported as $1,078,475 but was overstated $136,305 due to including expenditures paid with Federal funds. • Line 13 Total Expenditures of Calculated Adoption Savings was overstated by $736,127 due to the errors noted on Lines 10-12. Cause: Inadequate review. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The agency agrees with this finding.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2405NE5MAP, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302 (October 1, 2023), each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. Per 45 CFR § 75.403 (October 1, 2023), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately document services provided in the EVV (Electronic Visit Verification) system, and confirm that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states that the provider can provide services to only one client at a time, and services will not be paid unless performed during the actual hours noted in the EVV system. Title 471 NAC 15-005.01(A) states that the provider will comply with all EVV billing requirements. Per the “Service Definition” provided in the Personal Care Service Handbook, “Personal Care is a service of the HCBS Waiver for Aged and Adults and Children with Disabilities (AD) and Traumatic Brain Injury (TBI) which provides needed assistance with Activities of Daily Living (ADLs) health-related tasks or Instrumental Activities of Daily Living (IADLs) provided in a participant’s home and other community settings.” A good internal control plan requires procedures to ensure services provided agree to the service needs assessment or individual support plan and service authorization. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) In general. Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: “(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— “(i) for calendar quarters in 2019 and 2020, by .25 percentage points; “(ii) for calendar quarters in 2021, by .5 percentage points; “(iii) for calendar quarters in 2022, by .75 percentage points; and “(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person’s intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) and personal care service claims, we noted the following: • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without the verification of the location where the services were provided. • Services billed exceeded the number of hours authorized. • PAS and personal care services appeared to be claimed at the same time the provider was working at another job or was no longer providing services for the client, resulting in apparently fraudulent billings and payments. • The caregivers for two clients were incarcerated at the time of service and could not have provided the services. • The PAS and other employment hours exceeded 24 hours in one day for one client, which is not possible. • The PAS and personal care providers had the ability to edit the billable start and end times in the EVV system. • The Agency authorized a PAS provider to perform services for three clients, totaling up to 85 hours a week, which is unreasonable. • A PAS provider did not declare all income earned when applying for assistance. Similar findings have been noted in prior audits since 2014. Repeat Finding: 2023-050 Questioned Costs: $98,008 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency also offers personal care services under the Aged and Disabled (AD) Waiver to recipients with disabilities. These services enable the participants to carry out tasks that they are unable to perform because of their disabilities. The services provided are based on individual needs and criteria that are documented in the individual support plan and service authorization. The Agency implemented an electronic visit verification (EVV) system for PAS and personal care providers in January 2021, as required by Section 12006(a) of the 21st Century CURES Act, passed by Congress in 2016. The EVV system electronically captured and verified provider visit information, and providers were required to submit claims to the Agency electronically through this application. We judgmentally selected four providers and a PAS/personal care agency based on high total dollars and units for testing and two PAS providers from the prior year audit with findings who received payments during fiscal year 2024. For those providers, we selected one week of claims for testing. We also randomly selected five PAS and ten waiver payments for testing. Due to the numerous issues identified with the billings, we expanded testing for several of the providers. In addition to the billing issues identified for the weeks tested, we noted three of these providers had outside employment that conflicted with the PAS hours billed. We also identified billings submitted for two employees who no longer worked for the PAS agency. We identified $5,640 in potentially fraudulent payments made to the providers during fiscal year 2024. In addition to the potentially fraudulent payments, we noted $92,368 in Federal payment errors related to other issues, resulting in total Federal questioned costs of $98,008. See Schedule of Findings and Questioned Costs for chart/table. The Federal share of PAS and AD Waiver claims paid for the fiscal year totaled $6,282,331 and $170,743,608, respectively. Payments tested and questioned costs for each are as follows: See Schedule of Findings and Questioned Costs for chart/table. The following information describes issues noted with each provider: Provider #1 Murray’s Blessings LLC (Murray’s Blessings) is an agency that employed caregivers to provide PAS and personal care assistance for multiple clients. Murray’s Blessings received $87,857 in PAS payments and $921,160 in personal care payments during the fiscal year, for a total of $1,009,017. We initially selected one week of claims to test, from April 28, 2024, through May 4, 2024, for all clients. Six clients received PAS and 16 clients received personal care services during this week. Services for 18 of 22 clients were not completed through a device using Global Positioning System (GPS) verification. The caregiver for five of the clients was unknown because the forms listed only “Murray’s Blessings Admin” as the caregiver, and there were mileage variances for visits that were completed using GPS devices. Due to the numerous issues identified with the initial week tested, we reviewed an additional seven weeks of PAS and personal care services for the period of May 5, 2024, through June 22, 2024. We identified similar issues. The following is a summary of the issues identified for the eight-week period. Client 1 No personal care visits from April 28, 2024, through May 18, 2024, used a device with GPS verification. According to payroll records provided by Murray’s Blessings, the caregiver (caregiver A) for this client received his last check on April 30, 2024. Additionally, county court records noted that the caregiver was arrested on April 29, 2024, for possession of a firearm by a prohibited person, terroristic threats, and use of a firearm to commit a felony. The caregiver was in custody during the entire time that services for Murray’s Blessings submitted billings were supposedly provided. All visits were questioned as potential fraud, as this caregiver could not have performed these services. Previously, the caregiver served time in a Nebraska prison for State drug offenses from June 2013 through May 2019. In June 2017, while serving time for these State offenses, the caregiver was charged with committing Federal offenses. The caregiver was found guilty and on July 2, 2018, was sentenced to seven years in Federal prison for participating in a racketeering conspiracy involving acts of violence, including attempted murder and assaults, witness tampering, and drug distribution. The sentence was later reduced to 71 months. The caregiver was no longer in Federal prison as of October 5, 2023. Client 2 No PAS visits completed from April 28, 2024, through June 22, 2024, used a device with GPS verification. According to payroll records provided by Murray’s Blessings, the caregiver (caregiver B) for this client received her final paycheck on April 23, 2024, prior to these visits. Additionally, county court records noted the caregiver was in jail from June 3, 2024, until June 5, 2024, and could not have provided the services billed on June 3, 2024. All visits were questioned as potential fraud because services do not appear to have been provided by this caregiver. An arrest warrant was issued for the caregiver on May 30, 2024, for delivery of a controlled substance. The warrant was served on June 3, 2024, at the jail. The caregiver was taken into custody on June 3, 2024, for a pretrial violation in another case filed on April 11, 2024, for possession of a controlled substance. Client 3 All of the personal care visits for this caregiver had starting and ending mileage variances. Based on the GPS coordinates, the visits started at either the caregiver’s home or the home of another client receiving personal care services from another agency. All visits ended at the caregiver’s home, raising doubt that the visits were provided as billed. Additionally, the client was authorized to receive 25 hours of service per week, and the provider exceeded the service authorization all eight weeks by 0.5 to 3.75 hours. Due to these variances, all claims were questioned. Client 4 The SNA authorized 31.5 PAS hours of services each week. The provider exceeded the SNA for seven of eight weeks, ranging from 2.5 to 38.25 hours over the authorization. Four visits were not completed through a device using GPS. For the remaining visits, GPS was utilized; however, there were mileage variances for each visit, and only one visit appears to have had an end location at the client’s home. The client in this case was the caregiver’s parent. The majority of the visits started and ended at the caregiver’s home per the captured GPS coordinates. Seven visits occurred overnight. Other beginning or ending locations included a daycare center attended by the caregiver’s child and also a plasma donation center. All claims for this client are questioned due to the various issues identified. Client 5 This client was authorized to receive 70 hours of personal care each week. There were two caregivers for this client. All visits completed by Antoinette Murray, the owner of Murray’s Blessings, were from 4:00 p.m. to 12:00 a.m., and GPS verification was not used. The second caregiver used GPS; however, there were mileage variances for each visit. Per the GPS coordinates, the caregiver clocked in at her home for all visits but one. The starting location for the other visit was a retirement home that was not where the client lived. The majority of the visits ended at the caregiver’s home or at the home of the caregiver’s parents. The caregivers exceeded the service authorization for six of eight weeks, ranging from 2 to 10 hours over the authorization. All claims were questioned due to these issues.   Client 6 The client was authorized to receive 60 hours of personal care services each week between two agencies. For Murray’s Blessings, seven visits were not completed using a GPS device, and they included a duplicate claim on June 22, 2024. Due to the duplicate billing, the service authorization was exceeded by 4.5 hours. Additionally, the second agency billed 10 hours on this day – for a total of 27.5 hours of care provided in a day, which is impossible. Client 7 Six visits were completed that did not use a GPS device and, therefore, are questioned. One visit completed with a GPS device had a start time of 2:57:00 p.m. to 2:57:58 p.m. The billable start time was changed to 9:00 a.m. The client was authorized for 42 personal care hours each week. The caregiver exceeded the service authorization by 4.25 hours for one week. Other Clients For 18 additional clients (13 personal care and 5 PAS), no visits over the eight-week period were completed through a device using GPS verification. All claims were questioned. Additional billing issues were identified for these claims, as follows: • The caregiver for six personal care clients and two PAS clients was noted as “Murray’s Blessings Admin” for all or some of the visits, so the caregiver remains unknown. • Overlapping and duplicate services were paid for three personal care clients, as detailed in the following table: See Schedule of Findings and Questioned Costs for chart/table. • The caregiver for one personal care client received family support services and supervised visitation for a child who was removed from the home. Four family support visits and one visitation service overlapped with services performed by the caregiver. All personal care visits were logged from 9:00 a.m. to 4:30 p.m., and the family support and visitation services started at 4:00 p.m. Consequently, overlapping services occurred from at least 4:00 p.m. to 4:30 p.m. The following table summarizes the questioned costs for each client during the eight-week period: See Schedule of Findings and Questioned Costs for chart/table. Per the Nebraska Secretary of State’s website (https://sos.nebraska.gov/), Murray’s Blessings was established on June 1, 2022. The agreement with the Agency for the provision of PAS and personal care services began on August 5, 2022. Prior to the establishment of Murray’s Blessings, Ms. Murray was an individual PAS provider, beginning on August 13, 2013. Ms. Murray was also a license-exempt child care subsidy provider from November 13, 2015, through November 1, 2017, when her agreement was terminated for not providing attendance calendars, not billing according to service authorizations, and double billing. A $6,468 overpayment was established on October 14, 2017, due to the billing issues. A $1,617 recoupment was applied toward the balance in December 2017, and Ms. Murray made two $50 payments towards the overpayment balance in March 2018. The Agency wrote off the remaining debt of $4,751 in May 2024. The child care subsidy program did not approve another agreement with Ms. Murray due to this overpayment and her subsequent failure to make full restitution. Given her history of billing problems, as well as a substantial overpayment, the Agency’s decision to approve a Medicaid agreement with Ms. Murray appears questionable. Nevertheless, the Agency did not require Ms. Murray to repay the overpayment balance prior to consideration of a new personal care agreement. It is evident, based on the PAS and personal care findings, that billing problems have continued. Further, on August 25, 2023, the Agency met with Ms. Murray to complete the annual Medicaid provider renewal. The worker explained to Ms. Murray that the caregivers must clock in and out using the EVV system. No changes occurred, however, as the majority of the Murray’s Blessings caregivers continued to neglect using, either intentionally or otherwise, a GPS device to clock in and out. Provider #2 This provider was authorized a total of 27.75 hours of service per week for one client. For the week tested of April 14, 2024, through April 20, 2024, the provider billed 148.25 hours of service. The provider exceeded the SNA by 120.5 hours, more than four times the number of hours authorized. During this week, the provider billed multiple 24-hour visits using the GPS verification method. The provider lived with the client, making it convenient to clock in the morning of one day and then clock out the next morning and then repeat the process with no GPS mileage variances. From January 28, 2024, through April 7, 2024, the provider exceeded the SNA for an additional 11 weeks, ranging from 17.75 to 91.25 hours over the SNA. Beginning on May 6, 2024, the SNA was increased to 37 hours of service per week, and the provider continued to exceed the SNA by 0.5 to 17.75 hours per week through June 22, 2024. Not only was the number of hours billed excessive and unreasonable, but also the provider was employed full-time with a financial technology company. We obtained the provider’s employment records and compared the PAS billings to those employment records for a three-month period from February 2024 through April 2024. The provider generally worked for the other employer from 8:00 a.m. to 4:30 p.m., Monday through Friday, which conflicted with the hours being billed for personal assistance services. We identified 55 days during which PAS hours billed overlapped with times that the provider was recorded as having been working for the other employer. Based on employment records, the provider appears to have worked remotely; however, PAS hours would not be allowed during the time the provider was working another job. We questioned 338.5 hours as potential fraud, totaling $4,577 (Federal share $2,682 and State share $1,895). Below are examples of the overlapping hours identified: See Schedule of Findings and Questioned Costs for chart/table. We noted that 11 of the PAS visits from February 2024 through April 2024 were not completed using a device with GPS verification, and 30 visits were billed overnight. Due to the apparent fraudulent billings, excessive hours, visits completed overnight, and some visits not being completed using a GPS device, we questioned all claims paid from February 2024 through April 2024. This resulted in additional questioned costs of $3,506. This individual became a PAS provider on August 17, 2023, and began the outside employment on October 30, 2023. The provider had three children noted in the household and was receiving Supplemental Nutrition Assistance Program (SNAP) and Medicaid benefits at the time the PAS agreement was signed. On January 30, 2024, the provider submitted a renewal application for SNAP and declared income from only the PAS payments and reported working only 2-3 hours per week. Subsequent to the audit period, the provider applied for child care benefits on August 14, 2024, and declared only the income from the outside employer. The provider told the Agency worker that the PAS employment ended on August 20, 2024; however, the provider continued to receive PAS payments. The provider was evidently not only overbilling PAS services but also being deceitful when applying for public assistance. Provider #3 For the initial week tested, the provider was authorized a total of 38.5 hours per week for one client. The provider exceeded the SNA by 10.25 hours for the week. Additionally, from June 2, 2024, through June 8, 2024, the provider did not follow the SNA when billing for tasks provided. The SNA included some services to be provided every day of the week, but services were billed on only five days. For example, the client was authorized for meal preparation assistance for seven days, but the provider performed services on only five days. We considered the hours charged for meal preparation on two days overbilled. We also noted the provider exceeded the frequency for some services authorized. For example, the client was authorized to shop for food once a week, but the provider billed this service on five days. Additionally, we noted the client attended county court on June 6, 2024, at 10:30 a.m., and the provider billed from 8:00 a.m. – 4:00 p.m. on that day. Per Title 471 NAC 15-004.02(B)(ii), accompanying the client to court is not an allowable service for PAS. Due to the issues noted for the initial week tested, we reviewed additional weeks. From July 1, 2023, through March 1, 2024, the provider performed PAS services for three individuals. In addition to the 38.5 hours authorized for the first client, the provider was authorized to provide PAS services for two clients who lived in the same home. The SNA authorized 26 hours and 21 hours of PAS services for these two clients for a total of 85.5 hours each week for the three clients. The provider billed over the SNA for an additional 25 weeks reviewed. There were 128.5 hours overbilled. We also questioned three visits that were not completed through a GPS device. This provider not only billed over the authorization, recording up to 95 PAS hours worked in a week, but also worked full-time for a rental management company. We obtained the employment records for the provider and compared the PAS billings to those records for a three-month period from October 22, 2023, through December 16, 2023. We identified 29 days during which PAS hours billed overlapped with times that the provider was recorded as having been working at the rental management company. In determining overlapping hours, we did not factor in any travel time that may have occurred between the client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exist. On several days, the PAS hours and employment hours exceeded 24 hours, which is impossible. We questioned 62.75 hours of personal assistance services as potential fraud, totaling $848 ($510 Federal Share and $338 State share). The majority of the visits were completed through a device using GPS; therefore, another individual appears to have aided the provider in falsely claiming that personal assistance services were performed, as the provider could not have been in two places at once. Based on case file documentation, the first client lived with the provider, and those evening hours billed for this client overlapped with the provider’s other employment hours. The table below contains examples of the overlapping of hours: See Schedule of Findings and Questioned Costs for chart/table. Other billing issues were identified as well. On several occasions, for instance, the provider changed the start and/or end times of the visit. The claim form in the EVV system included the scheduled start time, the actual service start time, and the billable service start time. The provider was allowed to edit the billable start and end times verified through a GPS device, which resulted in duplicate billings and overlapping times billed between clients. There were other instances of the provider changing the time, so that there would be no overlapping of times between clients and the provider’s outside employment. The ability to edit the billable start and stop times recorded in the EVV system, with no secondary review, places doubt on whether the service was performed as billed. Below are some examples: See Schedule of Findings and Questioned Costs for chart/table. It is unreasonable for the Agency to authorize a provider to perform services for three clients for up to 85 hours a week. With those hours alone, the provider would have to average more than 12 hours per day for 7 days a week. After adding in the hours worked at the outside employment, the provider would have been working over 20 hours a day. We noted also that the provider received Medicaid benefits during the fiscal year. The provider signed a Medicaid renewal application on September 14, 2023, and reported only the income at the rental management company. The provider did not disclose the income made through PAS, which averaged out to be $3,186 for both July and August 2023. PAS payments made to the provider during the fiscal year totaled $52,900. The Agency had access to this information, so it is questionable how this income was not discovered and included in determining Medicaid eligibility. Additional questioned costs for the provider totaled $1,126. Provider #4 The provider double billed a service on June 17, 2024. The visit form on June 17, 2024, had a clock-in time of 1:31 p.m. and a clock-out time of 6:48 a.m. on June 18, 2024. It appears that the provider may have forgotten to clock out. Upon crossing from one day to another, the visit generated two claim forms in the EVV system. The first claim had an end time of 11:59 p.m., and the second claim form had the start time of midnight or 24:00 on the next day. In this case, the provider changed the billable start and end times for both claims and was able to double bill 4.25 hours. See Schedule of Findings and Questioned Costs for chart/table. The provider was authorized 31 hours per week for one client. The provider exceeded the SNA by three hours for the week tested. Questioned costs totaled $33. Provider #5 This provider was authorized 26.25 hours per week for one client. The provider exceeded the SNA by 25 hours for the initial week tested from April 14, 2024, through April 20, 2024. This included billing 21.75 hours on April 16, 2024. For the week tested, the provider did not follow the SNA when billing for tasks provided. The SNA included some services to be provided every day of the week, but services were billed on only five days. For example, the client was authorized for assistance with medication administration three times a day for seven days, but the provider performed services on only five days. We also noted the provider exceeded the frequency for some services. For example, the client was authorized to have cleaning done once a week, but the provider billed this service on five days. We reviewed an additional eight weeks of claims and noted the provider billed over the SNA for an additional five weeks. Hours that exceeded the SNA ranged from 1.5 to 21 hours. Questioned costs for the provider totaled $452. Provider #6 This provider was authorized a total of 66.75 hours of service per week for two clients. For the week tested of May 12, 2024, through May 18, 2024, no visits were completed using a GPS device that captured the location of the visits. We questioned the entire claim, totaling $499. This provider was tested in the prior year with similar issues. Potential fraud was also identified, as the provider billed PAS hours that overlapped with her employment hours as a student bus driver and with other court-related activities. A law enforcement raid was conducted at the provider’s home on December 2, 2022, and her child was removed after Fentanyl and firearms were discovered there. The provider’s agreement closed on June 15, 2023; however, the Agency received a referral on January 17, 2024, for the provider to perform personal assistance services for a client, and a new provider agreement was signed on January 30, 2024. The Agency was notified of the prior year billing issues on January 22, 2024. The Agency established overpayments for PAS hours billed that exceeded the service authorization; however, no PAS overpayments were established for those hours billed that overlapped with other employment hours and court-related activities. The provider began providing services again on January 30, 2024, and, according to quarterly employment records, the provider was also employed as a student bus driver. We inquired with the Agency in July 2024 to determine what action had been taken against the provider, and we were informed that preparation was underway to terminate the provider. On September 3, 2024, the Agency sent a letter to the provider terminating her from participation as a Medicaid provider due to the billing issues identified from the prior year audit. The provider appealed the termination, and on November 27, 2024, the Agency received the final order from the hearing officer affirming the Agency’s actions, and the provider’s agreement was terminated as of November 27, 2024. We obtained the provider’s timecard records from the employer and compared the employment records to the EVV visit forms for the week of May 12, 2024, through May 18, 2024. We identified four days during the week in which PAS hours billed overlapped with times the provider was working as a student bus driver. In determining overlapping hours, we did not factor in any travel time that may have occurred between the clients’ homes and the provider’s place of employment. Additionally, we compared only one week of records; therefore, the possibility of additional fraudulent payments exists. We questioned seven hours of personal assistance services as potential fraud, totaling $95 ($56 Federal share and $39 State share). It is concerning that the Agency signed a new agreement with the provider on January 30, 2024, after the potential fraud was disclosed and after the Agency had established $2,062 in overpayments for billing hours over the SNA. It is unreasonable for the Agency to have allowed the provider to submit billings that did not comply with EVV guidelines in order for the provider to “pay back” the overpayments for previous billing errors. From January 30, 2024, through June 30, 2024, the provider was paid $13,317, and payments from July 1, 2024, through December 2, 2024 totaled $21,475. See Schedule of Findings and Questioned Costs for the remainder of the text to the audit finding.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2405NE5MAP, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2023) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2023), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medicaid. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states, “If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management’s responses and b. performing other audit procedures as necessary in the circumstances.” A good internal control plan requires desk audits to include a testing sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2023-052 Questioned Costs: Unknown Statistical Sample: No Context: The APA selected 21 of 201 facilities to review desk audits of the fiscal year 2023 cost reports. Seven of 21 desk audits tested did not have adequate support to verify large variances. The contractor compared costs from the prior year to the current year and did request verbal explanations; however, appropriate audit evidence was not obtained to verify the explanations. For example: • For one facility, Total Nursing Services Direct Care Costs increased by 35% from $1,100,667 to $1,478,888. The facility explained that all employees received a cost-of-living increase of 5% and a yearly raise increase. The explanation was accepted with no support obtained. However, this does not satisfactorily explain a 35% increase in costs. • For another facility, Nursing Purchased Services – Direct Care increased by $1,961,780 (156%), and Total Nursing Direct Care Costs increased by $1,933,563 (57%). The provider explanation was that the increase in purchased services is supported by a corresponding net decrease in Direct Care nursing services. However, Direct Care nursing decreased by only $45,675. Also, Plant Costs salaries increased by $139,181 (62%), and the provider’s explanation for that increase was not supported. In neither example did the contractor obtain any underlying invoices to determine if the increased costs for supplies and services were accurate, nor any documentation to support that the number of direct staff had decreased. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. The total Federal share of nursing facility expenditures during fiscal year 2024 was over $290 million. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that nursing facility cost reports are accurate. Management Response: Management agrees. In a previous audit finding of the FY2022 Cost Reports, it was determined that the Department should require more information for the Desk Review process. The Department started requiring nursing facilities to include the General Ledger reports along with the Cost Reports and additional documentation; however, by this time the FY2023 Cost Reports had already been completed – therefore, there was insufficient time between the prior finding and completion of the FY2023 cost reports to incorporate the Desk Review process change. Facilities were required to provide the General Ledger reports for the FY2024 Cost Report. Additionally, the Department intends to expand its testing for large variances and to obtain supporting materials from the facilities.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2405NE5MAP, FFY 2024; 2405NE5021, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2023), the State Medicaid Agency must require the disclosing entity to provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2023): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency[.] Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under §455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2023), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303(a) (October 1, 2023) requires the Agency to “[e]stablish 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.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Four of 25 providers tested did not include disclosure requirements for managing employees. A similar finding was noted in the prior audit. Repeat Finding: 2023-053 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted four providers failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these four providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: Management agrees. Starting in January of 2024, the Department has received reports from Maximus that lists the agency, owner(s), and managing employee(s) that were listed in PDMS. On July 1, 2024, a ticket was deployed in the enrollment system that would require an owner (when applicable) and managing employee on the application to move forward with the enrollment. It was set to have a “hard stop” which would prevent enrollment without the required information in the enrollment/revalidation process if not completed. If a provider were to attempt to leave both owners and managing employees blank: a message will pop up that says “Ownership or control interest in the disclosing entity or in any subcontractor in which the disclosing entity has direct or indirect ownership of 5% or more is required when applicable. You are required to supply your managing employees.” If a provider lists managing employees but no owners: there is a notice that pops up saying “You have indicated there are no Owners of this provider entity associated with your enrollment, please verify this is correct before continuing.” They will keep the option to move forward with no owners. If they list owners but not a managing employee, the provider will receive the message “Managing Employees are required”. They can only cancel and remain on the page. They must supply a managing employee or cancel their enrollment/revalidation. If the provider supplies a minimum of one owner and one managing employee, they will not get an error or pop up and they will be able to continue. This ticket was deployed within the enrollment system on July 1, 2024. Not knowing the entities that did not have managing employees listed, we are unable to determine if they were providers that had not gone through their revalidation this year, or prior to the release of that ticket. However, no providers will have been able to complete the enrollment process without listing an owner and/or managing employee since July 1, 2024.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2405NE5MAP, FFY 2024; 2405NE5021, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR § 438.3(m) (October 1, 2023): The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards. A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: The MCO and PAHP audited financial reports for year ended December 31, 2023, were not conducted in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2023-054 Questioned Costs: Unknown Statistical Sample: No Context: Nebraska Total Care, Inc., Community Care Health Plan of Nebraska, Inc., United Healthcare of the Midlands, Inc., and MCNA Insurance Company had audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements for the MCOs were prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The PAHP audit was prepared using “accounting practices prescribed or permitted by the Texas Department of Insurance . . . .” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The MCO and PAHP audited financial reports were completed for the Nebraska Department of Insurance, which did not require the audit to be conducted in accordance with GAAP. Amendments to the contract effective January 1, 2024, now require the financial audits to be conducted in accordance with GAAP. Effect: When the financial audits completed by the MCOs and PAHP are not conducted according to GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO and PAHP financial audits to be conducted in accordance with GAAP. Management Response: Management agrees. As part of a prior year finding, we amended MCO contracts to require GAAP (generally accepted accounting principles) Audits to be performed beginning with contract period CY24 forward.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: 2405NE5MAP, FFY 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2023) sets forth requirements for a State fraud detection and investigation program, including a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2023): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under PI’s Policies and Procedures: Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority PI’s Policies and Procedures also include the following under the Surveillance and Utilization Review Subsystem (SURS) Quarterly Sample Selection & Review Procedures: At the end of each calendar quarter, [a contractor] runs the Advantage Suite SURS reports . . . Effective with the reports received in January 2008, a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports sometime during the calendar quarter of January 1, 2008 – March 31, 2008 and for each quarter thereafter unless notified otherwise. Per Section V.O. (“Program Integrity”) of the contract between the State of Nebraska and each of the three Heritage Health Managed Care Organizations (MCOs): O.2. The MCO must pursue the recovery of overpayments identified as FWA after receiving permission from NMPI and reflect the recovery on the encounter record and other reports used for rate setting. In the event that the MCO does not pursue all recoveries, MLTC will pursue them and collect the money. A good internal control plan requires procedures to ensure that cases are reviewed, and adequately collected on, and appropriate dispositions are made in a timely manner. Title 42 CFR § 433.320(a)(1) (October 1, 2023) states the following: (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64). Title 45 CFR § 75.511(a) (October 1, 2023) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: For 2 of the 20 PI cases tested, there was a lack of documentation to support that the cases were being worked timely. Additionally, policies and procedures to identify potential cases are not being followed, and an overpayment was not properly reported. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings listed the status as completed. Repeat Finding: 2023-055 Questioned Costs: $23,120 known Statistical Sample: No Context: PI is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred and accepted by MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. We tested 20 PI cases and noted the following: • One case opened in April 2023 was referred by a Managed Care Organization (MCO) for a provider potentially overbilling for Mental Health services and other “red flags,” including possible billing for therapy services provided to a household member, providing services through an unregistered business, not following proper diagnostic methods, and not complying with other required services through provider agreement with local Drug Court. The first investigator ran a background check on the provider and contacted the Nebraska Department of Labor, which stated there were no records of the provider using the social security number provided. That investigator left in October 2023, and the case was reassigned. The second investigator was contacted by the MCO in December 2023, requesting the provider to be removed from the network. From January 2024 to July 2024, the only updates on the case were notes indicating that the investigation was ongoing. The Agency could not provide support to show what the investigator had done in those six months to further the case. Communication was made to the other two MCOs in July 2024, requesting any additional information they may have on the provider. As of October 2024, at the time of field work, the case was still open, and the investigator was waiting for guidance on what to do next. • A case was referred to PI in November 2023 by a Managed Care Organization (MCO) for a provider potentially overbilling for medical services. The MCO’s investigative team found claims were not supported due to upcoding of the evaluation and management services, duplicate claims, and no records being provided for 69 claim lines. The MCO identified an overpayment, totaling $15,491, and requested approval to seek reimbursement. The MCO cannot seek reimbursement without State approval, as it could interfere with other investigations that may be occurring. From January 2024 to October 2024 (at the time of field work), the only actions taken on the case were background checks on the providers and searches for other businesses owned by the providers. We asked the Agency if any other documentation was available to show what actions had been taken on the case. The Agency indicated there was no other information on the case, and there is “no standard timing for requesting vetting information from the other two MCOs when a case originates with an MCO.” Furthermore, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the statewide SURS report quarterly and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” Beginning January 2023, no cases were opened from the SURS report. This was noted in our prior audit, and the Agency indicated it would be updating its policies and procedures; however, this was not completed as of June 2024. The Agency noted during our current audit that the SURS reporting mechanism was not functioning as designed, so it will be searching for a replacement fraud abuse detection system and will use other methods to identify potential fraud, waste, and abuse. In addition, we noted one of four overpayments tested was not properly reported. • In November 2020, PI started a project to analyze the MCO for dental services for excessive reimbursements. The initial overpayment was calculated at $237,633; however, in July 2023, a settlement was reached between PI and the MCO for $52,308. It was noted in the case that this amount was all Federal dollars and should be returned as such. The refund was received in August 2023 and reported on the quarter ended September 30, 2023, CMS-64 report. However, the refund was reported as $23,120 State and $29,188 Federal funds. The $23,120 not included in the Federal portion is considered questioned costs. Cause: The Agency did not follow proper procedures, including supervisor reviews of cases, to ensure Medicaid cases were properly and timely worked. The PI unit is understaffed. Clerical error by Finance staff in reporting overpayment. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. We further recommend the Agency strengthen procedures to ensure overpayments are accurately reported. Management Response: Management partially agrees. For the two cases listed, these cases should have been worked in a timelier manner. For the reporting of cases using exception reporting, the reports developed by the Department’s contractor for Fraud Abuse Detection reporting were consistently found to be inaccurate. Program Integrity leadership found that the reports were presenting false positives for cases. During this time frame, the Program Integrity team was addressing cases identified through the previous findings related to EVV and was working on other ways to identify providers that were different from their peers. APA Response: No cases were opened from the exception reports, and the Agency did not have alternate policies in place during the fiscal year.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Allowability & Eligibility Grant Number & Year: 2305NE5MAP, FFY 2023; 2405NE5MAP, FFY 2024; 2305NE3002, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 42 CFR § 435.1009(a) (October 1, 2023) states, in part, the following: FFP is not available in expenditures for services provided to— (1) Individuals who are inmates of public institutions as defined in § 435.1010[.] Per NE DHHS Medicaid Eligibility 477-000-002 (03/07/2023): A redetermination of eligibility for continued Medicaid benefits must be completed every twelve (12) months. * * * * The completed renewal form and necessary verifications shall be returned within thirty (30) days of the date the renewal form was sent. 477 Nebraska Administrative Code (NAC) 19.004(E) states the following: Children age 18 or younger who do not meet income limits for Medicaid are eligible for Children’s Health Insurance Program (CHIP) if their household income is equal to or less than 213% of the Federal Poverty Level (FPL) and the children are not covered by creditable health insurance[.] 477 NAC 3-007.01 states, in part, “The completed renewal form and necessary verifications shall be returned within 30 days of the date the renewal form was sent.” 482 NAC 1-002.36 (July 29, 2020) defines a Managed Care Organization (MCO) as an “organization that has or is seeking to qualify for a comprehensive risk contract to provide services to managed care enrollees.” 42 CFR § 438.806(c) (October 1, 2023) states, in part, “FFP is not available in an MCO contract that does not have prior approval from CMS . . . .” 42 CFR § 438.3(a) (October 1, 2023) states, in part, “CMS must review and approve all MCO, PIHP, and PAHP contracts, including those risk and nonrisk contracts . . . .” 42 CFR § 438.4(b) (October 1, 2023) requires, “Capitation rates for MCOs, PIHPs, and PAHPs must be reviewed and approved by CMS as actuarially sound.” Good internal control requires policies and procedures to ensure that recipients meet eligibility requirements, and reviews are completed in accordance with State and Federal regulations. Good internal control also requires contracts and rates to be approved before implemented. Condition: Managed care capitation rates were implemented prior to Federal approval. In addition, procedures should be improved to ensure payments for managed care are allowable, and recipients are eligible. Repeat Finding: No Questioned Costs: $10,777 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 40 Medicaid managed care claims and 25 CHIP managed care claims. We noted the following: Unapproved Rates Managed care claims tested for April 2024 services used calendar year 2024 contract rates prior to the required Federal approval. Upon further review, it was noted that all payments for services starting with January 2024 were made using the unapproved 2024 rates. Per support from the Agency, certified actuarial letters dated September 29, 2023, and other documentation required to be submitted to CMS for approval was submitted in an email dated December 21, 2023, 10 days prior to the beginning effective date of the MCO contracts and 83 days after actuarial rates were certified. Managed Care payments from January 2024 through June 2024 using unapproved rates totaled $1.29 billion. See Schedule of Findings and Questioned Costs for chart/table. Medicaid Three of 40 claims tested were not in compliance with regulations. • Payments were made for an incarcerated individual. A review and determination of eligibility did not occur for the Medicaid recipient, and no verifications were collected for over a 12-month period between January 2023 and April 2024. This was evidently because the recipient of the Medicaid benefits was incarcerated between January 4, 2023, and March 28, 2024, during which time no verification of household composition and living situation was verified. As a result, we question $625 for the payment tested and $8,276 for additional payments during the period of incarceration. • NFOCUS narratives showed that a renewal form was requested to be completed by the recipient on January 12, 2023; however, due to the State of Emergency declaration, the verifications and form requested due date was extended to February 11, 2024. The recipient failed to provide the renewal form or the verifications requested by the due date. The case should have been closed 30 days (March 12, 2024) after the renewal forms and verification were due, which would have been prior to the budget date of April 1, 2024. The case was not closed until June 4, 2024, resulting in questioned costs of $396 for the payment tested and additional questioned costs of $791 for May and June 2024. • One case was reviewed on July 31, 2020, and not again until September 9, 2023. This is over three years between reviews, and no redetermination of eligibility occurred in the Medicaid Program. Federal payment errors noted in the sample were $1,021. The Federal sample tested was $18,816, and the total Federal Managed Care expenditures during the fiscal year were $1,766,039,418. Based on the sample tested, the case error rate was 7.50% (3/40). The dollar error rate was 5.43% ($1,021/$18,816), which projects the potential dollars at risk for fiscal year 2024 to be $95,895,940 (dollar error rate multiplied by population). Out- of-sample questioned costs totaled $9,067. CHIP For 1 of 25 claims tested, the recipient did not meet age requirements to be eligible for the CHIP program, and the incorrect rating region was used for capitation payment rates. Additionally, Medicaid renewal/verification processes were not followed. The budget used for the Medicaid recipient was created in March 2021, when the recipient was 18 or younger. This budget was extended through June 2024 due to the State of Emergency. A renewal notice was sent to the recipient on April 10, 2024, and an incomplete renewal form was received on July 15, 2024. The case should have been closed 30 days (May 10, 2024) after the renewal forms and verification were due. Had the renewal and redetermination occurred, the recipient would have been ineligible for the CHIP program due to the recipient being over 18 years of age. However, capitation payments were made in June, July, and August 2024, for a total of $670 Federal questioned costs outside of the sample. Because of the lack of renewal verifications, the address information for the recipient was for Region 2, even though the recipient’s address information had been updated to Region 1. This resulted in a Federal overpayment of $20. Federal payment errors noted in the sample were $20. The Federal sample tested was $4,282, and the total Federal managed care expenditures during the fiscal year were $97,464,908. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 0.47% ($20/$4,282), which projects the potential dollars at risk for fiscal year 2024 to be $458,085 (dollar error rate multiplied by population). Out-of-sample questioned costs totaled $670. Cause: The Agency indicated that the 2024 rates were paid prior to approval, as the contract had substantive changes, and the Agency believed using the 2024 rates would result in smaller adjustments than if the 2023 rates were used. Claim errors due to inadequate review. Effect: Noncompliance with Federal regulations and increased risk for fraud or errors. Recommendation: We recommend the Agency implement MCO contracts and rate changes only after approval from the Federal grantor. We further recommend the Agency strengthen procedures to ensure recipients are eligible, and payments are proper. Management Response: Management agrees. As noted, due to significant program changes at the start of the reprocured managed care contracts January 1, 2024, such as carving in dental services, the Department made a calculated decision to pay the actuarily developed capitation rates for rate cells, prior to receiving approval from CMS. The Department otherwise follows our standard process of waiting for CMS approval prior to paying updated rates for subsequent rating periods.

Program: AL 93.959 – Block Grants for Prevention and Treatment of Substance Abuse – Level of Effort Grant Number & Year: B08TI084658, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure Maintenance of Effort (MOE) requirements are met. 45 CFR § 96.30(a) (October 1, 2023) requires the following: Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. 45 CFR § 96.134(a) (October 1, 2023) states the following: With respect to the principal agency of a State for carrying out authorized activities, the agency shall for each fiscal year maintain aggregate State expenditures by the principal agency for authorized activities at a level that is not less than the average level of such expenditures maintained by the State for the two year period preceding the fiscal year for which the State is applying for the grant. The Block Grant shall not be used to supplant State funding of alcohol and other drug prevention and treatment programs. 45 CFR § 96.124(c) (October 1, 2023) requires the State to expend the Block Grant on treatment services for pregnant women and women with dependent children no less than an amount equal to the amount expended by the State for fiscal year 1994. “A Primer on Maintenance of Effort Requirements” (2020), issued by the Substance Abuse and Mental Health Services Administration (SAMHSA), states the following, as is relevant: A state MUST provide accurate MOE figures every year. Otherwise, it risks a reduction in its award following the period of noncompliance. * * * * States must use a consistent methodology to calculate spending in base and subsequent years so that the expenditure data reflect the same fund sources from year to year. States must use generally accepted accounting principles. * * * * Examples of state fund sources that can be included in the SABG state MOE calculations are: * * * * Medicaid match funds (the state’s share of covered services in state Medicaid programs; this does not include the federal share of covered services) Condition: The Agency lacked adequate documentation to support that Maintenance of Effort (MOE) requirements were met. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the State MOE and the MOE for Expenditures for Services to Pregnant Women and Women with Dependent Children (Women’s Set-Aside) for State fiscal year 2023, which was reported on December 1, 2023. The required State MOE was $24,756,036, and the Agency reported $31,213,508 of expenditures. Included in reported expenditures was $7,004,989 of Medicaid Matching funds. The detail of Medicaid Matching provided totaled only $6,552,612. In addition, the detail provided was not expenditures paid directly from the State accounting system and did not agree to the State’s financial report. Nebraska operates a managed care program for Medicaid, and the State pays a per-member, per-month capitation fee to the managed care contractor. The Agency performed a query of substance use disorder services paid by the managed care contractors and estimated the State General funded portion based on the beneficiary’s enrollment information at the time of service. The Agency believes that, since the capitation payments are determined by an actuarial model that has a basis in paid claims experience, the method used is a reasonable proximation. Although this method appears consistent with the prior year, it was not described in the report and did not have formal, written approval from the Federal grantor. The required Women’s Set-Aside was $753,713, and the Agency reported $2,038,637. We noted the following issues: • The expenditures reported included $1,669,738 of Medicaid funds, which, as noted above, are not expenditures paid directly by the State. • The Medicaid expenditures included both State and Federal Medicaid funds, but Federal Medicaid funds are not an allowable source of funds to include. • The Agency used alcohol/drug services by providers that served exclusively women; however, the Agency did not ensure those women were either pregnant or had dependent children. We selected 10 individuals included in the detail of claims, and 6 of those were neither pregnant nor had dependent children. Given the inadequate support for the Medicaid dollars used, the Agency appears to have failed to maintain expenditures at the base amount for Women’s Set-Aside services. Cause: Inadequate procedures and employee turnover. Effect: Without adequate procedures, there is an increased risk for errors or unallowable expenditures to be reported. Recommendation: We recommend the Agency obtain written approval from the Federal grantor for the methodology used to report MOE expenditures. We further recommend the Agency ensure that MOE requirements are both met and accurately reported, and only allowable categories of expenditures are utilized. Management Response: Management agrees.

Program: AL 93.959 – Block Grants for Prevention and Treatment of Substance Abuse – Allowability & Subrecipient Monitoring Grant Number & Year: B08TI085820, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure costs are reasonable, necessary, allowable, and in accordance with Federal requirements. 45 CFR § 75.352(d) (October 1, 2023) requires the Agency to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 45 CFR § 96.30(a) (October 1, 2023) states the following: Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. Condition: Subrecipient monitoring procedures should be improved. Repeat Finding: No Questioned Costs: $9,141 known Statistical Sample: No Context: The Agency paid 10 subrecipients a total of $7,089,404 during the fiscal year. We tested one payment to each of the seven largest subrecipients and noted the following: Region IV Behavioral Health System was paid $647,025 during the fiscal year, and we selected a payment for $42,625. Of this amount, $9,141 was for services provided by Region IV, and $33,484 was for services provided by contractors of Region IV. The Agency performed a sampling of expenditures for Region IV; however, documentation was inadequate to support that personnel costs were related to the grant or prevention activities or women’s set-aside activities. Timesheets did not indicate the grant or activities upon which the employees worked. In addition, indirect costs were reimbursed, but the subaward agreement did not allow indirect costs. The Agency provided a spreadsheet to indicate how the Region allocated personnel time, but documentation was inadequate to support that the allocations were appropriate and in accordance with the time study results and methodology. In addition, the time study results provided were from July 2022, and the Region utilized an even earlier time study to allocate the costs. As a result, we question costs of $9,141. Cause: Inadequate procedures and employee turnover. Effect: Without adequate procedures, there is an increased risk for errors or fraud to occur and not be detected. Recommendation: We recommend the Agency improve subrecipient monitoring procedures to ensure that costs are allowable and in accordance with the grant and subaward terms and conditions. Management Response: Management agrees.

Program: AL 17.225 – Unemployment Insurance (UI) – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2023-056 Questioned Costs: $40,983 known Statistical Sample: No Summary: Audit Finding 2024-021, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total sample tested was $17,624, and questioned costs for payments tested were $2,983. Total benefit payments for the fiscal year ended June 30, 2024, were $87,552,659. Based on the sample tested, the dollar error rate for the sample was 16.93% ($2,983/$17,624), which estimates the potential dollars at risk for fiscal year 2024 to be $14,822,665 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $38,000. A similar finding was noted in the prior audit. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper UI benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: As part of our ongoing commitment to the accuracy of benefit payments, we plan to take additional steps in our effort to reduce improper payments. We will continue refining our processes to reduce errors. We acknowledge that there are areas where continued improvement is necessary, and we are committed to working to address these issues. We will also continue to monitor performance and make adjustments as needed. NDOL stressed the importance of quality this year and has been making changes to its review process to catch and prevent errors earlier.

Program: AL 17.225 – Unemployment Insurance (UI) – State – Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR § 200.302(a) (January 1, 2024): [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. The ETA Handbook 401 (5th Edition) (August 16, 2017) states the following, in relevant part: c. Line 12. Penalty/Interest. Enter in columns C and D the net collections of penalty, interest, and fines deposited during the month if transferred to the UTF. * * * * g. Line 36. FECA Net Federal Benefits – UCX. Enter in columns C and F the net Federal portion of unemployment compensation paid to former members of the armed services from funds in the benefit payment account. The total payments should be adjusted for refunds deposited during the month, credits and recharges, and cancellations and reissuances and exclude EUC08 benefits. Report in column F all benefits paid, including amounts transferred to the IRS for Federal income tax withholding, regardless whether paid from the state account in the UTF or the state benefit payment account. * * * * s. Line 46. FECA Net Benefit Payments-UCFE. Enter in columns C and F net benefit payments made during the month to former Federal civilian (including postal) employees, excluding EUC 2008, with funds from the FEC account. Report in column F all benefits paid, including amounts transferred to the IRS for Federal income tax withholding, regardless whether paid from the state account in the UTF or the state benefit payment account. Good internal control requires adequate procedures to ensure reports are complete and accurate. Condition: During testing of the ETA 2112 reports, we noted the following: • For three reports tested, a reconciliation of the ending balance per the report to the bank statement for each account was not completed. • For two reports tested, amounts reported either could not be traced to supporting documentation or used the inaccurate amounts from the supporting documentation provided. Repeat Finding: No Questioned Costs: None Statistical Sample: No  Context: The ETA 2112 Report is a monthly summary of transactions in the State unemployment insurance fund, which consists of the Clearing Account, Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. Agency controls over the ETA 2112 report include completing a reconciliation of the ending balance per the report to the bank statement for each account. For the three months the APA tested, a reconciliation was completed by the Agency; however, the ending balances per the report did not agree to the reconciled bank account balances. See the table below for a summary of the variances noted. After this issue was brought to the Agency’s attention, the Agency restated all 12 reports for fiscal year 2024. See Schedule of Findings and Questioned Costs for chart/table. In addition to testing the Agency’s reconciliations, the APA performed detailed testing of two monthly ETA 2112 reports. During this review, the following issues were noted: October 2023 • The beginning benefit account balance did not agree to the ending benefit account balance from the September 2023 report, resulting in the beginning balance being overstated by $39,217. • Total benefit disbursements and Net UI Benefit disbursements were understated by $37,168, as the Agency had backed out re-issued payments for the month. • The ending benefit account balance did not agree to the reconciled ending benefit bank account balance, due to the issues noted above, resulting in the ending balance being overstated by $76,385. • Clearing account Penalty/Interest deposits reported were amounts charged during the month, not amounts collected. This resulted in Penalty/Interest deposits being understated by $13,747 and Net UI Contributions being overstated by $13,747. The first three errors noted were corrected by the Agency with a reissued report on July 12, 2024, after we questioned the Agency about the amounts reported. The fourth error noted was not corrected. February 2024 • The beginning benefit account balance did not agree to the ending benefit account balance from the January 2024 report, resulting in the beginning balance being overstated by $140,808. • Total benefit disbursements and Net UI Benefit disbursements were understated by $33,826, as the Agency had backed out re-issued payments for the month. Additionally, these items were overstated by $85, as the Agency had manually adjusted February 2024 outstanding checks in order to have the ending balance agree to their reporting software. • The ending benefit account balance did not agree to the reconciled ending benefit bank account balance, due to the issues noted above, resulting in the ending balance being overstated by $174,549. • UCX and UCFE benefit disbursements were reported net of Federal and State withholdings when these amounts should have been included. This resulted in UCX disbursements being understated by $1,006, UCFE disbursements being understated by $2,495, and Net UI Benefit disbursements being overstated by $3,501. • January 2024 outstanding checks were not adjusted for January 2024 activity on the benefit account reconciliation, resulting in the beginning balance being understated by $13,209 and Net UI Benefits disbursements being overstated by $13,209. This error was not corrected by the Agency when the reports were reissued. The first three errors noted were corrected by the Agency with a reissued report on July 12, 2024, after we questioned the Agency about the amounts reported. The fourth and fifth errors noted were not corrected. Additionally, for both months tested, it was noted that the Daily Payment Register Summary was used to report the amount of disbursements by program. However, the Daily Payment Register Summary does not account for cancellations, which caused certain program disbursements to be overstated, such as UCFE, and Net UI Benefits to be understated. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of inaccurate amounts being reported for unemployment insurance programs. Recommendation: We recommend the Agency implement procedures to ensure that amounts reported for unemployment insurance programs are accurate. These procedures should ensure the following: 1) accurate reconciliations between the ending balances on the reports and supporting documentation are completed; 2) duplicate payments for the various programs are accounted for to ensure proper reporting; 3) amounts reported on the 2112 report can be traced to supporting documentation; and 4) amounts reported on the 2112 report are in line with Federal and State guidelines. Management Response: NDOL agrees that incorrect values were taken from reports, and that the reconciliation and review process was not sufficient.

Program: AL 17.225 – Unemployment Insurance (UI) – Admin – Allowability Grant Number & Year: UI347272055A31, grant period 4/1/2020 to 6/30/2024; UI370762155A31, grant period 9/1/2021 to 8/31/2024; UI386582255A31, grant period 4/1/2022 to 3/31/2024; UI393342355A31, grant period 10/1/2022 to 12/31/2025; UI395462355A31, grant period 1/1/2023 to 9/30/2024; 23A60UR000043, grant period 1/1/2023 to 9/30/2024 Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. 2 CFR § 200.405 (January 1, 2024) states the following, in relevant part: a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. * * * * d) Direct cost allocation principles: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. 2 CFR § 200, Appendix VII, subsection (E)(1) (January 1, 2024), states the following: Indirect cost rates will be reviewed, negotiated, and approved by the cognizant agency on a timely basis. Once a rate has been agreed upon, it will be accepted and used by all Federal agencies unless prohibited or limited by statute. 2 CFR § 200, Appendix VII, subsection (F)(3) (January 1, 2024), states the following: In certain situations, governmental departments or agencies (components of the governmental unit), because of the nature of their Federal awards, may be required to develop a cost allocation plan that distributes indirect (and, in some cases, direct) costs to the specific funding sources. In these cases, a narrative cost allocation methodology should be developed, documented, maintained for audit, or submitted, as appropriate, to the cognizant agency for indirect costs for review, negotiation, and approval. Sound accounting practices require the indirect costs to be allocated based on a reasonable basis and, when required, per an approved cost allocation plan. Condition: The Agency did not allocate indirect costs in accordance with its approved cost allocation plan. Repeat Finding: No Questioned Costs: $26,393 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Per the Agency’s indirect cost allocation plan, which was approved for the period July 1, 2021, to June 30, 2022, and provisionally approved through June 30, 2024, indirect costs were to be allocated based on direct labor hours allocated monthly. For the State fiscal year ended June 30, 2024, the Agency planned to submit an indirect cost allocation plan where each month’s costs would first be allocated to each Federal program Assistance Listing by the prior year’s total direct expenses, and then be allocated within each Federal program Assistance Listing by direct labor hours to each Federal grant. However, as this indirect cost allocation plan had not yet been approved, the Agency should have continued to allocate costs based on the plan that was provisionally approved and adjusted once the plan had been approved. Additionally, the Agency’s plan to allocate costs based on prior year expenses does not appear reasonable, and using a basis that considers more current information would be more reasonable. During the fiscal year, the Agency charged $3,099,014 to Unemployment Insurance from allocated indirect costs. We tested an entry that allocated $194,430 to the Unemployment Insurance program. Based on our recalculation, we determined that only $168,037 should have been allocated to the Unemployment Insurance program, a variance of $26,393. Cause: The Agency developed and used a new cost allocation plan for State fiscal year 2024 without approval from its cognizant Federal agency. Effect: When costs are not allocated based on the approved indirect cost allocation plan, Federal programs will not be allocated correctly, which could result in improper payments. Recommendation: We recommend the Agency allocate costs in accordance with its approved cost allocation plan. Management Response: NDOL agrees that the cost allocation plan requires approval from the Federal authority. The process as described in the finding was designed to establish a weighted factor to prevent over allocation of indirect costs to smaller federal grant programs. The factor was supposed to be updated every month rather than determined and set for an entire year.

Program: AL 17.225 – Unemployment Insurance (UI) – State – Special Tests Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. 20 CFR § 616.8(f)(2) (April 1, 2024) states the following: Except as provided in paragraphs (c)(2), (f)(3), and (f)(5) of this section, each such charge shall bear the same ratio to the total benefits paid to the Combined-Wage Claimant by the paying State as the claimant’s wages transferred by the transferring State bear to the total wages used in such determination. Each such ratio shall be computed as a percentage, to three or more decimal places. Neb. Rev. Stat. § 48-652 (Cum. Supp. 2024) states the following: (3)(a) Each experience account shall be charged only for benefits based upon wages paid by such employer. No benefits shall be charged to the experience account of any employer if: (i) Such benefits were paid on the basis of a period of employment from which the claimant (A) left work voluntarily without good cause, (B) left work voluntarily due to a nonwork-connected illness or injury, (C) left work voluntarily with good cause to escape abuse as defined in section 42-903 between household members as provided in subdivision (1) of section 48-628.13, (D) left work from which he or she was discharged for misconduct connected with his or her work, (E) left work voluntarily and is entitled to unemployment benefits without disqualification in accordance with subdivision (3), (5), or (11) of section 48-628.13, or (F) was involuntarily separated from employment and such benefits were paid pursuant to section 48-628.17[.] Good internal controls require procedures to ensure that employers are properly charged, or not charged, for benefit payments made to claimants that have separated from them. Condition: For two claims tested, the base period employers on the claims were not properly charged according to State statute or Federal regulation. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For Claim #1, the claimant was originally found to have been discharged for misconduct from the base period employer. This ruling was subsequently reversed upon appeal by the claimant. The Agency failed to charge the employer for $12,850 of benefit payments on the claim, until notified by the APA, at which time the employer was correctly charged. For Claim #2, the claim was a Combined Wage Claim (CWC), in which there were base period employers from Nebraska and Texas. On a CWC, employers are to be charged proportionately to wages paid in the base period by the employers from each state. In the claim tested, the Nebraska employer had paid 48.38% of the base period wages, while the Texas employer had paid 51.62%. It was found that the employers were not charged proportionately to the wages paid in the base period and that the total charges on the claim did not agree to total payments on the claim. This resulted in the Nebraska employer being overcharged by $991 and the Texas employer being undercharged by $1,409. See Schedule of Findings and Questioned Costs for chart/table. Cause: Adjudication errors, and the system was not set up properly to charge employers correctly for Combined Wage Claims. Effect: When adjudication errors are made and system errors occur, there is an increased risk of benefit payments being incorrectly charged, or not charged, to the base period employers. Recommendation: We recommend the Agency implement procedures to ensure that employer charging is correctly updated subsequent to appeal determinations and that the Agency corrects known system issues. Management Response: We understand the importance of ensuring that employer charging is correctly updated following appeal determinations. We are committed to improving the accuracy and timeliness of these updates. We are actively working with the vendor to prioritize the required system updates, and in the interim, we will continue to monitor and adjust our processes to minimize any impact on employer charging accuracy.

Program: AL 17.225 – Unemployment Insurance (UI) – State – Special Tests Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Neb. Rev. Stat. § 48-652 (Supp. 2023) states, in relevant part, the following: (3)(a) Each experience account shall be charged only for benefits based upon wages paid by such employer. No benefits shall be charged to the experience account of any employer if: (i) Such benefits were paid on the basis of a period of employment from which the claimant (A) left work voluntarily without good cause, (B) left work voluntarily due to a nonwork-connected illness or injury, (C) left work voluntarily with good cause to escape abuse as defined in section 42-903 between household members as provided in subdivision (1) of section 48-628.13, (D) left work from which he or she was discharged for misconduct connected with his or her work, (E) left work voluntarily and is entitled to unemployment benefits without disqualification in accordance with subdivision (3), (5), or (11) of section 48-628.13, or (F) was involuntarily separated from employment and such benefits were paid pursuant to section 48-628.17[.] * * * * (d) Benefits paid to an eligible individual shall be charged against the account of his or her most recent employers within his or her base period[.] (Emphasis added.) Neb. Rev. Stat. § 48-664 (Reissue 2021) provides the following: Any employer, whether or not subject to the Employment Security Law, or any officer or agent of such an employer or any other person who makes a false statement or representation knowing it to be false, or who knowingly fails to disclose a material fact, to prevent or reduce the payment of benefits to any individual entitled thereto, to obtain benefits for an individual not entitled thereto, to avoid becoming or remaining subject to such law, or to avoid or reduce any contribution or other payment required from an employer under sections 48-648 and 48-649 to 48-649.04, or who willfully fails or refuses to make any such contributions or other payment or to furnish any reports required under the Employment Security Law or to produce or permit the inspection or copying of records as required under such law, shall be guilty of a Class III misdemeanor. . . . When an unemployment benefit overpayment occurs, in whole or in part, as the result of a violation of this section by an employer, the amount of the overpayment recovered shall not be credited back to such employer's experience account. Title 221 NAC Chapter 3-004 provides that employers have 10 days to respond to the Separation Information Request. Title 219 NAC Chapter 15-001 provides the following: Pursuant to Neb. Rev. Stat. §48-631 and §48-607, the Commissioner or the Commissioner’s designee may redetermine a previous monetary or non-monetary determination if (1) there is an error in computation or identity, (2) pertinent wages not previously considered have been newly discovered, or (3) benefits have been allowed or denied or the amount fixed based upon misrepresentations of fact. When deciding if a redetermination should be made, the following definitions shall provide guidelines: A. “Error in computation”. Erroneous information based on omission, misconception, or mathematical error with a resultant consequence of altering claimant eligibility. B. “Error in identity”. The identity of a specific individual or employer as claimed or asserted which does not meet the condition of being the same as described. C. “Newly discovered wages”. Wages for an individual relevant to their eligibility which have not been previously known or incorrectly reported and documented. D. “Misrepresentation of fact”. An indication by words or other conduct by a person(s) to another that, under the circumstances, amounts to an assertion by words or other conduct not in accordance with the facts, and that if accepted leads the mind of the person relying thereon to an understanding other and different from that which actually exists. Misrepresentation can occur either ignorantly or intentionally[.] Good internal controls require procedures to ensure the following: 1) employers are properly charged, or credited, for unemployment benefits; 2) overpayments are established according to State statute and Federal regulation; and 3) overpayments are established in a timely manner by Agency staff after discovery by the Benefit Accuracy Management (BAM) team. Condition: During our testing, we noted the following issues regarding overpayments: • For seven overpayments established, the employers on the claim were not properly charged or relieved of charging for benefits overpaid to claimants. • For three overpayments, the overpayments were not established consistent with written procedures in statute and regulations. • One overpayment was not established in a timely manner after discovery by BAM staff. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The table below outlines the overpayments tested, the amount of each overpayment, the week endings during which the overpayments occurred, the amount each employer was charged for these weeks, and the amounts credited to their accounts after the overpayments were established. In each case, we noted that the amount credited to the employer’s account was incorrect based on the amount overpaid and State statute. See Schedule of Findings and Questioned Costs for chart/table. For overpayments #1 through #6, the overpayment amount should have been credited to the employers’ accounts. However, the credits were not appropriately applied to the employers’ accounts due to system and employee errors when applying the credits. For overpayment #7, the employer’s account should not have been credited as the overpayment was due to the employer’s untimely response to the separation information request. However, the Agency still credited the employer’s account. Additionally, we noted the following regarding improper credits to employer accounts. Overpayment #1 was established in conjunction with two other overpayments, one for week ended (W.E.) April 29, 2023, for $73 and another for W.E. May 27, 2023, for $514. Employer #1 was originally charged a total of $721 for W.E.s April 29, 2023, and May 20, 2023, and received a full credit for these charges, when only a $73 credit was received. Thus, Employer #1 was improperly credited an additional $319. Employer #2 should have received total credits of $552 but was instead charged an additional $207 during these weeks. Therefore, along with the amount in the table, an additional $392 was charged improperly. For Overpayment #2, the APA noted that Employer #3 was also credited for all additional payments made on the claim, not merely for the W.E.s put into overpayment. This resulted in an additional $9,252 that was incorrectly credited to the employer’s account. On Overpayment #4, Employer #6 was credited all charges that had been made against the account for the claim, a $8,997 total. The amount credited was greater than total overpayments established on the claim of $906. Due to this, Employer #6 incorrectly received additional credits of $7,376. For Overpayment #6, all payments on the claim had previously been credited to the employer’s account due to the claimant’s base period being incorrect. Due to this, Employer #8 had already received the $31 credit due to them by the overpayment tested. In addition to the incorrect employer charging errors, the following three overpayments were incorrectly established by the Agency. See Schedule of Findings and Questioned Costs for chart/table. In addition to the charging errors noted above for Overpayment #2, it was noted that the overpayment established by the Agency was incorrect. The Agency did not correctly consider the wage amounts reported by the claimant’s employer, resulting in the overpayment established being understated by $199. Overpayment #8 was established by the Agency on November 7, 2023. This had occurred because the claimant’s base period wages were redetermined after an earlier overpayment was established on the claim due to the claimant not reporting all wages earned to the Agency. When asked by the APA why the claimant’s base period wages were redetermined, the Agency stated that the earlier overpayment was caused by fraud; thus, the wages were cancelled in the base period. This was incorrect as, per 219 NAC 15, a claimant’s base period may only be redetermined if there is evidence to show that the initial base period was incorrect. As no evidence of this could be provided, the claimant’s base period should not have been redetermined, and Overpayment #8 should not have been established. Overpayment #9 was established after the Agency received a wage audit from the claimant’s employer on July 12, 2021, that stated the claimant earned $431 in wages during the period. However, the Agency had also received a separate wage audit from the same employer on July 6, 2021, which stated the claimant only earned $162 during the period. There was no documentation available to support how the Agency determined which wage amount was the correct one to consider when establishing the overpayment. Additionally, when sent a notice of the overpayment establishment on November 18, 2021, the claimant responded to the Agency on November 22, 2021, claiming not to have worked for this employer during that period. The Agency did not consider the claimant’s response when establishing the overpayment. Finally, during testing of the Benefits Accuracy Measurement (BAM) Investigations completed in fiscal year 2024, it was noted that the BAM investigator had obtained documentation showing the claimant was overpaid $980 for weeks ending February 17, 2024, and March 2, 2024. BAM completed review of the claim on May 6, 2024, and communicated the overpayment to the Benefits team to establish the overpayment. As of testing on August 9, 2024, an overpayment has yet to be established for this issue. Cause: Adjudication errors and the system not properly set up to charge employers correctly. Effect: Without adequate procedures to ensure employer charging is correct, and overpayments are established in a timely manner or properly according to written procedures, there is an increased risk of not only benefit payments being incorrectly charged, or not charged, to the base period employers but also noncompliance with Federal and State regulations. Recommendation: We recommend the Agency implement procedures to ensure the following: 1) employer accounts are properly charged or relieved of charges when overpayments are established; 2) overpayments are established in compliance with Federal and State regulations; and 3) overpayments are established in a timely manner after discovery by the BAM team. Management Response: We are committed to ensuring that employer accounts are properly charged or relieved of charges when overpayments are identified. We recognize the importance of addressing overpayments promptly to maintain the integrity of the UI system. We have established procedures to address the timely establishment of overpayment and their impact on charging.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-22-2-1001, FFY 2022; W91243-23-2-1001, FFY 2023; W91243-24-2-1001, FFY 2024; W91243-24-2-1021, FFY 2024; W91243-24-2-1024, FFY 2024 Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2024), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2024): 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. Title 2 CFR § 200.302 (January 1, 2024) requires financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Title 2 CFR § 200.305(a) (January 1, 2024) states, in part, “For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 . . . .” National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” Grants and agreements Policy Letter (GCAPL) 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. The instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a: Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients. A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements are minimized and in compliance with National Guard regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2023-057 Questioned Costs: None Statistical Sample: No Context: We tested five drawdowns of Federal funds to support the Agency’s operations. We tested to determine whether the Agency had expended the cumulative amounts drawn down for the awards tested within the required timeframe and noted the following: • Three drawdowns were not in compliance with NG Policy 5-1. Cumulative drawdowns for two of the draws tested were expended 49 and 62 days after the drawdown of Federal funds. Cumulative draws for the other draw tested had yet to be fully expended as of January 7, 2025. The table below provides a summary of the three draws: See Schedule of Findings and Questioned Costs for chart/table. • For five of five SF-270s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an underreporting of $265,642 to an overreporting of $660,608, with a net total overreporting of expenditures by $1,090,090 for the five reports tested. Cause: Inadequate procedures for estimating fund needs for the upcoming month. Regarding SF-270 reporting, the Agency has stated it agrees with the finding; however, it has yet to implement corrective action. Effect: The Agency is not in compliance with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and the advance state requirement function. The agency has reduced the Average # of Days to spend Total Draws by 23 for those draws in which drawdown timing was reported, indicating a general improvement over the prior year finding.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Allowability & Eligibility Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Title III, Subtitle B, Section 3201(f)(2), of the American Rescue Plan Act, 2021, Pub. L. No. 117-2 (March 11, 2021) states the following: ELIGIBLE HOUSEHOLD. – The term ‘‘eligible household’’ means a household of 1 or more individuals who are obligated to pay rent on a residential dwelling and with respect to which the eligible grantee involved determines that— (A) 1 or more individuals within the household has-- (i) qualified for unemployment benefits; or (ii) experienced a reduction in household income, incurred significant costs, or experienced other financial hardship during or due, directly or indirectly, to the coronavirus pandemic; (B) 1 or more individuals within the household can demonstrate a risk of experiencing homelessness or housing instability; and (C) the household is a low-income family (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)). Low-income family is defined in 42 U.S.C. § 1437a(b)(2)(A) as follows: [F]amilies whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families . . . . Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth in 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2024): 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. Question 4 of the Frequently Asked Questions (FAQ) guidance document (Revised March 5, 2024), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states, in relevant part, the following: If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. Question 5 of the FAQ guidance document states, in relevant part, the following: Grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. If a household does not have a signed lease, documentation of residence may include evidence of paying utilities for the residential unit, an attestation by a landlord who can be identified as the verified owner or management agent of the unit, or other reasonable documentation as determined by the grantee. In the absence of a signed lease, evidence of the amount of a rental payment may include bank statements, check stubs, or other documentation that reasonably establishes a pattern of paying rent, a written attestation by a landlord who can be verified as the legitimate owner or management agent of the unit, or other reasonable documentation as defined by the grantee in its policies and procedures. Question 7 of the FAQ guidance document states, in relevant part, the following: For both ERA1 and ERA2, other expenses related to housing include relocation expenses (including prospective relocation expenses), such as rental security deposits, and rental fees, which may include application or screening fees. It can also include reasonable accrued late fees (if not included in rental or utility arrears), and Internet service provided to the rental unit . . . . All payments for housing-related expenses must be supported by documentary evidence such as a bill, invoice, or evidence of payment to the provider of the service. Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. Condition: Procedures were inadequate to ensure that households were eligible and that the payment amounts were correct. A similar finding was noted in the prior audit. Repeat Finding: 2023-058 Questioned Costs: $12,343 known Statistical Sample: No Context: We tested 27 assistance payments. We noted the following: • For four payments, adequate income verification was not performed. o For one payment, the application stated that there was only one adult in the household. However, a second adult was included on the lease agreement. The Agency failed to verify whether a second adult was included in the household; thus, income verification was also not performed on the second adult. This resulted in questioned costs of $2,730. o For two payments, at least one member from each household attested on the application that the household member did not have income. Subsequent payments were made for rent three months after the attestation. The Agency did not reassess the household’s income, nor obtain a new self-attestation as required per the FAQ. This resulted in questioned costs of $3,525. o For one payment, the applicant was married but did not include the spouse on the application. The Agency considered only the applicant’s income when determining eligibility. However, income documentation on file for both the applicant and the spouse would result in the applicant being ineligible. The Agency did not verify whether the spouse should have been included in the household. This resulted in questioned costs of $3,540. • For 10 payments, the payment amount was incorrect. o For one payment, the Agency calculated a payment amount of $1,285; however, after reviewing the lease, we calculated an amount of $1,161, a difference of $123. o For eight payments, we did not agree with the amount paid for late fees. For rent paid for future months, it was the Agency’s policy to pay the late fee if the payment was approved after the 15th of the previous month. For example, if the Agency approved a rental payment for the month of May 2024 on April 16, 2024, the Agency would also pay a late fee for May 2024. However, per review of the actual date paid, the late fees paid were either excessive or should not have been paid at all. Additionally, in some cases, the Agency calculated the late fee by taking the monthly rent amount multiplied by 10%. However, this also resulted in the amount of late fees paid being excessive per the lease agreement. In total, we questioned $425 in excessive late fees. o For one payment, the Agency paid future rent for three months, totaling $3,000, on May 7, 2024. However, the tenant moved after the first month. The Agency did not start to attempt to collect the overpayment of $2,000 until January 10, 2025. The $2,000 overpayment is considered questioned costs. Federal payment errors for the sample tested were $12,343. The total sample tested was $68,482, and assistance payments for the fiscal year totaled $11,541,538. Based on the sample tested, the dollar error rate for the sample was 18.02% ($12,343/$68,482), which estimated the potential dollars at risk for fiscal year 2024 to be $2,079,785 (dollar error rate multiplied by the population). Cause: Inadequate procedures to ensure all income was verified, and self-attestations of income were obtained every three months. Inadequate procedures to ensure the payment amount was correct. Effect: Increased risk of loss or misuse of funds and noncompliance with Federal guidelines. Recommendation: We recommend the Agency strengthen policies and procedures to ensure applicants are eligible for assistance, and payment amounts are reasonable and proper. Management Response: NEMA will work with NIFA to strengthen policies and procedures and provide additional guidance to Nelnet agents to ensure applicants are eligible for assistance and payment amounts are reasonable and proper. Regarding late fees, we will consider a change to the existing policy and review recommended changes.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Reporting Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth in 2 CFR part 200. 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.   The Emergency Rental Assistance Program (ERA 2) Reporting Guidance (Revised January 3, 2024), issued by the U.S. Department of the Treasury, states, in part, the following: Each ERA2 Recipient must report the cumulative number of unique ERA2 participant households that were paid any dollar amount for at least one of the following: rent, rental arrears, utilities/home energy costs, utility/home energy arrears, or other expenses related to housing, between the date of receipt of the ERA2 award and the end of the current reporting period, by the following ranges of household income levels: i. Less than 30% of area median income (#) ii. Between 30% and 50% of area median income (#) iii. Between 50% and 80% of area median income (#) A good internal control plan requires procedures to ensure that all required information is reported accurately and supported by underlying data. Condition: For two of two quarterly reports tested, figures reported for unique participant households at certain income levels did not agree to supporting documentation. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For the quarters ended March 31, 2024, and June 30, 2024, ERA 2 quarterly compliance reports, the Agency reported a cumulative number of unique households of 862 and 1,940, respectively. We noted during testing that the cumulative number of unique households, once split between different ranges of household income levels, did not agree with the Agency’s supporting documentation. The tables below show the differences between the reported households and the actual households. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review of supporting documentation. Effect: Without adequate procedures to ensure reports contain accurate information, there is increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency implement procedures to ensure figures reported in the ERA 2 quarterly compliance reports are accurate and agree to supporting documentation. Management Response: A vendor supplied report was found to contain an error in the way summary AMI data was accumulated.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2023) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) Enumerated eligible uses: Responses presumed reasonably proportional. A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (D) Assistance to tourism, travel, hospitality, and other impacted industries for programs, services, or capital expenditures, including support for payroll costs and covered benefits for employees, compensating returning employees, support for operations and maintenance of existing equipment and facilities, and technical assistance[.] 31 CFR § 35.6(c) (July 1, 2023) states the following: Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID–19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID–19 public health emergency if: (1) The eligible worker’s total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID–19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID–19, and why the recipient determined that the premium pay was responsive despite the worker’s higher income). [Emphasis added] 31 CFR § 35.3 (July 1, 2023) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID–19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. H.J. Res 7 (2023) states the following: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, pursuant to section 202 of the National Emergencies Act (50 U.S.C. 1622), the national emergency declared by the finding of the President on March 13, 2020, in Proclamation 9994 (85 Fed. Reg. 15337) is hereby terminated. Approved April 10, 2023. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designated to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Footnote 230 states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2024), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.303 (January 1, 2024) states, in relevant part, the following: 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. Per 2 CFR § 200.403 (January 1, 2024), costs must be necessary and reasonable for the performance of the Federal award. Costs must also be adequately documented. Good internal control and sound business practices require procedures for ensuring that: 1) grants issued to beneficiaries are reasonable and proportional to the harm identified; 2) premium pay is paid to only eligible individuals; 3) expenditures are adequately supported; and 4) all expenditures are for allowable purposes. 2 CFR § 200.511(a) (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The State lacked procedures to ensure that: • Grants issued to beneficiaries for worker retention and incentives were used for such purposes. • Premium pay paid to eligible individuals was for work performed during the COVID-19 public health emergency. • Grants to beneficiaries were proportional to the negative economic harm incurred. • Funds used for behavioral healthcare programs were adequately documented. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2023-061 Questioned Costs: $512,698 known Statistical Sample: No Context: We randomly selected 40 payments to test. We also judgmentally selected 16 payments and 10 journal entries to test. We noted the following: Payments to Nursing Facilities and Assisted-Living for Employee Retention and Recruitment Nebraska Legislative Bill (LB) 1014 (2022), section 28, appropriated $15,000,000 from the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant to the Department of Health and Human Services (DHHS) for State fiscal year 2024 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $15,000,000 to Medicaid-certified nursing facilities during State fiscal year 2024. LB 1412 (2024), section 24, appropriated $1,499,657 in CSLFRF funds to DHHS to be used to issue payments to rural assisted-living facilities. Per DHHS, these funds were intended to be used for employee retention and recruitment programs at the facilities. DHHS paid out $1,499,657 to assisted-living facilities during State fiscal year 2024. During testing of a random sample of 40 CSLFRF expenditures, we tested four payments made to Medicaid-certified nursing facilities, totaling $383,409. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014. Additionally, DHHS obtained signed attestations from all nursing facilities that received funds in which the facility attested that it is aware that funds provided can only be used to enhance employee recruitment and retention and that funds were used for said purpose. No other procedures were performed by DHHS to ensure that the nursing facilities were using the funds for eligible recruitment and retention purposes and DHHS failed to provide documentation supporting any of the assessments required by the CSLFRF Final Rule. Given the lack of procedures to support that funds were being used for allowable purposes, all four payments of the $383,409 tested are considered questioned costs. Additionally, we judgmentally selected one payment to an assisted living facility pursuant to LB 1412, section 24, totaling $54,464. Similar to the nursing facility payments tested, DHHS intends to have each assisted-living facility sign an affidavit attesting that the assisted-living facility is aware that funds provided can only be used to enhance employee recruitment and retention and that funds were used for said purpose. No other procedures were performed or planned to be performed. Therefore, the $54,464 payment tested is considered a questioned cost. We also noted that one nursing facility did not receive its proportional allocation of $131,839. Instead, that amount was split among the other nursing facilities that received payments. Assistance to the State Fair LB 1014, section 52, appropriated $20,000,000 to the Department of Environment and Energy (DEE) from the CSLFRF grant to be used to provide wastewater and drainage system updates at the State fairgrounds. The State Fair Board received a grant of $20,000,000, and we judgmentally selected one payment to the State Fair Board, totaling $798,092. Of the $20,000,000 grant, $14,705,610 was for stormwater and sewer infrastructure, and $5,294,390 was for aid to tourism due to experiencing negative economic harm due to the COVID-19 public health emergency. Of the $5,249,390, however, the documentation on file only supported negative economic harm experienced of $4,539,525. Therefore, the grant award is not proportional to the harm experienced. As of June 30, 2024, only $1,396,267 of the portion for aid to tourism had been paid to the State Fair Board; therefore, we did not question costs. Payments to Schools, Child Care Providers, and Health Care Providers for Employee Premium Pay LB 1014, section 15, appropriated $10,000,000 to the Nebraska Department of Labor (NDOL) to be administered and distributed by NDOL through the recommendation of the Nebraska Worker Training Board. A portion of the $10,000,000 was being used for premium pay to teachers, child care providers, and nurses. NDOL paid out $5,277,250 to recipients for premium pay during the fiscal year. During our testing of a random sample of 40 CSLFRF payments, we tested four payments to recipients for premium pay, totaling $669,500. As part of NDOL’s procedures for reviewing requests for premium pay, NDOL had the entity provide the details of the employees that the premium pay was meant to benefit including name, hire date, and pay rate. NDOL had no procedures to verify the information submitted by the recipients to ensure that the employees met the eligibility requirements of 31 CFR § 35.6. Additionally, we noted that NDOL did not have any procedures in place after payments were issued to recipients to ensure that the premium pay was actually paid out to the employees they were intended to benefit. We asked NDOL to reach out to the recipients and subsequently provide us with underlying documentation for a selection of employees from the recipient. We noted that the employee information provided by the recipient was sufficient to determine eligibility and verify that individual employees received the premium pay that NDOL approved for them. However, for the four payments tested, we noted that premium pay was paid to 44 employees that were not hired until after the COVID-19 public health emergency ended or a few days prior to when the public health emergency ended on April 10, 2023. Premium pay paid to these individuals totaled $71,500, of which $70,250 was in-sample, and $1,250 was out-of-sample. The $71,500 is considered questioned costs. Behavioral Healthcare Programs LB 1014, section 24, appropriated $10,000,000 to DHHS to be distributed to local health departments for one-time infrastructure needs and any other costs including testing, personal protective equipment, and other preventative measures to combat the COVID-19 virus. We judgmentally selected one payment made pursuant to this purpose, totaling $367,699. Of the $367,699 tested, $3,325 was for backstage passes and zoo memberships purchased from the Henry Doorly Zoo. Per DHHS, these passes and memberships were used by program participants and employees of the local health department to facilitate non-traditional therapy methods, such as animal therapy and physical activity for the program participants. DHHS provided a list of 11 participants that supposedly used the passes and memberships; however, adequate documentation was not provided to support that those were the individuals that actually used the passes and memberships. We consider the $3,325 to be questioned costs. Total questioned costs from the random sample were $453,659. The total sample tested was $15,192,612, and the total sample population was $186,386,848. Based on the sample tested, the dollar error rate for the sample was 2.99% ($453,659/$15,192,612), which estimates the potential dollars at risk for fiscal year 2024 to be $5,572,967 (dollar error rate multiplied by the population). Cause: Inadequate procedures to ensure that grants to nursing and assisted-living facilities were used for allowable purposes, to ensure that premium pay was only paid to individuals employed during the COVID-19 public health emergency, and to obtain adequate documentation to verify that grants made were reasonably proportional to the negative economic harm experienced. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. Management Response: Department of Health and Human Services DHHS agrees with the finding regarding payments to nursing facilities and assisted-living for employee retention and recruitment. DHHS does not disagree with APA’s characterization of the Behavioral Health Care program administered by Douglas County Health Department. However, DHHS provided the membership IDs purchased and contact details, including name, phone, email, and address, for every parent or guardian and the age of their minor children who participated in this behavioral health program. To the Department’s knowledge, APA did not follow up with any of these contacts. Department of Environment and Energy NDEE management in coordination/conjunction with the Department of Administrative Services Budget Team revisited the State Fair Board tourism loss calculation, taking the APA’s assessment into consideration. We agree with the APA’s assessment and recalculation of tourism loss in the amount of $4,539,525. Department of Labor Premium pay is additional hourly compensation paid to eligible workers in addition to their regular hourly wages for the heightened risk they faced during the COVID-19 pandemic as defined under the CSLFRF. It may be called “Premium Pay” in the NDOL Guidance document, but the payments were for “recruitment and retention” of workers which are not subject to the time restrictions of the declaration of the COVID-19 emergency. The 12-31-2024 obligation date applies to recruitment and retention grants. Teacher Recruitment and Retention Grant (“TRRG”) awards will fund premium pay as part of a strategy to support recruitment and retention of educators in high-demand positions. Nursing Recruitment and Retention Grant (“NRRG”) awards will fund premium pay as part of a strategy to support recruitment and retention of healthcare workers in high-demand positions. Premium pay will target registered nurses (RNs), licensed practical nurses (LPNs), and certified nursing assistants (CNAs) working in eligible practice settings. NRRG award recipients will be healthcare institutions and healthcare systems, and these recipients will commit to provide training and professional development to support the retention of the healthcare workers eligible for premium pay. NRRG funds will be used to make lump sum payments of premium pay wages of $2,500.00 to RNs, $1500 to LPNs, and $1000 to CNAs in eligible positions who remain employed as of January 9, 2024. APA Response: The health department is a subrecipient of DHHS. It is DHHS’s responsibility to ensure that subrecipients comply with the requirements of the Federal program. Adequate documentation, such as attestation forms or sign-in sheets, were not provided to support that the zoo memberships and passes were actually used by those individuals for the behavioral health program. The guidance document that the NDOL provided to the APA referred to these payments as “premium pay.” Under the CSLFRF Final Rule, the use of CSLFRF funds for the purposes of employee retention and recruitment requires, among other things, the recipient to be able to substantiate that employees were likely to leave in the absence of the retention incentive or that funds were used only to rehire roles that became vacant due to the COVID-19 pandemic or up to an adjustment pre-pandemic baseline. No documentation of such an analysis was provided to the APA.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.3 (July 1, 2023) defines “obligation” as the following: [A]n order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. 31 CFR § 35.6(b)(4) (July 1, 2023) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b)(4) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions[.] Good internal control and sound business practices require policies and procedures to ensure that all Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million and that written justification is submitted to the Treasury, as required, for projects with expected capital expenditures of $10 million or more. 2 CFR § 200.511(a) (January 1, 2024) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations and expenditures were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was accurately submitted or on file for projects with expected capital expenditures. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2023-062 Questioned Costs: None Statistical Sample: No Context: We tested the quarters ended December 31, 2023, and June 30, 2024, Project and Expenditure reports. We selected 10 of 93 projects from the quarter ended December 31, 2023, report and 10 of 96 projects from the quarter ended June 30, 2024, report to test. We noted the following: Current and Cumulative Obligations Reported Nine of the projects tested did not have current obligations or cumulative obligations reported correctly, as shown in the following table. See Schedule of Findings and Questioned Costs for chart/table. For the Nursing Scholarships and Private Reverse Osmosis projects, the obligations consisted of multiple different awards to individuals. When testing some of the awards, we noted that the date the State was reporting the awards as obligated did not agree to the date that the awards were signed. For example, one award tested was reported as obligated in December 2023, but it was not actually signed until January 2024. Therefore, we were unable to determine the amount that should have been reported as obligations. During testing of the projects above, we also noted the following errors in the obligations reported. See Schedule of Findings and Questioned Costs for chart/table. Additionally, the PH EMS Ambulance project reported $0 in current period obligations on the quarter ended September 30, 2023, report. However, we reviewed two awards that were reported as obligated in April 2023 but were not actually signed until July 2023. Therefore, the current period obligations for September 2023 were understated. Current and Cumulative Expenditures Reported Three of the projects tested did not have cumulative or current period expenditures reported correctly. See Schedule of Findings and Questioned Costs for chart/table. For the Loan Repayment for Healthcare Workers project, $53,802 should have been reported under the ARPA Administration project, of which $23,709 was current period expenditures. Additionally, during our testing of the projects above, we noted that the cumulative expenditures reported for projects administered by the State Colleges System were overstated by $6,999 as of June 30, 2024. Capital Expenditures Four projects either did not properly report expected capital expenditures, or the required written justification was not on file. • Long-Term Housing Security – Affordable Housing – The State reported expected capital expenditures of $750,000 as of June 30, 2024, for this project and included no written justification in the quarterly report. Per the Department of Economic Development (DED), the State agency administering the project, all $39.4 million of CSLFRF funds obligated under the project are expected to be used for capital expenditures. Based on this valuation, written justification would have been required to be submitted to the Treasury and kept on file. Per DED, no written justification had been completed for the project, and nothing was submitted to the Treasury. • PH EMS Ambulance – The State reported no expected capital expenditures for this project. The project uses CSLFRF grant funds to reimburse licensed EMS services for partial costs of acquiring new ambulances. Per discussion with DHHS, all costs recorded under this project should be expected capital expenditures. DHHS treated each subaward under the project separately when determining if written justification was required. As no single subaward was for $1 million or more, DHHS had not documented any written justification. • Medical Facilities for Disproportionately Impacted Communities – The State reported no expected capital expenditures for this project, which is solely for the design and construction of a new clinic. Per discussion with DED, the agency administering the project, the project should have had $2,000,000 of expected capital expenditures. DED also stated that no written justification had been completed for the project. • New Law Enforcement Training Center – The State reported expected capital expenditures of $47,000,000 for this project. The written justification was submitted with the quarterly report; however, the written justification did not include a comparison of the proposed capital expenditure to at least two alternatives and demonstrate why the proposed expenditure was superior, as required by Federal regulations. • Additionally, during testing we noted that the Food Security project reported expected capital expenditures of $3,967,469; however, no written justification was on file for the project. DHHS treated each subaward under the project separately when determining if written justification was required. As no single subaward was for $1 million or more, DHHS had not documented any written justification. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report. Not all information reported by the agencies was accurate, and the State was not determining obligations in accordance with Federal definitions in several instances. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file or submitted to the Treasury as required. Management Response: Each quarter DAS pulls actual expenditures during the reporting period and sends to each agency for their reconciliation. Each agency submits its obligations and reconciled expenditures which are inputted into the US Treasury portal. DAS is working with agencies to ensure all funds are obligated as of December 31, 2024.

Program: AL 97.036 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) – Subrecipient Monitoring Grant Number & Year: 4616-DR-NE, declared September 6, 2021; 4420-DR-NE, declared March 21, 2019; 4641-DR-NE, declared February 23, 2022; 4662-DR-NE, declared July 27, 2022; 4521-DR-NE, declared April 4, 2020 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 200.332 (January 1, 2024) states, in relevant part, the following: All pass-through entities must: * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501. 2 CFR § 200.501(b) (January 1, 2024) states, in relevant part, the following, “A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 . . . .” A good internal control plan includes procedures to ensure subrecipient audits are reviewed timely. Condition: The Agency did not ensure subrecipients obtained Single audits. A similar finding was noted in the prior audit. Repeat Finding: 2023-063 Questioned Costs: None Statistical Sample: No Context: We selected three subrecipients for testing that would have required a Single audit based on the amount of funds received from the Agency during the subrecipient’s previous fiscal year. One of the three subrecipients received $12,604,747 in disaster grant funds passed through the Agency during the subrecipient’s fiscal year 2023, but did not submit a Single audit and the Agency had not followed up with the subrecipient. Cause: Employee oversight. The subrecipient returned a certification stating that they did not require a Single audit, and the Agency failed to verify the certification was proper. Effect: Without adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure subrecipient audits are obtained and reviewed timely. Management Response: Military (NEMA) agrees with the finding and has implemented the corrective action plan.

Program: AL 21.029 – COVID-19 Coronavirus Capital Projects Fund – Subrecipient Monitoring Grant Number & Year: CPFFN0183, grant period ending December 31, 2026 Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2024), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.201(b)(1) (January 1, 2024) states the following, in relevant part: The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. On May 17, 2023, the U.S. Department of the Treasury issued the SLFRF and CPF Supplementary Broadband Guidance, which states the following, in relevant part: Treasury further clarifies that a subaward that otherwise meets the requirements of 2 CFR 200.201(b) may be considered a fixed amount subaward even if: 1) the recipient uses its discretion to impose a cost-sharing or match requirement on the subrecipient; or 2) the recipient requires ISPs to submit evidence of costs. More specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs. Good internal controls require procedures to ensure that fixed amount subawards are based on a reasonable estimate of actual costs. This would include tracing budgeted costs to historical costs for similar projects, unit pricing data, or other documentation. Condition: For all four subrecipients tested, the Agency did not obtain adequate documentation to support that the subrecipients’ fixed amount subawards were based on a reasonable estimate of actual costs. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency awarded an initial amount of $61,345,287 to 18 subrecipients for broadband infrastructure projects. The Agency considered the subawards to be fixed amount subawards. We tested all the subawards issued to four subrecipients, which totaled $12,774,913. The Agency did not have adequate documentation on file to support that the fixed amount of the subaward was based on a reasonable estimate of actual costs. Documentation on file included a project budget, business plan, technical capability, and a funding breakdown. However, none of the costs included in this documentation was traced to historical costs for similar projects, unit pricing data, or other documentation. The Agency’s procedures include obtaining documentation for all costs actually incurred by the subrecipients when the project is completed. However, none of the projects were completed as of June 30, 2024, so the Agency had not yet obtained additional documentation. Total payments to subrecipients during the fiscal year ended June 30, 2024, were $24,426,287. Cause: Inadequate procedures to verify that the amount of the subaward was based on a reasonable estimate of actual costs. Effect: Without procedures in place to ensure the fixed amount of the subaward is based on a reasonable estimate of actual costs, there is an increased risk Federal funds disbursed could exceed a justifiable amount. Recommendation: We recommend the Agency improve its procedures to include tracing estimated costs of a project to historical costs for similar projects, unit pricing data, or other documentation. Management Response: As a threshold issue, we would note that the referenced supplemental guidance issued by the Treasury on May 17, 2023, stating that these should be considered fixed priced awards even though there is a review of actual costs prior to full reimbursement, came after our first round of applications were filed, budgets reviewed, and applications cured. Modified procedures were put into place for the second round of applications, which occurred after the supplemental guidance was issued. However, we feel the review of submitted budgets for the first round of applications that was conducted by PSC staff, assessed the reasonableness of costs presented using historical experience based on the scope of the project, geography/terrain, and type of technology used for deployment. Applicants based their budgets on prior experience with broadband deployments in similar project areas, which relied on practical knowledge and reasonable estimates. In cases where costs appeared to be outliers, staff would inquire for further explanations and justifications. This process reflects our commitment to ensuring that the funding requests were based on reasonable estimates of actual costs in that first round of applications. We concede that portion of review was not initially fully documented, however we have already implemented processes to better document this going forward. Additionally, we would mention with traditional Fixed Price Awards, awardees are paid the original budget amount with no reconciliation to actual costs. The Treasury nontraditional fixed price awards allow for reimbursements to not exceed actual costs, which we feel eliminates any opportunity for unjust enrichment. There is a complete review of actual costs done at project completion and subrecipients will only be reimbursed for allowable, actual incurred costs up to the award amount. In the unlikely event that support already advanced exceeds the final review of actual costs, awardees are required to repay those amounts as outlined in the grant agreement. APA Response: The U.S. Department of the Treasury requires recipients to follow Uniform Guidance, which requires fixed amount subawards to be based on adequate cost, historical, or unit pricing data. The U.S. Department of the Treasury further clarified in its supplemental guidance dated May 17, 2023, that subawards can be considered fixed amount subawards if the subaward otherwise met the requirements of 2 CFR § 200.201(b). Documentation was not provided to support that the subawards met those requirements.

Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2021-11-00, Performance End FFY 2024; NE-2023-030-00, Performance End October 30, 2025; NE-2024-006-00, Performance End December 31, 2026 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2024), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2024) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2024) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2024) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR § 200.405(a) (January 1, 2024), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” 2 CFR § 200.442(a) (January 1, 2024) states the following: Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions, are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with the prior written approval of the Federal agency. Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2023-065 Questioned Costs: $4,905 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: During the fiscal year, the Agency paid 64 subrecipients a total of $12,622,391. We selected five payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we provided the Agency with the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. See Schedule of Findings and Questioned Costs for chart/table. We noted the following: • Two subrecipients tested did not have adequate support for all personnel charges. One individual tested was reimbursed at the non-operating rate but should have been reimbursed at the operating rate. Another individual’s personnel costs were based on budgeted amounts. • Fuel costs for one subrecipient did not agree with invoices. • One subrecipient did not properly report revenues collected, resulting in an overcharge of the Federal reimbursement. • All five subrecipients tested had capital or non-operating costs that were not adequately supported. Costs allocated between programs were not adequately supported, travel costs did not appear reasonable, and fundraising costs of $100 were charged. Cause: Procedures were not adequate to ensure costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT acknowledges the audit findings related to subrecipient monitoring and cost allowability under the grant funding. We will continue to ensure compliance with regulations and are committed to improving our internal controls to prevent recurrence of similar findings.

Program: Various, including AL 93.778 – Medical Assistance Program (Medicaid), and AL 93.563 – Child Support Enforcement – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2205NE5ADM, FFY 2022; 2201NECSES, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR § 200.403 (January 1, 2023) and 45 CFR § 75.403 (October 1, 2022) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR § 200.405(b) (January 1, 2023) and 45 CFR § 75.405(b) (October 1, 2022) state, in relevant part, the following: All activities which benefit from the non-Federal entity’s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR § 200, Appendix V, subsection (G)(2), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(2), (October 1, 2022) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR § 200, Appendix V, subsection (G)(4), (January 1, 2023) and 45 CFR § 75 Appendix V, subsection (G)(4), (October 1, 2022) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. Neb. Rev Stat. § 81-1120.22 (Cum. Supp. 2022) states the following: The Director of Communications shall develop a system of equitable billings and charges for communications services provided in any consolidated or joint-use system of communications. Such system of charges shall reflect, as nearly as may be practical, the actual share of costs incurred on behalf of or for services to each department, agency, or political subdivision provided communications services. Using agencies shall pay for such services out of appropriated or available funds. Beginning July 1, 2011, all payments shall be credited to the Communications Revolving Fund. Beginning July 1, 2011, all collections for payment of telephone expenses shall be credited to the Communications Revolving Fund. 2 CFR § 200.444(a) (January 1, 2023) and 45 CFR § 75.444(a) (October 1, 2022) state, in relevant part, the following: For states . . . the general costs of government are unallowable . . . . Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . A good internal control plan requires: • Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. • Adequate documentation is maintained to support both rates charged and the approval of those rates. Condition: The Agency did not have adequate documentation to support the allocation of information services and communications costs in developing rates charged by the Office of the Chief Information Officer (OCIO). Additionally, the OCIO did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. We also noted the Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates, and the Agency’s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding has been noted in prior audits since 2015. Repeat Finding: 2022-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Office of the Chief Information Officer (OCIO) For 6 of 14 OCIO rates selected for testing, documentation provided by the division was not adequate to support the rate charged. • Five of the rates selected utilized an employee time allocation spreadsheet prepared by the OCIO. The spreadsheet was prepared by supervisors utilizing an estimate of how much time each year every employee spends on services provided by the division. During testing, it was noted that these estimates are not backed by a time study, nor is a review of actual hours worked on each service completed by the division. • For one rate selected, we identified variances between the total for networking equipment used in the calculation of the rate charged and the totals per the supporting documentation provided, netting to $1,313,693. When asked about the variances, the OCIO was unable to explain why the amounts did not agree. • For one rate tested, the rate included equipment and maintenance costs incurred by the University of Nebraska (University). The fee was related to the network operated and maintained by Network Nebraska (a collaborative aggregation partnership between the OCIO, the University, and the Nebraska Educational Telecommunications commission). The OCIO receipts funds from the services provided to participants on the network. However, it was noted during testing that the OCIO does not pay the University for its portion of costs incurred for this fee. Per documentation provided to support the calculation of the rate charged, the University incurs $582,049 of the total annual costs of $788,510. For 8 of 14 OCIO rates selected for testing, the rate charged was not reasonable or was improper. • For the six rates previously mentioned above, we were unable to determine if the rate was proper due to the lack of supporting documentation. • For one rate tested, we noted that actual costs incurred for the service provided recalculated to 40 cents per unit. The OCIO charged 22 cents per unit for the service. Total units sold for the service in calendar year 2022 were 39,348,448, resulting in an expected loss of $7,165,169. • For one rate tested, we noted that the rate calculation included employee salaries as a base for costs incurred. Per the calculation, the OCIO utilized salaries that were effective as of January 1, 2018. We compared the hourly compensation for a sample of employees at January 1, 2018, and as of July 1, 2021. During this period, we noted an average pay increase of 9.1% for the employees selected; thus, the rate charged is inappropriate per the actual costs incurred for providing the service. For 3 of 15 OCIO receipts tested, documentation provided was not adequate to support the rate charged. • For one receipt tested, we noted that the OCIO did not charge from an outside communications provider at the same rate that was shown on the invoice from the provider. These rates were “Re-rated” by the OCIO and then charged to the agency. The OCIO could not provide support for how the re-rates were determined. The APA selected seven rates from the OCIO billing to trace to support, and five of those rates could not be traced back to the provider invoice. Of the total payment of $116,175, $11,397 was charged at a rate that could not be traced to support. • For one receipt tested, we noted that the amount charged for a monthly Supreme Court retainer fee of $56,250 is determined by a rate calculated by the OCIO, but the OCIO could not provide support for the amounts used in the calculation. • For one receipt tested, $9,057 was charged for IT Support. This was based on an employee’s annual salary being paid 90% by the agency and 10% by the OCIO. The OCIO could not provide supporting documentation for how the 90/10 split was determined. In addition to the testing mentioned previously, we asked the OCIO how rates are calculated and what procedures are performed to ensure that the rates are appropriate. Most of the rates selected for testing were last updated in 2020. The staff that created these rates are no longer with the OCIO due to turnover. The OCIO reviews each rate on a yearly basis to determine if the amount charged is appropriate based on actual costs incurred. However, no documentation on the individual rate setting processes was developed or maintained when the rates were initially created.  The APA reviewed the OCIO’s fund balances and found them to be compliant with Federal regulations. However, because some rates charged are improper or inadequately supported, there is a risk of some Federal programs being overcharged and some being undercharged. The OCIO receipted $36,684,244 in Federal dollars for services performed for Federal programs. Of this amount, $16,480,956 was charged to Medicaid, and $4,597,226 was charged to Child Support Enforcement. Building Division The rental rate charged to agencies for building space includes an allocation for indirect administrative costs, grounds keeping, security, and energy management. We noted that security costs were allocated for neither the Capitol nor the Governor’s residence, even though security is provided at those locations. Because those locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs for the Capitol and the Governor’s residence are general costs of government and, therefore, not allowable. The fiscal year 2023 indirect allocations for security were $785,709. Print Shop As noted in prior audits, the Print Shop lacked adequate support for service rates charged. The Agency was in the process of developing new rates using a new methodology, but no changes were made for fiscal year 2023. Receipts from sales for fiscal year 2023 totaled $3,058,910. Cause: Inadequate procedures. Per the Agency, the methodology used to allocate the security allocation is based on a management decision; however, management cannot simply choose to disregard Federal regulations. Effect: When information services and communications costs are not allocated to all agencies in an equitable manner, there is an increased risk that Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs or State agencies will be overcharged for services. When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Recommendation: We recommend the Agency review its allocation of information and communications costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency improve procedures to ensure that published rates are the actual rates charged. Lastly, we recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services, in accordance with Federal regulations. Management Response: The OCIO agrees with the findings as identified by the APA. The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate published rates at the individual service line level. In response to prior findings, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. That tool is currently being utilized to build Print Shop rates for the fiscal year 2026 - 2027 biennium. APA Response: As noted above, security costs for the Capitol and the Governor’s residence are general costs of government; therefore, despite any management business decision, such costs are not allowable.

Program: Various, including AL 93.575, 93.596 – CCDF Cluster; AL 93.558 – Temporary Assistance for Needy Families –– Reporting Grant Number & Year: Various, including 2301NECCDF, FFY 2023; 2101NETANF, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires: 1) adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented; and 2) the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 45 CFR § 75.510(b) (October 1, 2022) and Title 2 CFR § 200.510(b) (January 1, 2023) state in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. § 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. Title 45 CFR § 75.511(a) (October 1, 2022) and 2 CFR § 200.511 (January 1, 2023) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations provides the following, as is relevant: When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. The Summary Schedule of Prior Audit Findings lists the status as “completed.” A similar finding was noted in the prior audit. Repeat Finding: 2022-018 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.575 by $3,909,201, underreporting AL 93.596 by $7,416,246, and overreporting AL 93.558 by $11,325,447. The Department of Military underreported AL 21.027 by $920,874. The Department of Labor underreported AL 17.225 by $3,696,585. Twenty-three programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services did not have adequate procedures to ensure the accuracy of amounts not pulled directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.98% accurate. APA Response: We agree that SEFA adjustments were not significant in total. However, errors amounting to millions of dollars for individual programs are unquestionably significant to those programs. Such errors could result, moreover, in a program not being audited as a major program when it should be.

Program: AL 14.228 – Community Development Block Grants – Reporting Grant Number & Year: B-20-DW-31-0001, grant period 6/15/2020 to 6/15/2026; B-22-DC-31-0001, grant period 7/1/2022 to 9/1/2029 Federal Grantor Agency: U.S. Department of Housing & Urban Development Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to FFATA reporting are submitted on time. Condition: FFATA reporting was not submitted for three of nine subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 43 subawards obligated during the fiscal year ended June 30, 2023. We tested nine of the subawards, and three of those subawards were not reported in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS) as of December 21, 2023. One subaward should have been reported by April 30, 2023, and two subawards should have been reported by June 30, 2023. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported in FSRS as required. Management Response: DED acknowledges that the FFATA information for some of its subawards were not reported in FSRS in a timely manner.

Program: AL 10.553 – School Breakfast Program; AL 10.555 – National School Lunch Program; AL 10.556 – Special Milk Program for Children; AL 10.559 – Summer Food Service Program for Children; and AL 10.582 – Fresh Fruit and Vegetable Program – Reporting Grant Number & Year: Various, including 233NE308N1199, FFY 2023; and 233NE377L1603, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all required reports are submitted on time. Condition: Federal Funding Accountability and Transparency Act (FFATA) reporting for the Child Nutrition programs has not been completed since December 2020. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: For fiscal year ended June 30, 2023, the Agency paid subrecipients from the Child Nutrition programs $148,896,593. As explained to the APA, however, the Agency has been unable to submit the required FFATA reporting since December 2020. The Agency had submitted a ticket to the U.S. General Service Administration’s Federal Service Desk (FSD) and reached out to other state agencies for assistance but has been unable to resolve the issue. Cause: The Agency has attempted to complete FFATA submissions but has been unable to do so. It is unknown why the submissions are unsuccessful. Effect: Without adequate procedures to ensure that FFATA reports are submitted in a timely manner, there is an increased risk of the State not being in compliance with Federal regulations. Recommendation: We recommend the Agency continue to reach out to the FSD to resolve this issue and complete FFATA reporting as soon as possible. Management Response: The NDE disagrees with this audit finding for the following reasons: NDE Nutrition Services has made several attempts to resolve the FFATA reporting issue in the FSRS by contacting the FSRS help desk dating back to August 2021. These attempts have not produced a resolution; instead, the unresolved ticket has been closed by FSRS staff and has been requested to be re-opened by NDE Nutrition Services staff. The NDE has also made contact with the Branch Chief of the MPRO Grants Management team to request support to resolve the reporting issue. This did not help resolve the issue. APA Response: The Agency is responsible for completing the required FFATA reporting. Regardless of the reasons for failing to do so, the fact remains that no such reporting has occurred since December 2020.

Program: AL 10.555 – National School Lunch Program – Allowability Grant Number & Year: 233NE308N1199, FFY 2023 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 7 CFR § 210.18(f) (January 1, 2023) states, in relevant part, the following: During the course of an administrative review for the National School Lunch Program and the School Breakfast Program, the State agency must monitor compliance with the critical and general areas in paragraphs (g) and (h) of this section, respectively. 7 CFR § 210.18(g)(1)(ii) (January 1, 2023) provides the following, as is relevant: The State agency must gather information and conduct an on-site visit to ensure that the processes used by the school food authority and reviewed school(s) to count, record, consolidate, and report the number of reimbursable meals/snacks served to eligible students by category (i.e., free, reduced price or paid meal) are in compliance with program requirements and yield correct claims. The State agency must determine whether: (A) The daily meal counts, by type, for the review period are more than the product of the number of children determined by the school/school food authority to be eligible for free, reduced price, and paid meals for the review period times an attendance factor. If the meal count, for any type, appears questionable or significantly exceeds the product of the number of eligibles, for that type, times an attendance factor, documentation showing good cause must be available for review by the State agency. * * * * (C) For each school selected for review, all meals are correctly counted, recorded, consolidated and reported for the day they are served. Good internal control requires procedures to ensure reviews of programs include a review of a claim to ensure the correct number of meals is claimed. Condition: For one of 26 school food authorities (SFA) tested, the Agency’s administrative review did not include a review of a claim to ensure the correct number of meals was claimed by the SFA for each category (free, reduced, paid). Repeat Finding: No Questioned Costs: $1,061 known Statistical Sample: No Context: The Agency relies on administrative reviews completed for each SFA to ensure that the SFAs are claiming the correct number of meals. For one SFA tested, the administrative review completed for school year 2022-2023 did not include a review of a claim to ensure that the correct number of meals was claimed by the SFA. After the APA’s inquiry into the matter, the Agency reviewed a claim for February 2023 and noted an overpayment of $1,061. The Agency subsequently requested that the overpayment be reimbursed. The total amount of the February 2023 claim was $11,304, and this SFA claimed $107,337 for school year 2022-2023. The APA performed an overview of the other claims for this SFA during the year, noting that the month of February 2023 was an outlier and had claimed over 70 meals per day more than any other month during the school year. Additionally, the Agency’s procedure for when an error is found on a claim is to review the prior month’s claim to determine if there is a systematic issue. However, documentation could not be provided to support that the prior month’s claim was reviewed. Cause: Inadequate review and monitoring procedures. Effect: Without adequate review procedures, there is an increased risk of not only costs failing to comply with Federal regulations but also loss of Federal funds due to error or fraud. Recommendation: We recommend the Agency implement procedures to ensure that administrative reviews performed by the Agency include a review of meals claimed, and documentation is maintained to support that such reviews were performed. Management Response: The Administrative Review that was found to not verify a claim for reimbursement was addressed by reviewing the claim submitted for the school’s review month – February 2023. The review identified a claiming error of 1,248 Paid price meals. This information was completed in the 300 series on-site review forms in the CNP system. A follow-up review letter was also issued. The February 2023 edit check document was used to validate and correct the claim. Finally, NDE Central Accounting received a check from the SFA to cover the overclaimed amount. APA Response: The Agency did not complete its review of the February 2023 claim until after it was brought to its attention by the APA, which then resulted in the Agency seeking reimbursement for the overclaimed amount.

Program: Various, including AL 84.027 – Special Education Grants to States; AL 84.173 – COVID-19 Special Education Preschool Grants; AL 84.425D – COVID-19 Education Stabilization Fund – Elementary and Secondary School Emergency Relief Fund (ESSER I and ESSER II); AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Subrecipient Monitoring Grant Number & Year: Various, including H027A210079, FFY 2022; H173X210077, FFY 2022; S425D200048, grant period ending 9/30/2022; S425D210048, grant period ending 9/30/2023; S425U210048, grant period ending 9/30/2024. Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). Per 2 CFR § 200.403 (January 1, 2023), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward[.] * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. 2 CFR § 200.521 (January 1, 2023) states, in relevant part, the following: (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. Good internal control requires procedures to ensure that subrecipients are using grant funds for allowable purposes. Good internal control also requires procedures to ensure that subrecipient Single Audit reports are being reviewed, and management decision letters are being issued in a timely manner to ensure that corrective action is being implemented. Condition: For 3 of 27 subrecipients tested that received Federal funds from the Special Education Cluster, the Agency did not perform adequate subrecipient monitoring to ensure that funds were used for allowable purposes. For seven subrecipients tested that received Federal funds from the Education Stabilization Fund and/or Special Education Cluster, the Agency did not issue a management decision letter within the time requirement for five subrecipients and did not issue a management decision letter for two subrecipients. The Agency also failed to track and review the Single Audit report for one subrecipient. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs various subrecipient monitoring activities during the year to ensure that subrecipients are using funds for an allowable purpose. These activities include reviewing a sample of expenditures from all reimbursement requests, tracking subrecipient audit requirements and reviewing Single Audit reports, and performing fiscal monitoring on a three-year basis. During review of reimbursement requests, the Agency does not perform procedures to ensure that salary and benefits allocated to the Special Education (SPED) grants are adequately supported by underlying documentation for a majority of its subrecipients. Rather the Agency relies on the fiscal monitoring to test that payroll is being properly allocated to grants, and the subrecipients have procedures in place to comply with Uniform Guidance Requirements. During testing of 27 subrecipients that received SPED grants, we noted the following for three subrecipients: • For the first subrecipient, the Agency had never completed a fiscal monitoring review. The Agency indicated that it was currently conducting fiscal monitoring of the school, but the subrecipient had been slow to provide documentation, resulting in delays. • The second subrecipient also did not have a fiscal monitoring review. At the time of the reimbursement, moreover, the Agency did not review any underlying documentation to support the costs allocated to the grant. The Agency stated that it relied on the entity’s annual audit to ensure costs were allocated properly; however, the subrecipient had not had a recent Single Audit in which the Special Education Cluster was a major program. • The third subrecipient had a fiscal monitoring review of payroll costs, but there was no documentation to show that the Agency had reviewed other purchased services at the time of reimbursement or during the fiscal monitoring. During review of the Agency’s procedures for reviewing subrecipient Single Audits, we noted the following: • For two subrecipients tested, their Single Audits noted significant deficiencies and material weaknesses, including one instance of questioned costs totaling $105,273; however, the Agency did not issue a management decision letter on the findings or provide documentation of any follow-up performed. • For five subrecipients tested, the management decision letter was issued eight to nine months after the audit was made available on the Federal Audit Clearinghouse (FAC). • One subrecipient was not being tracked by the Agency. This subrecipient had received $939,358 in Federal funds from the Agency. After the APA pointed this out, the Agency obtained a copy of the subrecipient’s Single Audit report, which noted no findings. Cause: Inadequate subrecipient monitoring procedures. The Agency stated it had other priorities during the year that delayed its review of the subrecipients’ Single Audit reports. Effect: Without adequate procedures, there is increased risk of noncompliance with Federal regulations, audit findings of subrecipients not being corrected, and an increased risk of loss or misuse of funds. Recommendation: We recommend the Agency review its procedures for reimbursements and fiscal monitoring to ensure subrecipients are operating in compliance with Federal requirements. We also recommend the Agency improve procedures to ensure that all subrecipients are being tracked for Single Audit requirements, and management decisions are issued in response to all findings in a timely manner. Management Response: First SPED subrecipient – The first recipient’s fiscal monitoring review is part of the current annual group of recipients being monitored; set to close June 30, 2024. Second SPED subrecipient – As part of the FY2020 federal Single Audit testing conducted by KPMG, determined the after-the-fact verification as a method to certify that the payment received on a project is reasonable in relation to the amount of work performed. Third SPED subrecipient – Purchased services and supplies were reviewed during fiscal monitoring, but the documentation was in paper form, not electronic, and was not initially provided to the auditors when requested. It was provided on March 4, 2024, when located. Single Audits – Due to extensive time commitment to State audit facilitation and Education Stabilization Fund Annual Performance Reporting, some management decision letters were not issued or were issued late. The NDE staff member performing the annual audit reviews was not aware of an additional subrecipient that needed reviewed. APA Response: The Special Education Cluster was not a major program for the second subrecipient in FY2020. For the third subrecipient, we originally requested the Agency’s fiscal monitoring documentation on December 21, 2023. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) requires compliance with such a request to occur within “three business days after actual receipt of the request.” The only exceptions to that three-day response requirement are if there is “a legal basis for refusal to comply with the request” or “the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request.” In either instance, § 84-305(2) requires the recipient of the request to take specific action in claiming the exception. The Agency failed to do so, clearly violating § 84-305(2). In no case not involving a legal basis for noncompliance, moreover, may the required compliance “exceed three calendar weeks after actual receipt of such request by any public entity.” Nevertheless, the additional documentation was not provided until over 11 weeks after being requested, which is another clear violation of § 84-305(2).

Program: AL 84.287 – Twenty-First Century Community Learning Centers – Subrecipient Monitoring Grant Number & Year: S287C210027, FFY 2022 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2023), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.508 (January 1, 2023) states, in relevant part, the following: The auditee must: * * * * (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) A proper system of internal control includes procedures to ensure the Department’s fiscal monitoring polices are followed. Good internal control also requires procedures to ensure audit information is provided promptly in accordance with State and Federal requirements. Condition: The Agency failed to perform fiscal monitoring of one subrecipient tested for the Twenty-First Century Community Learning Centers grant. Contrary to § 84-305(2), moreover, the Agency failed to respond promptly to requests for information. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency performed a review of a reimbursement request for $183,825, where staff compared the amount claimed to the school-provided accounting records and payroll reports with employee names. The Agency’s policy then requires further fiscal monitoring on at least a three-year rotational basis for all school districts. As part of this process, a more detailed review of time and effort documentation is supposed to be completed. According to Agency staff, fiscal monitoring was scheduled for October 2022; however, school district staff stated that the timing would not work for them. The Agency began its review in December 2022, but the process had yet to be completed – more than a year later – due to a lack of responsiveness from the school district. Fiscal monitoring of the school district was last performed in fiscal year 2020. Additionally, the APA asked the Agency on January 11, 2024, for documentation to support the payroll expenses on the reimbursement request. On January 12, 2024, the Agency presented the APA with the documentation from the school district; however, this was the same documentation provided previously to the Agency at the time of reimbursement. This documentation was insufficient to support the payroll expenses questioned. On March 1, 2024, seven weeks after the APA’s request, the Agency produced the additional information to support the payroll expenses. Cause: Inadequate subrecipient monitoring procedures. Effect: Without adequate monitoring procedures, there is an increased risk for the payment of unallowable Federal expenses. Recommendation: We recommend the Agency strengthen its procedures for ensuring that fiscal monitoring is completed in accordance with the Agency’s policies. We further recommend the Agency implement procedures to ensure compliance with both 2 CFR § 200.508 and § 84-305(2). Management Response: The Grants Compliance Section is the Agency’s internal control function performing the requirements within 2 CFR 200.332, applying risk assessment to determine the annual fiscal monitoring base cadence and sequential sampling; non-probability sampling ensuring all recipients are subject to fiscal monitoring efforts in a three-year cycle at a minimum. As education subrecipients have received a significant influx of subawards to mitigate post-COVID supports for Nebraska education with limited staff capacity, the Department has remained mindful of these conditions and completed fiscal monitoring activities and issued an exit letter on September 5, 2023. APA Response: This finding was included as Comment 4 in the Annual Comprehensive Financial Report (ACFR) management letter dated December 13, 2023. The Agency responded, in part, “Fiscal monitoring of Lexington Public Schools was being performed in 2023 but was not completed as of the time of the ACFR audit.” When the Single Audit team requested the payroll documentation, the Agency did not inform the APA that monitoring was completed until March 5, 2024, which is well past the time requirements set out in § 84-305(2). Regardless, the fiscal monitoring was not completed within three years.

Program: AL 84.425U – COVID-19 Education Stabilization Fund – American Rescue Plan – Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – Reporting Grant Number & Year: S425U210048, grant period ending 9/30/2024 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for 2 of 11 subawards tested. Additionally, two other subawards were not submitted timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 104 subawards obligated during the fiscal year ended June 30, 2023. We tested 11 of the subawards. Two of those subawards were not reported in FFATA Subaward Reporting System (FSRS) as of February 7, 2024. The subawards should have been reported by September 30, 2022, and April 30, 2023. Additionally, the Agency did not submit two other subawards tested timely. The subawards were both reported 122 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal Requirements. Management Response: For the two subawards not reported, the NDE staff completing the FFATA reporting was not aware these subawards were issued. Regarding untimely reporting, the NDE staff was trying a new method to streamline reporting, but it was determined some amendments were missed. These subawards were reported at the time the error was found, which was a few months late.

Program: AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Enforcement; AL 93.568 – Low Income Home Energy Assistance (LIHEAP); AL 93.575 – Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.778 – Medical Assistance Program; AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: 2001NETANF, FFY 2020; 2301NECSES, FFY 2023; 2301NELIEA, FFY 2023; 2301NECCDD, FFY 2023; 2301NEFOST, FFY 2023; 2305NE5ADM, FFY 2023; 233NE406S2514, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), 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. Title 45 CFR § 75.302 (October 1, 2022) and 2 CFR § 200.302 (January 1, 2023) require financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. Condition: Procedures to ensure journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP) were not adequate, resulting in multiple Federal programs being overcharged. Repeat Finding: No Questioned Costs: $581,496 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: Each quarter, as the PACAP is prepared, the Agency makes multiple adjustments for costs that either were charged to Federal funds and should not have been, or costs that were not charged to Federal funds but are claimable to a Federal grant. We tested five adjustments between two quarters. One adjustment tested for the quarter ended December 31, 2022, was recorded to charge the Foster Care grant for allowable costs incurred by the Foster Care Review Office (FCRO), a separate agency. The amounts provided by FCRO erroneously included payroll charges from a previous quarter, inflating the amount charged. The FCRO later caught the mistake and adjusted the internal spreadsheet but did not alert the Agency to the error, so a correcting adjustment was never made to the PACAP. The amount charged was $353,984; however, the adjustment should have been $212,725, a difference of $141,259. Foster Care is matched at 50%, so the grant was overcharged $70,629, which are questioned costs. Due to this error, we reviewed a second Foster Care adjustment for the quarter ending March 31, 2023, and noted the Agency’s calculation included amounts for a State funded program that should have been removed, resulting in the grant being overcharged an additional $1,561. We also tested six journal entries that moved costs between cost centers to determine any impact on the PACAP and if those journal entries were appropriate. We noted three improper journal entries that the Agency had not corrected as of the end of the fiscal year: • A journal entry for $526,487 was performed in November 2022 to temporarily move postage costs of multiple programs from State funds to the Child Support Enforcement (CSE) grant until new coding could be created in the State’s accounting system to track expenses from one fiscal year to another. The intent was to reverse the entry as soon as the new coding was completed; however, the reversing entry was never performed. Since the Agency performs a quarterly adjustment for the CSE grant to charge indirect costs identified by the Agency’s PACAP to the grant, the CSE grant was overcharged a total of $263,628. No correcting entry had been made as of September 30, 2023. These are considered questioned costs. • A journal entry for $207,369 was performed in December 2022 to move expenses to allow payroll to post. The intent was to reverse the entry before the end of the fiscal year; however, that was not done. The expenses were moved from Medicaid administration and were charged to the Central Services and Supplies Cost Center, which is then allocated to numerous other Cost Centers that are further allocated or charged directly to Federal programs such as TANF and Child Care. Due to the intricacies of PACAP allocations, exact questioned costs are unknown. No correcting entry was made as of September 30, 2023. • A journal entry for $5,317,640 was done in February 2023 to move Premium Pay to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant as additional pay for certain job roles allowed under that grant. However, the entry performed included some lines that were miscoded, most significantly a line for $764,187 that was supposed to move money within the same Cost Center (CC 25C21910 – Field Office Administration); however, it pulled costs out of Cost Center 25C21780 - Protection and Safety Policy Chief instead. Additionally, we confirmed with the Agency that the costs charged to CC 25C21910 under the CSLFRF grant were also allocated to other Federal programs through the PACAP, essentially charging Federal programs twice. Due to the intricacies of the PACAP allocations, total questioned costs are unknown; however, we were able to determine that this error caused Medicaid to be overcharged $149,478, LIHEAP to be overcharged $33,447, SNAP to be overcharged $44,984, Child Care to be overcharged $10,412, and TANF to be overcharged $7,357. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper and that journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 93.778 – Medical Assistance Program – Allowable Costs/Cost Principles Grant Number & Year: Various, including 2305NE5ADM, FFY 2023 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: 45 CFR § 75.303 (October 1, 2022) states, in relevant part, the following: 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. 45 CFR § 75.403 (October 1, 2022) requires costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2022) requires financial management systems of the State be sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for twelve allocations tested. A similar finding was noted in the prior audit. Repeat Finding: 2022-023 Questioned Costs: $498,214 known Statistical Sample: No Context: We tested 23 PACAP allocations. We noted errors for 12 of 23 allocations tested, resulting in various programs undercharged or overcharged. The net effect of errors noted resulted in $498,214 overcharged for the Medicaid program, which are considered questioned costs, with undercharges to other various Federal programs ranging from $7,505 to $125,868. We noted the following: Time and Effort Report Allocations • We tested the allocation of cost center 25C21940 Field Office Resource Development for quarter ended December 31, 2022, which allocated $1,516,328 of administration costs, based on Time & Effort reports. The payroll costs for 92 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees tested included a Child and Family Services Specialist Supervisor, a Program Accuracy Specialist, and two Program Specialists. All these employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, numerous programs were not charged correctly, ranging from undercharges of $837 to overcharges of $1,808. Medicaid was overcharged $538. Additionally, we were unable to determine how the payroll costs of $17,095 to one of the Program Specialists should have been allocated. RMTS Allocations • We tested the allocation of cost center 25C21960 Field Office Social Services Casework for quarter ended December 31, 2022, which allocated $7,682,207 of administration costs, based on Random Moment Time Study (RMTS) results. There were several errors found in the sorting process of the RMTS results to Federal programs, resulting in several programs undercharged or overcharged. Medicaid was overcharged $2,644. • We tested the allocation of cost center 25C21920 Field Office Child Protection & Safety Services for the quarter ended March 31, 2023, which allocated $14,187,156 in administration costs based on RMTS results. Below are the issues noted: o RMTS observations for Trial Home Visits were not included in the allocation. As a result, State programs were undercharged, and Federal programs were overcharged. o The RMTS observations for Child Protection Initial Assessment were not properly allocated. As a result, Foster Care was overcharged, and Adoption Assistance and Guardianship Assistance were undercharged. o The RMTS Observation coded as “Non-Court/Child Protection Initial Assessment/Alternative Response (AR)” was misallocated to both State and Federal programs, causing Guardianship Assistance to be overcharged and Adoption Assistance and Foster Care to be undercharged. Labor Hours Statistics • We tested six allocations based on labor hours statistics. All six allocations were calculated incorrectly. Labor hours statistics are gathered by using an Agency-wide report of all employee time, and then filtering that report for specific pay type codes (e.g., regular pay, holiday pay, sick pay, etc.) and specific programs and divisions within the Agency. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. We noted the following during testing: o Cost center 25C21910 is allocated based on a formatted Labor Hours report, which should only include field offices.  For the quarter ended December 31, 2022, the Agency did not remove irrelevant pay type codes (such as overtime, shift differentials, and termination payouts), and included labor hours for two programs that were not related to field office employees.  For the quarter ended March 31, 2023, the Agency was unable to provide the Labor Hours report it used to calculate the allocation percentages. We recalculated both quarters using the report formatting instructions provided by the Agency and found that the Agency’s errors caused numerous programs to be undercharged by as much as $17,670, while overcharging the Medicaid grant by $301,485. o Cost centers 25C20960 and 25C20975 are allocated based on all Agency hours worked (i.e., does not include paid leave) and excludes two thirds of the labor hours from 24-hour facilities. The Agency did not properly format any of the quarterly Labor Hours reports by removing irrelevant pay type codes (such as Shift Differentials and Sick and Vacation leave paid) and dividing the hours in the 24-hours facilities by three. These repeated errors skewed the data used for the allocations in all three quarters tested. We were able to identify undercharges to Medicaid of $117,611; however, due to the intricacies of these PACAP allocations, we were unable to determine total questioned costs. The largest variances are listed below: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts • We tested the allocation of cost center 25C20990 IST Application NFOCUS Applications for the quarter ended March 31, 2023, which allocated $6,672,560 in administration costs, based on recipient counts per NFOCUS/MMIS reports. NFOCUS and MMIS are databases used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. We noted that the recipient counts used in the allocation did not agree to support. The Miscellaneous State programs did not include 1,653 recipients, resulting in the State being undercharged and all other programs being overcharged, such as Medicaid for $5,939. Additionally, we were unable to trace the recipient counts to documentation that supported allocating $3,857,377 to Medicaid and $486,931 to CHIP. The Agency did not maintain the recipient count reports used at the time of the allocation. The Agency was able to generate a historical report; however, while the report amounts were similar, they did not agree with the counts used in the allocation. The Agency did maintain system summary reports at the time of the allocation, and the total counts on the summary reports did agree to amounts used for the allocation. However, as the summary reports used did not maintain the detail of members counted, we could not verify the accuracy of the reports used. • We tested the allocation of cost center 25C23006 Expansion Call Center for quarter ended March 31, 2023, which allocated $2,934,314 in administration costs, based on recipient counts per NFOCUS/MMIS reports. It was determined that the same allocation numbers had been used since at least the quarter ended December 31, 2020, and were not being updated each quarter to account for actual benefiting programs. The Agency agreed that the allocation should have been updated each quarter, and it will start doing so as of the June 30, 2023, quarter end. We recalculated what the allocation should have been for each benefiting program and noted variances to numerous programs including overcharges to Medicaid of $305,219. Other • We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared for quarter ended December 31, 2022, which allocated $3,457,879 in project costs based on the project’s cost allocation plan. The Agency is developing the new iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs. This application will be replacing ACCESSNebraska, the current application used by Nebraskans to apply for benefits. For the implementation phase of the project, the Agency was only allocating costs to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request. We were unable to calculate questioned costs as we were not able to determine which Federal and State programs should receive an allocation, and the basis for how the costs would be allocated to these programs. See table below for how the costs were allocated. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that system reports were set up and formatted correctly, employees coded their time correctly, and that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1, that system reports are set up correctly and formatting instructions are followed, and that costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency partially agrees. The Agency provided the federally approved Cost Allocation Management (CAM) Toolkit that was used to develop and explain all aspects of the iServe methodology. Premise for this finding is based upon locking DHHS into conversations had with the Federal Government in very early-on planning stages of the APD, prior to APD submission and approval. All communication between DHHS and the Federal Government regarding iServe has been clear and concise, and the Federal Government has agreed with DHHS’s approach, as is evidenced in the communication that has been provided as well as the APD methodology approval that has been received. APA Response: As noted above, correspondence from the Agency’s Federal contacts stated, “As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.” We asked again this year for documentation to support that only the four programs being charged were benefiting from this stage of the project, such as internal planning documents. The Agency was still unable to provide adequate documentation to support our request.

Program: AL 93.268 - Immunization Cooperative Agreements; AL 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.558 - Temporary Assistance for Needy Families (TANF); AL 93.563 - Child Support Enforcement; AL 93.778 - Medical Assistance Program – Allowable Cost/Cost Principles Grant Number & Year: 19NH23IP922589, FFY 2022; 19NU50CK000547; FFY 2023; 2001NETANF, FFY 2020; 2201NECSES, FFY 2022; 2301NECSES, FFY 2023; 2305NE5ADM, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): 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. 45 CFR § 75.430(i) (October 1, 2022) requires payroll expenses charged to Federal awards be based on official records that accurately reflect the work performed. Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: No Questioned Costs: $91,150 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 31 employee paychecks paid with Federal funds. Twelve of the 31 tested had payroll charged to Child Support Enforcement. One employee tested was a Child Support Enforcement Worker through September 25, 2022, and changed positions to a Youth Security Specialist II on September 26, 2022. The employee’s payroll costs were not updated to be charged to cost center 25C40360 Youth Rehabilitation and Treatment Centers, which only records costs to the General fund. Instead, the employee’s payroll costs continued to be charged to cost center 25C21750 Child Support Operations. As a result, for the pay period tested, Child Support Enforcement was overcharged by $2,206. During the fiscal year, this employee had an additional $25,726 incorrectly charged to Child Support Enforcement. A Program Accuracy Specialist was recorded to the 25C43060 Child Support Enforcement cost center; however, the supervisor the employee worked with was not charged to this cost center. According to the supervisor, no employees under their management were assigned to read child support enforcement cases. As a result, for the pay period tested, Child Support Enforcement was overcharged by $1,704. During the fiscal year, this employee had an additional $27,976 incorrectly charged to Child Support Enforcement. We noted another Program Accuracy Specialist with this same supervisor also recorded to Child Support Enforcement. During the fiscal year, this employee had $30,670 incorrectly charged to Child Support Enforcement. We tested $20,143 Federal payroll charges to Child Support Enforcement and noted $3,910 in sampled questioned costs and $84,372 additional questioned costs. Federal payroll charges for Child Support Enforcement totaled $3,920,653. Six of the 31 employees tested had payroll charged to TANF. One employee was a Contract Procurement Manager whose payroll expense was split between State funds, TANF and Medicaid. The payroll costs were to be allocated based on a time study; however, the Agency had not completed a revised time study. Therefore, we were unable to ensure the grants were correctly charged. The Agency indicated no time study was done for the entirety of fiscal year 2023. We tested $9,557 Federal payroll charges to TANF and noted $99 in questioned costs. We tested $3,482 in Medicaid payroll charges and noted $197 in questioned costs. We tested the April 19, 2023, paycheck for an Epidemiology Surveillance Coordinator. Payroll expenses were allocated with 75% to the ELC grant and 25% to the Immunization grant. The Agency did not provide documentation to support how this split was determined. An email was provided on July 28, 2023, with a breakdown of the activities and hours the employee worked for each grant; however, the number of hours in the email did not agree to the hours worked per the paycheck. Additionally, to charge payroll expenses to a Federal grant, a timesheet or other official record that accurately reflects the work performed is required. We tested $3,692 Federal payroll charges to ELC and noted $1,929 in questioned costs. We tested $3,659 in Federal payroll charges to Immunization and noted $643 in questioned costs. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost center for one employee who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in the State Accounting System, and those costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.658 - Foster Care Title IV-E; AL 10.561 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.659 - Adoption Assistance – Allowable Costs/Cost Principles Grant Number & Year: 2301NEFOST, FFY 2023; 202323S251443, FFY 2023; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR § 75.405(a) (October 1, 2022) and 2 CFR § 200.405 (January 1, 2023) state, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2022) and 2 CFR § 200.403 (January 1, 2023) provide the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022) and 2 CFR § 200.303 (January 1, 2023), 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. Per the CAP’s RMTS Time Study Design/Coding Structure: [P]articipants are asked whether they are working on an activity that is client related. If they select “Yes” to this question, they are asked to identify the Case ID and type of case . . . . Per the CAP’s RMTS Survey Validation: The contractor and the NE DHHS staff review subsample responses to ensure the activity selected matches the description provided. If the activity and description do not match, the participant is notified and the moment is considered invalid. Per the CAP’s RMTS Response Time/Non-Responses: Participants have two (2) calendar days to respond to each moment. The two (2) day response time allows workers who may spend time outside of their office location and away from email the opportunity to respond to the moment before it expires. The two (2) day period is inclusive of calendar hours and not business days . . . . Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2022-024 Questioned Costs: $55,666 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Random Moment Time Study (RMTS) is conducted on an ongoing basis to provide data for the allocations of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 55 RMTS surveys and noted 18 errors resulting in questioned costs as follows: • For 10 of 15 surveys tested, the workers erroneously reported they were working on a Foster Care IV-E (Federally funded) case when the survey should have been reported as Foster Care Non IV-E; therefore, Foster Care was overcharged. o For two surveys, the cases had previously been IV-E Foster Care cases but were changed to Non IV-E cases the month prior to the surveys submitted by the Child and Family Services Specialists. o For one survey, the worker completed the survey three calendar days after the RMTS was generated and the activity described on the survey form was for the date submitted, not when the RMTS was generated. • For 7 of 19 Supplemental Nutrition Assistance Program (SNAP) surveys tested, the RMTS survey form appeared to have been completed incorrectly. o For two surveys, the workers selected SNAP; however, per the case files, the case worker appeared to be working on Low Income Home Energy Assistance (LIHEAP) and not on SNAP. o For one survey, the worker stated on the survey form they were working on a case activity for SNAP; however, no case file name or identification case number was given to identify what case was being worked. o For three surveys, the workers selected the SNAP program; however, we could not confirm from the documentation on file what the worker was working on, and the questioned costs are unknown. o For one survey, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the survey. • For one of seven Adoption IV-E surveys tested, the worker erroneously reported that they were working on an Adoption IV-E case when the survey should have been reported as Foster Care IV-E; therefore, Adoption IV-E was overcharged. Total known Federal payment errors, amount tested, error rate (amount of errors/amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency’s training of staff and supervisor reviews of RMTS surveys were not sufficient to ensure the surveys were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random surveys will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS surveys are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment surveys are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through June 30, 2024; U3REP190555, Project Period through June 30, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR § 75.405(a) (October 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(b) (October 1, 2022) states the following: The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. * * * * (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a non-Federal entity uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded. 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. 45 CFR § 75.406(a) (October 1, 2022) says the following: Applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal award as direct or indirect (F&A) costs. Examples of such transactions are: Purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-025 Questioned Costs: $13,025 known (NU90TP922039) Statistical Sample: No Context: The Agency made 161 aid payments, totaling $5,353,085, during fiscal year ended June 30, 2023. This included payments to 34 subrecipients. Subrecipient reimbursement requests included an invoice and budget workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, desk reviews were performed for only 12 of 34 subrecipients during the fiscal year. The Agency did not perform any desk reviews for the HPP program. We selected a sample of 16 payments, totaling $360,772, which included eight subrecipients with desk reviews. When a desk review was not completed or not adequate, we offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was inadequate for 5 of 16 payments tested. All five of these subrecipients had Agency desk reviews. We initially allowed the Agency four weeks to provide support. After we reviewed that support, we allowed the Agency an additional two weeks to provide further support. We noted the following after considering all support provided: • Two payments did not have adequate documentation to support that fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In one case, the subrecipient was charging accrued leave to the subaward, while its financial statements were being prepared on a cash basis. In the other case, the personnel costs were calculated based on projected or budgeted hours devoted to the subaward, rather than actual hours worked. • Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, and other charges did not have adequate support for the amount charged to the grant. For example, the full cost of two phone lines was charged for two employees; however, neither employee worked 100% on the program. Also, multiple subrecipients allocated costs based on estimated hours worked on the program, rather than the actual time worked. o One subrecipient was using reward points earned from purchasing supplies for seemingly personal benefit. The reward points could be used for discounts on future purchases or for free office supplies that would further benefit the program; instead, we noted invoices showing that reward points were used for such items as Millennium Falcon blankets, a luxury robe and spa set, deluxe slippers, a traveler's toiletry set, and a travel cooler set. o One subrecipient was reimbursed for sales tax; however, the entity was tax exempt. Subrecipient aid payments for the fiscal year ended June 30, 2023, totaled $5,353,085. Federal payment errors noted were $13,025. The total sample tested was $360,772. The dollar error rate for the sample was 3.61%. This estimates the potential dollars at risk for the fiscal year to be $193,246 (dollar error rate multiplied by the population). Cause: Inadequate procedures and staff turnover. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. The agency agrees with a portion of questioned costs. Notably, sales tax paid by an exempt entity. The agency partially disagrees with allocated costs not being supported by documentation. In one instance, it appears allocated costs were undercharged to the award rather than overcharged. The agency disagrees with APA's contention that the phone lines noted in the finding were not allocated appropriately. As provided by the subrecipient, but for the preparedness funds, these staff would not have these lines and both staff are listed as part of the local health department's emergency response plan. APA notes a use of reward points being used for seemingly personal benefit. The agency disagrees. The subrecipient used the rewards points to purchase items for an employee recognition event. The use of these points appears consistent with the subrecipient's policy regarding compliance with the Nebraska Local Government Miscellaneous Expenditure Act. APA Response: Documentation provided to the auditors was inadequate to support the allocation of costs charged. The Agency could not support that the two phone lines were used exclusively for the program; moreover, the employees did not work 100% on the program. As noted, Federal cost principles require costs to be charged based on the relative benefits received. Additionally, we were not provided the subrecipient’s policy regarding employee recognition.

Program: AL 93.069 – Public Health Emergency Preparedness (PHEP); AL 93.889 – National Bioterrorism Hospital Preparedness Program (HPP) – Matching and Reporting Grant Number & Year: NU90TP922039, Budget period through June 30, 2022; U3REP190555, Budget period through June 30, 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR Appendix VII to Part 75: Provisional rate means a temporary indirect cost rate applicable to a specified period which is used for funding, interim reimbursement, and reporting indirect costs on Federal awards pending the establishment of a “final” rate for that period. 45 CFR § 75.306 (October 1, 2022) states, in part, the following: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; * * * * (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee's regular rate of pay plus an amount of fringe benefits that is reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization's approved federally negotiated indirect cost rate or, a rate in accordance with § 75.414(f), provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. 45 CFR § 75.403(a) requires costs to be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” A good internal control plan requires procedures to ensure documentation is adequate to support that matching funds are in accordance with Federal requirements. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. We also noted the Agency did not use the final approved indirect cost rate (IDCR) to report indirect costs (IDC). Repeat Finding: 2022-026 Questioned Costs: Unknown Statistical Sample: No Context: We tested the annual reports for PHEP and HPP for the budget period ended June 30, 2022. The reports included PHEP expenditures through September 21, 2022, and HPP expenditures through October 21, 2022. We noted the following: • Both reports used the interim indirect cost rate rather than the final approved indirect cost rate. The final indirect cost rate was approved on August 22, 2022, prior to the submission of both reports. See Schedule of Findings and Questioned Costs for chart/table. • The Agency reported $93,374 in State matching expenditures for the HPP grant, which included $87,300 of third-party in-kind match. However, only $1,905 was adequately supported and verifiable. Cause: Inadequate procedures. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency partially agrees. In the reporting period under review, locally-provided match was insufficiently reported. However, the agency will substantiate additional match within the period of the cooperative agreement budget cycle so that total match over the five year period is sufficient to meet federal requirements.

Program: AL 93.323 – COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases – Allowability & Subrecipient Monitoring Grant Number & Year: NU50CK000547, period ending July 31, 2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure payments are allowable and in accordance with Federal requirements. 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.404 (October 1, 2022) states, in part, the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.511(b) (October 1, 2022) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Neb. Rev. Stat. § 84-305(2) (Cum. Supp. 2022) states, in relevant part, the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. (Emphasis added.) Condition: The Agency lacked adequate documentation to support that Epidemiology & Laboratory Capacity for Infectious Diseases (ELC) expenditures were allowable and in accordance with Federal requirements. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2022-027 Questioned Costs: $236,188 known Statistical Sample: No Context: ELC expenditures for the fiscal year totaled $24,568,124. Of that amount, $11,575,904 comprised payments to subrecipients. We tested the three largest payments to subrecipients, totaling $2,935,844. We also tested the largest journal entry. We noted the following: • One subrecipient payment tested, totaling $747,489, lacked adequate documentation to ensure costs were in accordance with Federal cost principles. We noted questioned costs of $236,188. o Payments related to call center services did not have a contract, and there was no support for the percentage charged to the subaward. We requested information from the Agency on November 17, 2023, for the contract and allocation basis; however, as of January 31, 2024, no contract or additional information had been received. o Contract payments to a doctor to “furnish the full range of primary and preventive health care services” did not have support for the percentage charged to the subaward. The doctor was paid $27,052 monthly for a minimum of 14 days per month, and 50-60% of the payment was charged to the subaward. o Payroll and fringe benefits were not adequately supported, including $6,000 that appears to have been related to a loan reimbursement lacking adequate support that the amount was allowable or related to the subaward. Also, various fringe benefits were not adequately supported. The subrecipient was paid $1,645,791 during the fiscal year. • We tested a journal entry for $2,993,082 related to air purifiers and filters that were shipped directly to daycares and schools across the State. After the orders were placed in December 2022, the Agency completed no procedures to ensure that the entities received the items ordered until October 2023. A total of 1,978 air purifiers and 2,934 filters were ordered by 231 daycares and schools. We reviewed the orders and, on December 8, 2023, requested documentation to support that the 15 largest orders were received in full. The Agency provided us with emails confirming that 11 of those 15 orders were received. The emails did not provide any details about how many items were ordered or received, only that items were received. The 15 orders totaled $794,962 of the $2,993,082 journal entry, and the 4 orders not confirmed totaled $230,242. Initially, we questioned the costs of the orders for which the Agency was unable to confirm receipt. Then, on February 7, 2024, eight weeks after our original request, the Agency provided us with four additional emails, dated February 7, 2024, (13 months after the orders were received) indicating that the four recipients related to the questioned costs did receive their orders. Again, none of the emails contained details of how many items were, in fact, ordered or received. Cause: Inadequate procedures. Effect: Without adequate controls, there is an increased risk for misuse of funds and abuse or fraud to occur. Recommendation: We recommend the Agency implement procedures to ensure that costs are necessary, reasonable, and in accordance with Federal requirements and contract provisions. We further recommend implementing procedures to track orders that are paid by the Agency to ensure ordered items are received in full. Lastly, we recommend the Agency implement procedures to ensure compliance with § 84-305. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per Nebraska’s Combined State Plan (Program Years 2020-2023): DHHS will use TANF funds to support an array services to assist needy families with children so that children can be cared for in their own homes . . . . The eligibility criteria will be needs based as indicated by the family’s program eligibility status for Aid to Dependent Children (ADC), Supplemental Nutrition Assistance Program (SNAP), SSI or Medicaid. Medicaid eligibility will be based on parent income and not state ward status of an identified child. Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR § 75.303(a) (October 1, 2022) the non-Federal agency must do the following: 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. Good internal control requires procedures to ensure compliance with Federal regulations. Condition: Child welfare claims paid with TANF funds were not in accordance with State and Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2022-029 Questioned Costs: $3,426 known (2001NETANF, $2,853; 2101NETANF, $573) Statistical Sample: No Context: The State Plan allows for payment of certain child welfare costs from Federal TANF funds. To identify eligible claims, the Agency performs a query of the NFOCUS system to pull claims for certain services (e.g., family support services, intensive family preservations and drug testing) for families in an active TANF, SNAP, or Medicaid case or an SSI recipient. The Agency transferred $4,203,769 from State general funds to Federal TANF funds during fiscal year 2023. We reviewed the NFOCUS detail and noted 3,571 claims totaling $1,011,922 charged to TANF identified as no active TANF, SNAP, or Medicaid case. We selected 10 of these claims, totaling $3,426, and reviewed the case eligibility information on NFOCUS. For all 10 claims tested, there was no active TANF, SNAP, or Medicaid case or SSI for the family and/or no child in the home at the time of service; therefore, per the State Plan, these claims were not eligible. The known questioned costs for claims tested was $3,426. The potential dollars at risk is $1,011,922 identified as no active TANF, SNAP, or Medicaid case. Cause: Inadequate review procedures. The NFOCUS detailed active program cases, but the Agency failed to exclude those cases that were not active for TANF, SNAP, or Medicaid. Effect: Without adequate controls to ensure claims are paid per Federal requirements, there is an increased risk for loss or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure compliance with the Federal requirements. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 42 U.S.C. § 608(a)(4), “A State . . . shall not use any part of the grant to provide assistance to an individual who has not attained 18 years of age, is not married, has a minor child at least 12 weeks of age in his or her care, and has not successfully completed a high-school education (or its equivalent), if the individual does not participate in – (A) educational activities directed toward the attainment of a high school diploma or its equivalent; or (B) an alternative educational or training program that has been approved by the State.” The Nebraska State Plan for TANF, effective from July 1, 2020 to June 30, 2024, states, “Failure of a dependent child age 16, 17, or 18 to attend school without participating in any other Employment First approved work activity results in removal of the child’s needs from the ADC unit.” Title 468 NAC 4-002.01(D) states that a work-eligible individual includes “A dependent child age 16, 17, or 18 who quits school or reduces hours under full-time status according to the educational institution’s standards. This dependent child remains a work-eligible individual even if he or she returns to school.” Per Title 468 NAC 4-002.02(F), a "dependent child age 16, 17, or 18” may be excluded as a work-eligible individual if he or she is “a full-time student and regularly attending an elementary or secondary school according to the educational institution’s standards . . . . If the child is enrolled full-time for the next school term, the child’s attendance in the first month of the school term must be verified.” Title 465 NAC 2-001.02A, states, in relevant part, the following: The applicant or client must request a fair hearing within 90 days following the date the notice of adverse action is mailed. . . . If the client submits a request for a hearing within ten days following the date the notice is mailed, the staff shall not take the adverse action until a fair hearing decision is rendered. Per Title 468 NAC 4-010.02(A), “If the parent fails or refuses to participate in Employment First without good cause, the result is the loss of Aid to Dependent Children cash assistance for the entire family.” Title 468 NAC 4-010.02(A)(i)(1) outlines the length of each sanction: If the individual who has failed or refused to participate in EF is a parent, the sanctions will be as follows: (i) The first imposition of a sanction will last one month or until the failure to participate ceases, whichever is longer. (ii) The second sanction will last for three months or until the failure to participate ceases, whichever is longer. (iii) The third and subsequent sanctions must not be imposed without a second-level supervisory review. This sanction will last for a minimum of 12 months or until the failure to participate ceases, whichever is longer. Per Title 468 NAC 3-008.05(B)(ii), “All overpayments, regardless of cause, must be recouped if there is an active Aid to Dependent Children grant case or a recovery must be attempted from a closed grant case, if the outstanding overpayment amount is $35 or more.” A good internal control plan requires eligibility determinations and payments to be accurate. Condition: Three of 25 TANF cash assistance payments tested were not in compliance with State and Federal requirements. Repeat Finding: 2022-030 Questioned Costs: $1,216 known (2001NETANF, $654; 2101NETANF, $562) Statistical Sample: No Context: For two cases tested, the Agency failed to verify that a dependent child was a full-time student regularly attending school. The dependent child should have been removed from the family unit until such verification was received. For one case, the school status for a 17-year-old dependent was not verified, resulting in questioned costs of $77 for the January 2023 benefit payment tested and an additional $346 in questioned costs for benefit payments for August 2022 through December 2022. For the second case, the school status for a 16-year-old dependent was not verified, resulting in questioned costs of $77 for the February 2023 benefit payment tested and an additional $308 in questioned costs for benefit payments for November 2022 through January 2023 and March 2023. For another case tested, the March 2023 benefit payment should not have been issued to the client, resulting in questioned costs of $408. A third Employment First sanction was imposed on February 10, 2023, effective March 1, 2023, and the case was closed. The Notice of Action regarding the adverse action was mailed to the client on February 13, 2023. The client appealed the sanction; however, the request for fair hearing form was not received by the Agency until March 6, 2023 – 21 days after the Notice of Action was mailed. The worker processed the March 2023 benefit payment on March 7, 2023, even though the appeal request form was not submitted in 10 days. The error was identified by the Agency on March 8, 2023, and the case was closed again as of April 1, 2023. The appeal hearing was held on April 3, 2023, and on April 7, 2023, the Employment First sanction was affirmed, and the case remained closed. As of end of fieldwork on October 25, 2023, no overpayment has been established. Federal payment errors noted in the sample were $562 with additional out-of-sample questioned costs of $654. The Federal sample tested was $10,028, and the total Federal cash assistance expenditures during the fiscal year were $13,140,182. Based on the sample tested, the case error rate was 12% (3/25). The dollar error rate was 5.6% ($562/$10,028), which projects the potential dollars at risk for fiscal year 2023 to be $735,850. Cause: Worker error. Effect: Increased risk that Federal funds will be paid to ineligible individuals. Recommendation: We recommend that the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Reporting Grant Number & Year: 2101NETANF, FFY 2021; 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 42 USC § 611, each State must “collect on a monthly basis, and report to the Secretary on a quarterly basis,” case record information on the families receiving TANF assistance. 45 CFR § 265.3(a) (October 1, 2022) states the following: (1) Each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). (2) Each State that claims MOE expenditures for a separate State program(s) must collect on a monthly basis, and file on a quarterly basis, the data specified in the SSP-MOE Data Report. 45 CFR § 265.7(a) (October 1, 2022) states the following: Each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), and the SSP-MOE Data Report) must be complete and accurate and filed by the due date. The TANF Data Report instructions contain the following: For purposes of completing this report, include all TANF eligible families receiving assistance (i.e., families funded under the TANF block grant and State MOE funded TANF families) as families receiving assistance under the State (Tribal) TANF Program. All counts of families and recipients should be unduplicated monthly totals. * * * * Instruction: Enter the number of families receiving assistance under the State (Tribal) TANF Program for each month of the quarter. A. First Month: B. Second Month: C. Third Month: Good internal control requires procedures to ensure reports are accurate, and any issues are resolved in a timely manner. Condition: The Agency was unable to provide a detail of cases to support the Section Three Total Number of SSP-MOE Families. Also, issues noted during the Agency’s review were not resolved timely. A similar finding was noted in the prior audit. Repeat Finding: 2022-031 Questioned Costs: None Statistical Sample: No Context: We tested the total number of families reported on the ACF-199 and ACF-209 reports for September 2022 and February 2023. We asked the Agency to provide the detail of unduplicated families for those months. The Agency provided four Notepad text files for each month. The auditor copied the files to Excel and removed duplicate cases; however, the number of families per the Notepad files did not agree to the number of families reported for the ACF-209 reports. September 2022 Total SSP-MOE families reported was 310, and the number of families per the Notepad files was 388. February 2023 Total SSP-MOE families reported was 1,111, and the number of families per the Notepad files was 412. Program staff review a sample each month of three 199 reports and three 209 reports. Issues noted were sent to the Agency IT staff. One of the issues noted was that closed cases appeared on the reports. This issue was noted prior to May 2021 but had not been resolved by the IT staff as of October 31, 2023. Cause: Adequate resources were not devoted to correcting reporting errors noted. Effect: Increased risk for inaccurate reporting and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure reports are accurate, and any system issues are resolved in a timely manner. Management Response: The Agency agrees.

Program: AL 93.558 – Temporary Assistance for Needy Families (TANF) – Allowability & Subrecipient Monitoring Grant Number & Year: 2001NETANF, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352 (October 1, 2022) requires a pass-through entity to do the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; . . . * * * * (f) Verify that every subrecipient is audited as required by subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 75.501. 45 CFR § 75.403 (October 1, 2022) requires costs be reasonable, necessary, determined in accordance with generally accepted accounting principles (GAAP) and adequately documented. 45 CFR § 75.430(i)(1) (October 1, 2022) provides the following, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] Per 45 CFR § 75.431(c) (October 1, 2022): The cost of fringe benefits . . . must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. Per the subaward agreement, “Under this Subaward, DHHS shall only pay for actual and allowable costs.” Good internal control requires procedures to ensure State and Federal requirements are met. Condition: Subrecipient monitoring procedures should be improved. Repeat Finding: No Questioned Costs: $10,921 known Statistical Sample: No Context: We requested the financial monitoring files for two subrecipients. The Agency performed financial desk reviews for subrecipients; however, the reviews tested were not adequate. When desk reviews did not maintain adequate documentation, we provided the Agency with the opportunity to obtain additional support from the subrecipient. We tested one payment for each of the two subrecipients and noted the following: • One payment did not have adequate support for salaries and benefits. Time records did not reflect the total activity for employees. Additionally, fringe benefits were based on budgeted amounts, not actual costs. The payment tested was $110,492, and we question $2,963. The subrecipient was paid $1,750,753 during the fiscal year. We further noted this subrecipient should have had a Single audit submitted for fiscal year ended June 30, 2022, by March 31, 2023; however, none had been submitted. After our inquiry, the Agency followed up with the subrecipient on October 25, 2023, and the subrecipient stated the fiscal year 2022 audit had not yet been completed. • A second payment tested did not have adequate support. Time records did not reflect the total activity for employees, and there was not adequate support for employees who worked on more than one activity. Also, an overbilling was not corrected. The payment tested was for $114,895, and we question $7,958. The subrecipient was paid $1,426,186 during the fiscal year. Fourteen subrecipients were paid a total of $15,223,886 during the fiscal year. Cause: Inadequate review and staff turnover. Effect: Noncompliance with Federal regulations and increased risk for fraud or errors to occur. Recommendation: We recommend the Agency improve procedures to ensure compliance with Federal regulations, including cost principles. We further recommend the Agency improve procedures to ensure that subrecipients have a Single audit completed and submitted, as required. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Eligibility Grant Number & Year: 2201NERCMA, FFY 2022; 2301NERCMA, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022), 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. Per the U.S. Department of Health and Human Services’ Office of Refugee Resettlement (ORR) guidance, published in the Federal Register on March 28, 2022, at 87 FR 17312: In accordance with ORR regulations, the Director of ORR is announcing the expansion of the Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) eligibility period from 8 months to 12 months of assistance for participants whose date of eligibility for ORR benefits is on or after October 1, 2021. Per 45 CFR § 400.66(e) (October 1, 2022), “The State agency may use the date of application as the date refugee cash assistance begins in order to provide payments quickly to newly arrived refugees.” Title 470 NAC 2-002 states, in part, the following: Eligibility begins with the date of arrival in the United States, if the refugee meets all eligibility requirements. For asylees, victims of severe forms of trafficking, and Cuban and Haitian Parolees eligibility begins with the date of granted status. The time limit is applied to each refugee separately, not to the unit as a whole. If the refugee applies after the date of arrival in the United States, they may receive assistance for the remaining months of their eligibility period. Per Title 470 NAC 1-010, “Eligibility is redetermined at six months. Eligibility may be redetermined in less than six months to coordinate review dates for more than one program. An application is required as part of the eligibility review and to establish a new eligibility period.” Title 45 CFR § 400.2 (October 1, 2022) defines refugee cash assistance (RCA) as “cash assistance provided under section 412(e) of the Act to refugees who are ineligible for TANF [Temporary Assistance for Needy Families], OAA [Old Age Assistance], AB [Aid to the Blind], APTD [Aid to the Permanently and Totally Disabled], AABD [Aid to the Aged, Blind, and Disabled], or SSI [Supplemental Security Income].” Title 45 CFR § 400.2 defines refugee medical assistance (RMA) as, “(a) Medical assistance provided under section 412(e) of the Act to refugees who are ineligible for the Medicaid program[.]” Title 468 NAC 2-001 explains the eligibility requirements for Nebraska’s TANF program, including “(B) United States citizenship or alien status; (C) Nebraska residence; . . . (F) Age requirement for a dependent child; . . . .” Title 477 NAC 2-001 provides, in relevant part, the following: To be eligible for Medicaid, an individual must satisfy the requirements of the following eligibility criteria, as applicable: 1. Application; 2. U.S. citizenship or alien status (see Appendix 477-000-003 and 477-000-004); 3. Nebraska residence; 4. Social Security number; 5. Age (limited to ABD, Former Foster Care, Children, 599 CHIP, Former Ward, Women’s Cancer Program)[.] Title 45 CFR § 401.2 (October 1, 2022) states the following: For purposes of this part a Cuban and Haitian entrant or entrant is defined as: (a) Any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and (b) Any other national of Cuba or Haiti (1) Who: (i) Was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act; (ii) Is the subject of exclusion or deportation proceedings under the Immigration and Nationality Act; or (iii) Has an application for asylum pending with the Immigration and Naturalization Service; and (2) With respect to whom a final, nonappealable, and legally enforceable order of deportation or exclusion has not been entered. The Agency utilizes SAVE (Systematic Alien Verification for Entitlements) to determine an applicant’s status. SAVE is an online service that allows Federal, State, and local benefit-granting agencies to verify a benefit applicant’s immigration status or naturalized/derived citizenship. SAVE is administered by U.S. Citizenship and Immigration Services, a component of the Department of Homeland Security. Good internal control requires procedures to maintain SAVE documentation used to verify an applicant’s status and ensure the applicant is not under an active order of deportation. Condition: Refugee assistance payments were not in compliance with State and Federal requirements. Repeat Finding: No Questioned Costs: $9,092 known (2201NERCMA, $1,957; 2301NERCMA, $7,135) Statistical Sample: No Context: The Refugee and Entrant Assistance program provides aid payments both directly to individuals who are deemed eligible for cash assistance (RCA) and also medical assistance (RMA) through the managed care program. We tested 25 RCA payments and 25 RMA payments to a total of 35 recipients. (For 15 of these recipients, we tested both RCA and RMA payments.) We noted the following: • One recipient tested, who received both RCA and RMA, was over the age of 65 and may have qualified for other assistance programs before refugee assistance; however, a referral to other programs was not completed. Refugee assistance is not allowable for individuals eligible for other programs, such as Medicaid and OAA. • Another recipient, who received both RCA and RMA, had been in the U.S. for over 12 months and had, in fact, became a permanent resident in August 2013. Therefore, she was ineligible for Refugee assistance. • We tested 25 recipients to determine whether eligibility had been redetermined at six months, as required. o One recipient tested entered the United States on January 30, 2022, and applied for assistance on February 25, 2022, making his eligibility redetermination due on or about August 26, 2022. We reviewed all support for the recipient’s case and were unable to verify that a redetermination of eligibility, including a new application, was completed. The Agency confirmed that no documentation was on file to support completion of the redetermination. The recipient continued to receive benefits until January 2023, when his 12-month eligibility period had expired. o Another recipient tested entered the United States on June 25, 2022, and applied for assistance on July 5, 2022, making her eligibility redetermination due on or about January 3, 2023. We observed that an eligibility redetermination was recorded to the recipient’s case on December 15, 2022; however, the Agency did not receive a new application at that time. The Agency was unable to verify that an application was provided before eligibility was redetermined. The recipient continued to receive benefits until May 2023, when her 12-month eligibility period had expired. • For 25 of 35 recipients, adequate documentation was not on file to support that the Agency had verified, using the SAVE system, that the individual was not under an active order of deportation prior to starting benefit payments. In some cases, we were unable to verify if a SAVE system query had been completed at all. One of the recipients had a SAVE response of “No Status,” which indicates an immigration status was not found for the applicant, and updated documents were required for a new search. After our inquiry, the Agency requested new SAVE responses; therefore, we did not question costs related to SAVE documentation. Refugee Cash Assistance payments for the fiscal year totaled $6,924,438. The Federal sample tested was $8,099, and Federal payment errors noted for the RCA sample tested were $331. The dollar error rate for the sample was 4.09% ($331/8,099), which estimates the potential dollars at risk for fiscal year 2023 to be $283,210 (dollar rate multiplied by the population). Refugee Medical Assistance payments for the fiscal year totaled $5,058,730. The Federal sample tested was $3,949, and Federal payment errors noted for the RMA sample tested were $327. The dollar error rate for the sample was 8.28% ($327/3,949), which estimates the potential dollars at risk for the fiscal year 2023 to be $418,863 (dollar rate multiplied by the population). In addition to the $658 Federal questioned costs noted on the sample items tested, we noted $3,133 of Federal questioned costs on other cash assistance payments to the recipients noted above during the fiscal year and $5,301 of Federal questioned costs for other medical assistance payments on behalf of these recipients. Cause: Ineffective controls. Written procedures are in place but not consistently followed. Effect: Increased risk for loss or misuse of funds. Recommendation: We recommend the Agency strengthen procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. We further recommend the Agency ensure that SAVE documentation is maintained on file. Management Response: The Agency agrees.

Program: AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs – Allowability & Subrecipient Monitoring Grant Number & Year: 2101NERSSS, FFY 2021; 2201NERSSS, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.352(d) (October 1, 2022) requires a pass-through entity to: “Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.” 45 CFR § 75.302(a) (October 1, 2022) requires the State to have accounting procedures sufficient to allow for “the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 45 CFR § 75.405(a) (October 1, 2022) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR § 75.430(i)(1) (October 1, 2022) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR § 75.431(c) (October 1, 2022) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in § 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. 45 CFR § 75.2 (October 1, 2022) defines general purpose equipment as follows: [E]quipment which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles. 45 CFR § 75.2 (October 1, 2022) defines capital assets as follows: [T]angible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (1) Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases . . . . 45 CFR § 75.439(b)(1) (October 1, 2022) states, "Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the HHS awarding agency or pass-through entity." A good internal control plan requires procedures to ensure that subrecipient expenditures are properly documented, in accordance with Federal regulations, and apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. Repeat Finding: No Questioned Costs: $400,864 known (2101NERSSS, $154; 2201NERSSS, $400,710) Statistical Sample: No Context: The Agency paid 14 subrecipients a total of $5,212,322 during the fiscal year ended June 30, 2023, for the Refugee and Entrant Assistance program (Program). Subrecipients provide employment services, social support services, and legal assistance to refugees. Subrecipient reimbursement requests are submitted quarterly with a summarized invoice of costs incurred and a Budget Workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, are required at the time of reimbursement. Program staff were unable to provide any program-specific procedures; however, they eventually did provide Agency-wide procedures for subrecipient monitoring and noted that program-specific procedures were being written. These Agency-wide procedures indicate that each reimbursement invoice should include timesheets or time studies, paystubs, and receipts, among other documentation, to support that expenses are allowable. Program staff also provided a schedule used to review one quarter of reimbursed expenses for each subrecipient, throughout the year, looking at three subrecipients each quarter. We selected the four highest-paid subrecipients of the fiscal year and requested the support that the Program obtained from its review of the scheduled quarter. The Agency obtained minimal invoice support for the desk reviews and did not request any documentation to support personnel costs, such as paystubs and timesheets, nor any underlying support for amounts used for allocated expenses. Due to the inadequacy of desk review documentation, we offered the Agency the opportunity to gather supporting documentation from the subrecipients. We allowed the Agency three weeks to obtain support and an additional week after our review. However, the support provided was not adequate for any of the four subrecipients tested. We noted the following: • Documentation was not adequate to support that personnel charges were allowable and in accordance with Federal cost principles. Time records were missing or did not agree to time charged or were not in accordance with 45 CFR § 75.430(i). We also noted personnel costs charged using budgeted amounts, which is not allowable. We further noted fringe benefits were not adequately supported. • Documentation was not adequate to support the percentage of non-payroll expenses charged to the Program. Numerous charges were based on allocations, which are allowable only if distributed using reasonable methods in accordance with relative benefits received. Support was not adequate to determine the allocation was proper, for example: o One subrecipient had a finance agreement that appeared to be for equipment with a principal amount of $153,028 and monthly payments of $5,390. The subaward was charged $1,250 per month, but there was no support for how this amount was determined or that it was reasonably distributed in accordance with benefits received. In addition, this appears to be a capital expenditure for general purpose equipment, and prior written approval was not on file. Also, there was no support detailing the items purchased to determine if allowable per the grant and Federal cost principles. o One subrecipient charged 92% of workers’ compensation insurance to the grant, but documentation was not adequate to support this percentage agreed to staff time worked on the grant. o One subrecipient did not have support for the percentage of rent charged to the grant. o One subrecipient had accounting fees charged each month on varying percentages, but the basis for those percentages was not supported. • Indirect costs were not calculated correctly on one reimbursement tested. Below is a summary of amounts paid and support reviewed by the Agency for those four subrecipients. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: The Agency agrees.

Program: AL 93.568 – Low-Income Home Energy Assistance (LIHEAP) – Reporting Grant Number & Year: 2201NELIEA, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 96.30(a) (October 1, 2022) requires “fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .” 45 CFR § 96.82(a) (October 1, 2022) states the following: Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97–35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. 42 U.S.C. § 8624(c)(1)(G) requires a plan that does the following: [S]tates, with respect to the 12-month period specified by the Secretary, the number and income levels of households which apply and the number which are assisted with funds provided under this subchapter, and the number of households so assisted with- (i) one or more members who had attained 60 years of age; (ii) one or more members who were disabled; and (iii) one or more young children; . . . . The Instructions for the LIHEAP Household Report, published November 30, 2022, by the U.S. Division of Energy Assistance, contains the following: Concept of Unduplicated Household Counts * * * * The concept of unduplicated counts means that an item, such as a household, is counted only once for a specific data variable. However, unduplicated counting becomes complex when there are multiple data variables. Such counting requires the use of computerized data systems and tracking of households across a state’s entire LIHEAP program, including households receiving weatherization through LIHEAP funds. Unduplicated household data must be reported separately for EACH type of LIHEAP assistance and for ANY type of LIHEAP assistance, as described in “Unduplicated Household Counts” under Section II of these instructions. * * * * Section II - Assisted Households by Poverty Intervals for Each Type of LIHEAP Assistance Household poverty levels must be reported according to the specified percent intervals. The number of assisted and applicant households are to be counted by poverty level for EACH Type of LIHEAP Assistance and each line, but not for applicant and assisted households that received ANY Type of LIHEAP Assistance. . . . * * * * Uniform Counting and Reporting Annual gross household incomes, adjusted by the number of household members (household size), are to be used in computing household poverty percentages, using the 2021 HHS Poverty Guidelines that were in effect at the beginning of FFY 2022 (October 1, 2021). Gross Household Income Adjusted by Household Size * * * * A household's gross annual income and/or household size can change during the fiscal year. If a household received two benefits or services under the same type of LIHEAP assistance, use that household's gross annual income and household size at the time of the initial determination of benefits or services in calculating that household's poverty level for statistical reporting. Condition: The Agency lacked adequate procedures to ensure that Household Report information was complete and accurate. A similar finding was noted in the prior audit. Repeat Finding: 2022-033 Questioned Costs: None Statistical Sample: No Context: In its LIHEAP Household Report for FFY 2022, the Agency reported 762 applicant households for the weatherization program. This information for weatherization applicant households was provided by the Nebraska Department of Environment and Energy (NDEE), which obtained the figures from its subrecipients. NDEE forwarded the information to the Agency for reporting. We noted the following: • The report logic and formulas to count households by poverty level was inaccurate, resulting in 103 households not being included. • Duplicates were noted within the data provided by the subrecipients. Only one line should be reported per household; however, 46 lines were observed to be duplicates. The applicants reported by poverty level, and the correct numbers after considering the errors noted are listed in the table below: See Schedule of Findings and Questioned Costs for chart/table. We selected a sample of 10 households included on the FFY 2022 Household Report as LIHEAP assisted households, LIHEAP applicant households, or weatherization-assisted households. Two of the 10 households tested were reported or classified improperly, as follows: • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $15,872/year for a household size of two, this is 91% of the 2021 Federal poverty level for a household of two, which was $17,420. • One household was reported at the “Under 75% Poverty” income level. However, based on the Agency’s calculation of annual income of $11,352/year for a household size of one, this is 88% of the 2021 Federal poverty level for a household of one, which was $12,880. Cause: Inadequate review procedures. The logic error noted in the prior audit has not been corrected. Effect: Without adequate procedures to ensure reports contain accurate information, there is increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure all participants of the LIHEAP program are reflected properly in the Household Report. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Allowability & Eligibility Grant Number & Year: 2201NETANF, FFY 2022; 2001NECCDF, FFY 2020; 2301NECCDM, FFY 2023; 2301NECCDF, FFY 2023; 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 75.403 (October 1, 2022) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also §§ 75.300 through 75.309. Per 45 CFR § 75.303 (October 1, 2022): 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. 42 USC § 9858k(b) states, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day[.]” 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” To be eligible for services, 45 CFR § 98.20 (October 1, 2022) requires a child to be under 13 years of age, a citizen, and residing with a family whose income does not exceed 85% of the State’s median income. Title 392 of the Nebraska Administrative Code (NAC) 2-013.03(A) (Eff. 9/15/2020) states, “A recipient is limited to a maximum of sixty hours of Child Care Subsidy per week. A week is defined as the seven day period from Sunday through Saturday.” Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, “The Department pays by attendance, not enrollment." Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, “The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.” Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, “The recipient and child care provider must ensure that the services are delivered as authorized.” Title 392 NAC 4-001 (Eff. 9/15/2020) states, in relevant part, “In order for a child care provider to participate in the subsidy program: . . . (F) Service provider enrollments are in effect for up to 12 months, are not back-dated, and must be completed and signed by all parties on or before the effective date.” Title 392 NAC 4-002 (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards; . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, Section IV.C., states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Additionally, the Handbook Section I, defines a “Full Day of Care” as “Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.” Section IV.A., of the Handbook goes on to state, “K.1. Authorized Units. Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2022-034 Questioned Costs: $163,622 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted claims that lacked support and/or did not agree to support, services billed more than authorized, and duplicate claims charged, as detailed below. Random Sample We tested 30 child care claims paid with Federal funds. We noted 11 claims with errors. Some payments had more than one type of error. • For eight claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the Agency was unable to obtain the attendance calendar from a provider who had closed in October 2022. With no attendance calendar, we were unable to verify the accuracy of the claim amount. o For two claims, two providers were authorized to provide care for the same child at the same time. We requested the attendance calendars from the second provider and found overlapping claims where both providers were billing for the same time period.  For one claim, there were two days with a total 5.75 overlapping hours of care.  For another claim we noted 17 hours and seven days of overlapping care. o For five claims, the providers billed for more hours and/or days than what was recorded on the child’s attendance sheet:  One provider billed a day with 9 hours and 53 minutes of care as one day plus one hour. Per the NAC, the additional time over a day unit is not billed until the care has reached 10 hours.  One provider billed for 19 days of child care, while the attendance calendar for the child showed only 18 days of care.  One provider billed 12 days and one hour of child care. The attendance calendar showed 7 days and four hours of care.  One provider billed for 19 days of child care, while the attendance sheet showed only 16 days of care.  One provider billed for four days and 60 hours of child care. The attendance sheet showed 65 hours of care, but no days. • For two claims tested, the providers provided care for a child over the authorized amount. o One provider was authorized to provide child care to a child for up to 18 hours per week while the father was working as a self-employed maintenance worker, which is the equivalent of three days of care. The provider claimed four days of care (totaling 31 hours). o One provider was authorized to provide child care up to 27 hours per week – equivalent to four days at one day unit each (more than six hours each). The provider claimed five to six day units each week in the month tested. Weekly hours provided ranged from 32 to 45 hours. • For three claims tested, the School Age Care claimed did not agree to the school schedule of the child. School Age Care is authorized for before and after school and on days school is not in attendance. o Two providers were recording the child’s “out” time each morning at 9:00 a.m. and the “in” time in the afternoon at 4:00 p.m. The school day started at 8:50 a.m. and ended at 4:05 p.m. While the NAC does allow for rounding to the nearest quarter hour for each day’s total time of services, the “in” and “out” times should not be rounded. It would not be possible for the child to leave daycare at 9:00 a.m. and arrive at school at 8:50 a.m., or to leave school at 4:05 p.m. and arrive at daycare at 4:00 p.m. The Agency agreed that this practice was adding an extra 15 minutes or quarter hour to each day. o For one claim, the provider charged a full day of care on a school day during which the child would have been in school. The Agency could not explain why a full day of care was being charged on a day that school was in session. • For one claim, the Agency could not provide a birth record or birth certificate for the child; therefore, we could not verify that the child was under 13 years old. • For one claim, the Agency was unable to provide the agreement between the Agency and the provider that would have been valid at the time of service. Federal payment errors noted for the sample tested were $1,458. The total Federal sample tested was $10,095, and total child care Federal assistance claims for the fiscal year were $45,598,523. Based on the sample tested, the case error rate was 36.67% (11/30). The dollar error rate for the sample was 14.44% ($1,458/10,095), which estimates the potential dollars at risk for the fiscal year 2023 to be $6,584,427 (dollar rate multiplied by the population). In addition to the $1,458 questioned costs noted on the sample items tested, we noted $695 of questioned costs on other line items of the claims reviewed, which resulted from missing and inaccurate documentation and service authorizations being exceeded. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as excessive hours billed in a month. Four of five claims tested were improper.  One provider billed 348 hours for School Age care provided during one month. We reviewed the attendance calendar, which showed that care was provided from 6:00 a.m. to 6:00 p.m. or 9:00 p.m. every day but Sundays. This is not reasonable, as it includes hours when the School Age child should have been in school. We also noted the provider billed over the authorized hours of care. The provider was authorized to provide care up to 53 hours per week; however, during the last two weeks of the month, the provider claimed 60 hours of care. After identifying the dates and times that the child would have been attending school, we then recalculated attendance with reasonable in and out times, up to the authorized hours per week, and determined that the provider overbilled by $906. We consider these questioned costs.  One provider billed 240 hours at a rate of $5.50/hour for School Age care provided during one month. We reviewed the attendance calendar, and the care was overnight from 7:00 p.m. to 7:00 a.m. (12 hours), so the provider should have been billing for one day unit (up to 10 hours) plus 2 additional hourly units for each day of care. We recalculated what the claim should have been with 20 day units at $34/day and 40 hourly units at $5.50/hour and question the difference, or $460.  One provider billed care of one School Age child between the dates of May 1, 2021, and May 17, 2021, for 231 hours at a rate of $2.25/hour and 17 days at a rate of $15/day. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation because the provider had closed. Without the attendance calendar needed to verify the propriety of these units, we question the $775 paid.  One provider billed 240 hours of overtime during one month. We requested the attendance records to verify the claim, but the Agency was unable to provide the documentation. The provider responded to the Agency that she would not be sending in an attendance calendar because she had thrown away all the documentation when the Agency closed her down. Without the attendance calendar to verify the reasonableness of these units, we question the $997 paid. Duplicate Claims Child care claims are initially paid from State funds. Journal entries are then performed throughout the year to transfer costs to Federal funds. A detailed listing of claims accompanies these journal entries to show which claims are included in the amounts moved from State funds to Federal funds. We reviewed the detailed claim listings for each journal entry completed during the fiscal year and found that duplicate claims were included in two journal entries. The journal entry in March 2023 included 428 claims, totaling $158,331, that had been charged to Federal funds in September 2022; therefore, $158,331 is considered questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure: 1) attendance records agree to billing documents; 2) service authorizations are not exceeded; and 3) claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency implement procedures to ensure journal entries do not charge duplicate claims. Finally, we recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 – CCDF Cluster – Special Tests and Provisions Grant Number & Year: Various, including 2301NECCDF, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.41 (October 1, 2022), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A and NAC 4-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency lacked adequate procedures for ensuring that health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2022-035 Questioned Costs: None Statistical Sample: No Context: We tested 17 child care centers subject to fire and sanitation inspections. For six child care centers tested, a required inspection had not been performed as of fieldwork on November 13, 2023. The Agency has made referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshall or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. This also should include establishing a documented review of inspection requirements for school-age-only child care centers as well as child care centers located in a school. Management Response: The Agency partially agrees. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021, 2022 and 2023; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that "per 45 CFR § 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training." DHHS disagrees that: "The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers." Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long-standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 – Child Care and Development Block Grant – Period of Performance Grant Number & Year: 2101NECCDD, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 98.60(d) (October 1, 2022): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (5) Obligations may include subgrants or contracts that require the payment of funds to a third party (e.g., subgrantee or contractor). However, the following are not considered third party subgrantees or contractors: (i) A local office of the Lead Agency; (ii) Another entity at the same level of government as the Lead Agency; or (iii) A local office of another entity at the same level of government as the Lead Agency. According to 45 CFR § 75.511(a) (October 1, 2022), “The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.” Per 45 CFR § 75.511(b), “The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs.” 45 CFR § 75.511(b)(1) adds, “When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.” Finally, 45 CFR § 75.511(b)(2) provides, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2021 grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2022-036 Questioned Costs: $1,939,538 known Statistical Sample: No Context: The FFY 2021 Child Care Discretionary grant must be obligated by September 30, 2022. We noted $1,939,538 paid from October 5, 2022, through June 28, 2023, for Agency employee payroll. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency agrees.

Program: AL 93.575 – COVID-19 Child Care and Development Block Grant – Allowability Grant Number & Year: 2101NECCC5, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR § 98.67(a) (October 1, 2022) states, “Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.” The Contractor’s “4.1a Payment Processing Manual v2.0” provides a summary of the payment criteria for the Workforce Recognition Retention Stipend Grants (WRRS) and Loan Repayment and Debt Reduction Grants (LRDR), as follows: • WRRS grant: Base Award $2,500; $750 for Full-Time and $0 for Part-Time; $500 for 5+ years of tenure and $250 for 1-5 years of tenure; $1,000 for Teachers and Assistant Teachers and $0 for all other roles; $500 for Night (9pm to 6am) and Weekend Shift Workers and $0 for Day Shift Workers; and a $1,750 bonus for Family Home Child Care I and II facilities. • LRDR grant: Base award up to $20,000 but not to exceed total eligible student loan debt. Additional $5,000 bonus was made available for teachers and assistant teachers and $5,000 bonus was made available to applicants with master’s degrees. Good internal control requires procedures to ensure that State and Federal requirements are met. Good internal control also requires procedures to ensure that grant applications are accurate, and amounts awarded are adequately supported. Condition: The Agency did not have adequate procedures to ensure that grant applications were accurate, or funds paid to child care providers were spent properly. Repeat Finding: No Questioned Costs: $32,000 known Statistical Sample: No Context: Section 2201 of the American Rescue Plan Act (ARPA) of 2021 provided Federal funding to increase provider rates and workforce compensation so that child care providers can retain a skilled workforce and deliver higher-quality care to children receiving subsidies. Secondarily, states were to implement policies to build the supply of child care in low-income communities and underserved populations. The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act (Public Law 116-260), signed into law on December 27, 2020, provides states with supplemental child care funds to address the immediate needs of families struggling to pay for child care and child care providers facing financial uncertainty due to the COVID-19 pandemic, including supporting the stability of the child care sector. The Agency entered into an emergency contract on September 7, 2022, with a contractor to manage applications, program requirements, and distribution of over $60 million in ARPA and CRRSA funds for three grants defined by the Agency. These grants were: 1. Business and Child Care Partnership Grants (BCC) to increase child care capacity throughout the State of Nebraska. This funding would help individuals, businesses, and organizations create new child care programs and enable existing licensed child care programs to increase their license capacity. 2. Workforce Recognition Retention Stipend Grants (WRRS) to support and recognize Nebraska’s child care workforce quickly and efficiently and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. 3. Loan Repayment and Debt Reduction Grants (LRDR) to increase economic stability for child care providers with student loans by decreasing their debt burden and to help workers improve their financial well-being and, more broadly, shape the future of child care and early education in the state by incentivizing workers to stay in the field. We tested a total of 33 grants paid and noted the following: BCC We tested 13 of 125 BCC grants. Total BCC grants paid to recipients in the fiscal year totaled $23,303,985. Individual grants ranged from $4,611 to $1,506,362 with 11 applicants receiving over $500,000 each. Payments were made to grant recipients beginning in March 2023; however, recipients had until July 2023 to spend the funds. This deadline was then extended to December 31, 2023. We noted 7 of 17 locations (among the 13 recipients tested) had increased license capacity as of testing on October 12, 2023. However, there was no support that the other locations had increased license capacity. The remaining recipients would have until December 31, 2023, to increase capacity, which was after our audit period. The Agency indicated staff would review licensing requirements after December. The Agency’s contractor requested support from 10% of the grantees, reviewing 20 grantees and $2,916,561 of expenditures. The Agency did not have procedures to perform any further sampling of the remaining 105 grants or over $20 million in expenditures to ensure expenditures were in accordance with the purpose of the Federal grants. We tested 13 grants to determine that the purpose was to increase child care capacity, and the recipient was eligible; however, as the recipient had until December 31, 2023, to spend the funds, we were unable to determine if all funds were spent in accordance with Federal and State requirements. According to the Agency, if any recipients have not spent funds fully by December 31, 2023, staff will inform them and direct the unspent funds to be returned to the State. WRRS and LRDR We tested 10 of 5,148 WRRS grants and 10 of 744 LRDR grants. Total WRRS grants paid to recipients in the fiscal year totaled $23,477,750. Individual grants ranged from $2,500 to $7,250. Total LRDR grants paid to recipients in the fiscal year totaled $12,377,871. Individual grants ranged from $592 to $30,000. The Agency created a grant funding formula based on various factors for the WRRS and LRDR grants. We noted that documentation was inadequate to support the grant amount. • For 11 applicants, the Agency was unable to provide documentation to support that it verified what was reported on the grantee’s application. Grantees received additional funds over the base grant if they reported meeting certain criteria. o Seven applicants received an additional $1,000 on top of the WRRS Base grant for being a teacher or teacher’s assistant. o Four applicants received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for being a teacher or teacher’s assistant. o One of the four applicants also received an additional $5,000 in student loan reduction (i.e., the LRDR grant) for having her master’s degree in a field related to child care. The support provided showed that she had yet to complete the process of obtaining her degree; in fact, no classes were completed after 2012. Federal payment errors noted for the sample tested were $32,000 ($7,000 WRRS; $25,000 LRDR). The total sample tested for WRRS was $44,250, and the total WRRS grant payments for the fiscal year were $23,477,750. The WRRS dollar error rate for the sample was 15.82% ($7,000/$44,250), which estimates the potential dollars at risk for fiscal year 2023 to be $3,714,180 (dollar rate multiplied by the population). The total sample tested for LRDR was $195,673, and the total LRDR grant payments for the fiscal year were $12,357,871. The LRDR dollar error rate for the sample was 12.78% ($25,000/$195,673), which estimates the potential dollars at risk for fiscal year 2023 to be $1,579,336 (dollar rate multiplied by the population). Cause: Inadequate procedures to ensure applications were accurate. Effect: A lack of adequate supporting documentation increases the risk of payments not being in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.658 – Foster Care Title IV-E – Reporting Grant Number & Year: 2201NEFOST, FFY 2022; 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per 45 CFR § 1356.60(a) (October 1, 2022), Federal matching funds for foster care maintenance payments are available at the Federal medical assistance percentage. Per 45 CFR § 1356.60(c), Federal financial participation is 50% for administrative expenditures. Condition: The Agency lacked adequate procedures to ensure the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 2022 and March 2023 and noted the following: • Part I, Line 1a, Maintenance Payments – Foster Family Home, current quarter claims for the September 2022 report included $4,765,533 related to prior-period administration expenses that should have been reported as a prior-period adjustment. The total maintenance on Line 1a was overstated by $4,765,533, and administration adjustments were understated by that amount. As maintenance is matched at 64% and administration at 50%, the total Federal share was overreported by $667,175. • The supporting worksheets for the March 2023 report contained a clerical error. As a result, administrative costs were understated by $16,904, with the Federal share understated by $8,452. Cause: Clerical errors and inadequate review. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.658 – Foster Care Title IV-E; AL 93.658 – COVID-19 Foster Care Title IV-E – Allowability Grant Number & Year: 2301NEFOST, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Per 45 § CFR 75.303(a) (October 1, 2022), the Agency must do the following: 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. 45 CFR § 75.302(a) (October 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, “Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date; (B) To provide service only as authorized, in accordance with the Department’s standards;” and “(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]” The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, “You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]” Condition: The Agency did not have adequate documentation on file to support Foster Care payments for childcare services. Repeat Finding: No Questioned Costs: $577 known (2301NEFOST, $521; 2301NEFOST-COVID-19, $56) Statistical Sample: No Context: For 1 of 25 claims tested, the Agency was unable to obtain the childcare attendance calendar from the provider. With no attendance calendar, we were unable to verify that the payment amount was accurate, resulting in questioned costs of $577. Federal payment errors noted in the sample were $577. The Federal sample tested was $13,527, and the total Federal Foster Care maintenance payments during the fiscal year were $5,401,586. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate was 4.27% ($577/$13,527), which estimates the potential dollars at risk for fiscal year 2023 to be $230,648 (dollar rate multiplied by population). Cause: Employee oversight; inadequate procedures to ensure documentation was on file. Effect: When adequate support is not on file, there is an increased risk of both non-compliance with State and Federal requirements and improper payments. Recommendation: We recommend the Agency implement procedures to ensure the maintenance of adequate documentation for supporting that expenditures are allowable and proper in accordance with State and Federal regulations. Management Response: The Agency agrees

Program: AL 93.659 – Adoption Assistance – Reporting Grant Number & Year: 2201NEADPT, FFY 2022; 2301NEADPT, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure that reports are accurate and complete and reconcile to the accounting system. EnterpriseOne is the official accounting system of the State. 45 CFR § 75.302 (October 1, 2022) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also §75.450. (b) The financial management system of each non-Federal entity must provide for… (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements… Per Instructions for Completion of Form CB – 496 Part 4: Line 9. Prior Reported FFYs - Total Cumulative Expenditure of Calculated Adoption Savings (Line 1 Amount) – This line includes the cumulative total of calculated adoption savings that were expended and reported on Form CB-496 Part 4 in those Part 4 reporting periods consisting of all prior FFYs. An entry is made only in Column B since this line does not contain any amounts sourced from the current FFY. The entry must be taken directly from the amount reported on the CB-496 Part 4 for the immediately prior FFY on line 14, Column C. Title IV-E agencies are required to enter into an adoption assistance agreement with the prospective adoptive parents of any child who meets specified criteria by applying differing, and less restrictive, program eligibility criteria. This results in some number of children who, under previously applied program eligibility criteria, would not have been determined as Title IV-E eligible, but who will now be determined as Title IV-E eligible for adoption assistance. Each Title IV-E agency is required to calculate and spend an amount equal to any savings in Title IV-E agency expenditures as a result of applying the differing program eligibility criteria for a Federal fiscal year (FFY) for services permitted under Title IV-B or IV-E. These non-Federal funds are referred to as “adoption savings.” The State is required to spend an amount equal to any adoption savings in State expenditures for a fiscal year for any services that may be provided under Title IV-B or IV-E. Per 42 U.S. Code § 673(a)(8)(D)(ii) “Any State spending required under clause (i) shall be used to supplement, and not supplant, any Federal or non-Federal funds used to provide any service under part B or this part.” Condition: The Agency lacked adequate procedures for ensuring the accuracy of Federal Financial Reports (FFRs). Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended December 2022 and March 2023 and noted the following: • For both reports tested, Line 20, Adoption Assistance Payments, was incorrect. The Line 20 total for December was understated by $679,601, and the Federal share was understated by $435,420. The Line 20 total for March was understated by $643,861, and the Federal share was understated by $412,522. This was due to reducing expenditures for the Federal debit side of a journal entry but including the General Fund credit side. Both sides of journal entries should be considered. We reviewed the September 2022 and June 2023 reports for this issue and noted similar errors with the Federal share being understated by $417,414 and $41,971 respectively. • For both reports tested, the Federal and State shares of expenditures reported did not agree to the EnterpriseOne accounting system. For December, the Agency did not include all allowable General Fund expenditures. For March, the Agency performed a journal entry that moved $1 million from Federal funds to State General funds. This entry was meant to be temporary but was not reversed. As a result, the Federal Share reported was $1 million more than the accounting system, and the State Share reported was $1 million less than the accounting system. • A reconciliation of the reports to the accounting system was not done each quarter. The Agency indicated its intention to do a reconciliation annually; however, due to staff turnover, it was not performed. As of the date of fieldwork, November 29, 2023, the reconciliation had not been completed. We also tested Part 4 of the September 2022 report for the Annual Adoption Savings Calculation and Accounting Report. • Line 9b, Cumulative Calculated Adoption Savings, was reported as $25,184,469 but should have been reported as $28,490,558 to agree with Line 14c of the previous report. • Line 12a, Expenditures of Adoption Savings on Other Title IV-B or IV-E Allowable Services, reported $868,963, but these expenditures should not have been included. These expenditures were paid with Federal funds and State matching funds and, therefore, are not allowable uses of Adoption Savings. • Line 11a, Expenditures for Children at Risk of Foster Care, was reported as $962,268 but was overstated by $134,722 due to including expenditures paid with Federal funds. Cause: Inadequate review and staff turnover. Effect: Increased risk for errors and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: The Agency agrees

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program - Allowability Grant Number & Year: 2305NE5MAP, FFY 2023; 2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.” Per 45 CFR § 75.403 (October 1, 2022), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(H) requires that the provider perform the personal assistance services noted on the service plan, accurately documenting services provided in the Electronic Visit Verification (EVV) system and confirming that services were received as authorized according to Agency procedures. Title 471 NAC 15-005.02(A) states, “Providers cannot provide services to more than one client at a time.” That same regulation says also, “Medicaid will not pay for services that were not performed during the actual hours noted by the provider in the Electronic Visit Verification (EVV) system.” A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term “electronic visit verification system” means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to – (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Public Law 114-255, § 12006 (December 13, 2016) (“21st Century Cures Act”) provides, as is relevant, the following: (a) Section 1903 of the Social Security Act (42 U.S.C. 1396b) is amended by inserting after subsection (k) the following new subsection: ‘‘(l)(1) Subject to paragraphs (3) and (4), with respect to any amount expended for personal care services or home health care services requiring an in-home visit by a provider that are provided under a State plan under this title (or under a waiver of the plan) and furnished in a calendar quarter beginning on or after January 1, 2019 (or, in the case of home health care services, on or after January 1, 2023), unless a State requires the use of an electronic visit verification system for such services furnished in such quarter under the plan or such waiver, the Federal medical assistance percentage shall be reduced— ‘‘(A) in the case of personal care services— ‘‘(i) for calendar quarters in 2019 and 2020, by .25 percentage points; ‘‘(ii) for calendar quarters in 2021, by .5 percentage points; ‘‘(iii) for calendar quarters in 2022, by .75 percentage points; and ‘‘(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point[.] 42 CFR § 440.167(a)(2) (October 1, 2022) states, in part, that personal care services are those provided “by an individual who is qualified to provide such services and who is not a member of the individual's family[.]” 42 CFR § 440.167(b) adds, “For purposes of this section, family member means a legally responsible relative.” Neb. Rev. Stat. § 28-512 (Reissue 2016) creates the offense of “theft by deception.” That statute says the following, in relevant part: A person commits theft if he obtains property of another by deception. A person deceives if he intentionally: (1) Creates or reinforces a false impression, including false impressions as to law, value, intention, or other state of mind; but deception as to a person's intention to perform a promise shall not be inferred from the fact alone that he did not subsequently perform the promise; or (2) Prevents another from acquiring information which would affect his judgment of a transaction; or (3) Fails to correct a false impression which the deceiver previously created or reinforced, or which the deceiver knows to be influencing another to whom he stands in a fiduciary or confidential relationship[.] Further, Neb. Rev. Stat. § 28-911 (Reissue 2016) prohibits “abuse of public records,” as follows: (1) A person commits abuse of public records, if: (a) He knowingly makes a false entry in or falsely alters any public record; or (b) Knowing he lacks the authority to do so, he intentionally destroys, mutilates, conceals, removes, or impairs the availability of any public record; or (c) Knowing he lacks the authority to retain the record, he refuses to deliver up a public record in his possession upon proper request of any person lawfully entitled to receive such record; or (d) He makes, presents, or uses any record, document, or thing, knowing it to be false, and with the intention that it be taken as a genuine part of the public record. (2) As used in this section, the term public record includes all official books, papers, or records created, received, or used by or in any governmental office or agency. (3) Abuse of public records is a Class II misdemeanor. Condition: During testing of personal assistance service (PAS) claims, we noted the following: • Personal assistance services appeared to be claimed at the same time that the provider was working at another job or at other activities, resulting in apparent fraudulent billings and payments. • Services provided lacked adequate supporting documentation. This included providers being able to submit claims without verifying the location where those services were provided. • Services billed exceeded the number of hours authorized under the service needs assessments. • Providers billed for unreasonable amounts of time – including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week’s worth of duties for one client in only three days. • Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. • Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2022-039 Questioned Costs: $53,758 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers PAS (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an EVV system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century Cures Act, passed by Congress in 2016. The EVV system electronically captures and verifies provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five provider payments for testing – and, from those, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. Due to the numerous issues identified with the billings, we expanded testing and randomly selected an additional five provider payments for testing, and one week of services. We noted issues with 9 of 10 providers tested. In addition to the billing issues identified for the weeks tested, we also noted that three of these providers had outside employment or participated in activities that conflicted with the PAS hours billed. We obtained more documentation for additional weeks. Based on the documentation obtained, we identified $14,397 in potentially fraudulent payments made to the providers during fiscal year 2023. See Schedule of Findings and Questioned Costs for chart/table. In addition to the potentially fraudulent payments related to hours claimed while at another job or activity, we noted $44,534 in Federal payment errors related to other issues, for total Federal questioned costs of $53,758. The Federal share of payments tested totaled $81,926. The total Federal share of PAS claims for the fiscal year was $5,416,039, and the State share was $3,814,632. Federal payment errors noted in the random sample totaled $268. The total Federal sample tested for the random sample was $979. The total dollar error rate was 27.37%, which estimates the potential dollars at risk for fiscal year 2023 to be $1,482,370 (dollar rate multiplied by the population). The following details issues with each provider. Provider #1 This provider was authorized a total of 87.25 hours of service per week for three different clients. For the week tested, the provider manually created the claims for payment and did not use the EVV system to create a visit form; therefore, the claims did not capture client signatures or verify the location of the visit through the Global Positioning System (GPS). Likewise, there was no listing of the activities performed to ensure compliance with the SNA. We requested the claim detail for a second week of services and, again, the provider manually created the claims and did not enter a visit in the EVV system. Consequently, we questioned all of the claims selected for testing. We noted further that the provider exceeded the SNA by 12 hours and billed 24.5 hours of service on one day, which is impossible. We reviewed three additional weeks of claims and noted also that the provider exceeded the SNA by .25 to 2 hours each week, resulting in additional questioned costs. Most concerning was the fact that the provider worked two additional jobs during the time that she billed for personal assistance services. The provider worked as a dental hygienist and as a pharmacy technician. The provider billed personal assistance services beginning at 6:00 a.m. every day until at least 5:30 p.m. The dental office with which the provider was employed was open only from 8:00 a.m. to 5:00 p.m., Monday through Friday. During the week of February 5, 2023, the provider claimed 87 hours for PAS, of which 43.75 hours were claimed to have been provided between 8:00 a.m. and 5:00 p.m., Monday through Friday. As the provider did not use the EVV, it is unknown where she was at the times the services were claimed; however, considering the provider’s other employment, it is possible that fraud may have occurred. We obtained the pharmacy technician employment records for the provider and compared the PAS billings to those records from July 2022 through January 2023. We identified 101 days during which PAS hours billed overlapped with times that the provider was working as a pharmacy technician. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. The provider billed 1,200 hours of personal assistance services during this time period, and more than half of these hours could not have been provided. We questioned 770 hours as potential fraud, totaling $8,678. We also noted that the provider did not complete all of the PAS visits through a device using GPS; therefore, additional questioned costs resulted from not using the GPS verification method. Given that many of the visits completed with GPS verification overlapped with the times that the provider was working at the pharmacy, another individual appears to have aided the provider in falsely claiming that personal assistance services were provided. The employment records for the provider included the exact time punched in and out for the shifts worked. Below are a few examples of the hours billed by the provider and the hours the provider worked at the pharmacy. Clients 1 and 2 live at the same residence, and Client 3 is the provider’s mother. See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent hours billed, the provider received overtime pay for the weeks reviewed. Providers are paid at time and one-half for services in excess of 40 hours each week. The provider evidently received overtime pay, in part, due to the apparent fraudulent billing. The provider was paid overtime for 21 weeks from July 2022 through December 2022. This resulted in additional questioned costs of $3,140 for potential fraud. Federal questioned costs not related to other employment totaled $3,604. Provider #2 This provider was authorized a total of 116.75 hours of service per week for four different clients. For the week tested of December 18, 2022, through December 24, 2022, the provider billed 121.25 hours of service. This provider manually completed visits; consequently, there was no location verification, and no client signatures were captured. Therefore, we questioned the claims for the week tested. We also identified other issues for the week tested. We noted the provider billed a total of 32 hours of service for the four clients on December 22, 2022, which is impossible. Also, for one client, the visit forms for this day supported only 2.75 hours, but the provider billed 20 hours for the client. The provider also exceeded the service authorization by 75 quarterly units or 18.75 hours for the week. Due to the issues noted, we reviewed additional weeks and claims of service. This resulted in more questioned costs for the provider exceeding the SNA. The provider exceeded the SNA for 8 of the 15 weeks reviewed, ranging from .25 to 11.5 hours overbilled. Per documentation in the case file, the provider was involved in a court case pertaining to her own child. On December 2, 2022, a law enforcement raid was conducted at the provider’s home, which revealed Fentanyl and firearms. The provider was not present at the time and, when contacted later, claimed to be on vacation; however, the provider billed for 14.5 hours of services that day. Despite appearing in court on December 20, 2022, at 11:30 a.m., the provider billed for client services that same day from 10:15 a.m. to 1:30 p.m. Based on these discrepancies, we requested the EVV records for the remaining days billed in December 2022. None of the additional visit forms were completed through a device using GPS to track the location, and no signatures were obtained; therefore, we questioned these claims. The case file also included documentation of supervised visits that occurred between the provider and the provider’s child at the provider’s home. Reviewing the EVV records for the days that the visits occurred, we noted that the times the provider billed for PAS services overlapped with the times of these supervised visits. The provider could not have provided the majority of PAS services billed on these days. Again, the visit forms did not contain verification of the location where the services were provided. We questioned the hours billed for each of these days. See Schedule of Findings and Questioned Costs for chart/table. Lastly, the provider had other employment as a medical assistant and a student bus driver. It is likely that the hours of other employment conflicted with the PAS hours billed. We requested the provider’s employment records for July 2022 through December 2022. While comparing the employment records to the days and hours billed for PAS services, we identified 40 days from June 27, 2022, through November 16, 2022, during which hours worked overlapped with times billed for PAS services. We questioned any PAS hours billed that overlapped with the provider’s employment hours as potential fraud. In determining these overlapped hours, we did not factor in any travel time that may have occurred between client homes and the provider’s place of employment; therefore, the possibility of additional fraudulent payments exists. We also noted the provider did not complete the PAS visits through a device using GPS; therefore, any times billed on these 40 days were also questioned for inadequate documentation. Apparent fraudulent PAS hours billed totaled $1,383. Overlapping times ranged from 1.25 hours to 5.25 hours per day. The table below contains a few examples of overlapping hours billed by the provider: See Schedule of Findings and Questioned Costs for chart/table. In addition to the apparent fraudulent overlapped hours, the provider was paid for overtime for the weeks reviewed. The provider received overtime, in part, due to the apparent fraudulent billing. All overtime hours paid during fiscal year 2023 were questioned, either due to the fraudulent hours billed for the week, or for inadequate documentation for not using the GPS verification method. This resulted in additional questioned costs of $204 for potential fraud. Federal questioned costs not related to employment issues totaled $6,671. Provider #3 This provider was authorized a total of 97.5 hours of service per week for four clients. For the week initially tested, six visit forms were entered through a personal computer, so there was no location verification and no client signature. Five of these visits occurred in the evening, from 7:00 p.m. to 10:15 p.m., for 3.25 hours. The provider incorrectly billed 4 hours for one of these visits. The visits with no location verification were questioned. We also noted mileage variances on the visit forms entered through a mobile device when GPS tracking was utilized. There were two visits with a 20-mile variance from the location of the client and where the provider apparently ended the visit. There are unknown questioned costs for these mileage variances. The service authorizations for each of the clients included some services to be performed every day of the week; however, only two of the four clients were billed daily for services. For example, if a client was authorized for a bath seven times per week, but the provider performed the service on only three days, we considered the hours charged for four baths to be overbilled. We reviewed additional weeks during the fiscal year, and there were additional questioned costs based on the frequency of the task authorized. This provider also received overtime pay for several of the weeks reviewed. Therefore, the provider was not only overpaid due to billing for tasks that were not provided as authorized but also received overtime pay based upon some of those overbillings, resulting in additional questioned costs. Federal questioned costs for issues not related to other employment and activities totaled $880. The provider was also receiving wages from a home health care company during fiscal year 2023. Based on the wages earned there, the provider appears to have been working full-time, and hours claimed for PAS likely overlapped with hours worked at the home health care company. We requested the provider’s employment records from the home health care company, and the employer responded that the provider was a salaried employee and did not have a set schedule. The provider also stated that a timesheet was not kept. We performed a social media search and found several posts on Facebook that depicted the provider being out of-state on several weekends during fiscal year 2023. We compared those apparent out-of-state dates to the dates of billed services. The provider billed at least nine days that conflicted with these trips outside of Nebraska. The provider billed 94.25 hours during these days, resulting in potential fraud of $992. Four of the nine days billed did not use the GPS verification method for any of the clients. Based on the Facebook posts, however, the provider was attending an event in Indianapolis, Indiana, on March 11 and 12, 2023, but billed 8.25 hours of services for each of these days. On March 31, 2023, the provider billed 15.75 hours; however, she appeared to be in Arizona. No GPS verification was used on June 6, 2023, and the provider billed 10.75 hours, but appeared to be in Arizona. For the remaining five days, the hours billed did not agree to the times logged through GPS. Additionally, times overlapped between services, and travel time between client homes was unreasonable, or part of the hours billed did not use the GPS verification method. For those visit forms that indicated GPS verification was used, another individual may have entered information into the verification system. The table below contains examples of some of the discrepancies noted: See Schedule of Findings and Questioned Costs for chart/table. Provider #4 The Agency authorized this provider to provide 118 hours of service per week (approximately 40 hours for each of 3 clients). It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 454 quarterly units or 113.5 hours. This included billing 9.5 hours on November 18, 2022, from 7:10 p.m. to 12:04 a.m., even though this is only 5 hours, and then an additional 23.75 hours on November 19, 2022, from 12:06 a.m. to 11:57 p.m. Each SNA of these clients included some services to be performed every day of the week. The provider billed for tasks authorized for seven days per week but did not provide services on each of those seven days for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only three days, we considered the hours charged for four baths to be overbilled. We reviewed an additional two weeks of services and found more errors for not following the SNA. There were $757 Federal questioned costs for not following the SNA. It should be noted that only these three weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of the task authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider also received overtime pay for these three weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $269 in Federal questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, a claims overtime team reviews the service authorizations to ensure they are not exceeded. For the three weeks reviewed alone, the provider was paid for 60.82, 73.86 and 61.65 hours of overtime. This provider has had similar findings in prior audits since 2021, with no changes to the number of hours authorized by the Agency. Provider #5 Per documentation provided from the EVV system for the week tested, the provider used a personal computer to clock in and out, so there was no GPS verification of the visit location. The visit forms noted that the provider was unable to clock in with a cell phone; however, the services were being provided at the provider’s home. On April 14, 2023, the Agency notified the provider by letter that using a personal computer that did not have GPS to verify location was not compliant with either the Cures Act or Agency EVV guidelines. This letter gave the provider 90 days to achieve compliance. The Agency sent a second noncompliance letter to the provider on August 30, 2023, giving her an additional 30 days to comply. The claims tested are questioned due to the provider’s failure to comply with Federal regulations. We noted also that the provider was the parent and co-guardian of the two clients to whom services were provided. Per 42 CFR § 440.167, personal care services cannot be provided by a member of the individual’s family. A family member is defined as “a legally responsible relative.” As the co-guardian, the provider was a legally responsible relative of the clients and, therefore, not allowed to be paid for those services. Thus, all payments made during fiscal year 2023 are questioned. The Federal share was $32,083. Provider #6 The provider used a device with GPS tracking to record her visits. Although the visit form supported only 3.75 hours of services, the provider billed 5 hours, resulting in Federal questioned costs of $9. Provider #7 This provider was authorized for up to 107 quarterly hour units or up to 26.75 hours of PAS services per week. For the week tested, the provider used a personal computer to complete visits in the EVV system, resulting in the location not being verified through GPS tracking and no client signatures being obtained. Therefore, we question the claims, resulting in Federal questioned costs of $202. We also noted that the provider performed personal care services for two additional clients under the Aged and Disabled Waiver. One of these clients also lived with the client to whom PAS services were provided. Because the provider did not use a device with GPS tracking, it is possible that she could have provided services for these two clients during the same time, which is not allowable. For the week tested, the provider billed a total of 116 hours of service for all three clients. The provider also exceeded the authorization for the week tested by 1.25 hours. We noted that the Agency sent a letter to the provider in April 2023 about the overbilling of 1.25 hours for the week tested; however, the accounts receivable was not established until September 30, 2023, after we inquired about the overbilling. The Agency also sent a letter to the provider on April 14, 2023, giving her 90 days to comply with the EVV regulations. No changes were made, so the Agency sent a second letter to the provider on August 30, 2023, giving the provider an additional 30 days to come into compliance. A third letter was sent on September 29, 2023, giving the provider an additional 30 days to comply. It is unreasonable to allow a provider who is not compliant with EVV regulations to continue billing for five months of services. The provider was also paid for overtime hours for the week tested. The provider received $351 in Federal share overtime pay for 74.75 hours of overtime. The overtime was paid under the PAS program. However, only 26.75 hours were related to PAS, and 88 hours were billed under the Aged and Disabled (AD) Waiver; therefore, the overtime should have been charge under the AD Waiver. Per the Agency, the overtime was paid under the PAS program because the Federal share reimbursement is higher, which is not reasonable. Provider #8 This provider was authorized for up to 164 quarterly hour units or up to 41 hours per week for two clients living in the same household. The provider exceeded the service authorization for both clients by .25 hours each, resulting in Federal questioned costs of $4. The service authorization for both clients included some services to be performed every day of the week; however, services performed were not reasonable based on the times the provider billed. For example, one client was authorized for reminding or coaxing to eat three times a day for seven days a week. The provider billed from 6:00 a.m. to 9:30 a.m. every day for this client. It is not reasonable that the client would be eating only in the morning. We allowed the hours charged for one meal. Additionally, both clients were authorized for the administration of medication three times a day for seven days; however, based on the time during which the provider was providing services, the administration of medication appears to have occurred only once per day. This resulted in additional Federal questioned costs of $51. Provider #9 The provider used a device with GPS tracking to record her visits; however, the provider exceeded the SNA by two quarterly units or .5 hours for one client resulting in Federal questioned costs of $4. Cause: Procedures were inadequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient’s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse to occur and not be detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency immediately discontinue paying claims that are not in accordance with EVV/GPS requirements. Additionally, because this comment gives rise to concerns regarding possible violations of State statute, we are forwarding the information herein to the Nebraska Attorney General for further review. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.778 – COVID-19 Medical Assistance Program – Allowability & Eligibility Grant Number & Year: 2205NE5MAP, FFY 2022; 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR § 75.303 (October 1, 2022): 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. Per 45 CFR § 75.302(a) (October 1, 2022), “Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds.” 45 CFR § 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.04(A) defines a “deprivation of resources” as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant’s, client’s, or spouse’s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 477 NAC 23-003.04(G) states the following, in relevant part: “To determine if a client or his or her spouse deprived himself or herself of a resource to qualify for Medicaid, the Department must look back 60 months before the month of application.” 471 NAC 12-006 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). Title 42 CFR § 433.400(b) (October 1, 2022) states the following, in relevant part: “A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination . . . because of agency error or fraud . . . .” 42 CFR § 435.916(b) (October 1, 2022) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, “The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .” A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Title 45 CFR § 75.511(a) (October 1, 2022) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, “When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken.” Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid prior to the preadmission screening and resident review being completed. The Summary Schedule of Prior Audit Findings state the corrective action is complete. A similar finding was noted in the prior audit. Repeat Finding: 2022-040 Questioned Costs: $20,153 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: The budgets for two recipients used the wrong living arrangement, causing the share of cost to be understated. • For one nursing home recipient, the Medicaid benefit was determined as if the recipient was living in an apartment or house. For the June 2022 budget, the recipient received an unearned income disregard of $20 and a standard of need of $392. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $87. There were additional out-of-sample questioned costs for July 2022 through September 2022 benefits totaling $261. • For another nursing home recipient, the September 2022 budget included an unearned income disregard of $20 and a $1,133 standard of need. The standard of need should have been $60 with no unearned income disregard. This resulted in questioned costs of $665. The Medicaid budgets used the incorrect living arrangement the entire fiscal year resulting in additional out-of-sample questioned costs of $7,313. The countable resources for two recipients were not calculated correctly. • For one recipient, the budget for February 2023 did not include the correct bank balances. There was a $2,000 transfer between two bank accounts the recipient owned that was not accounted for in the balances. If the $2,000 had been included, the recipient would have been over resources by $1,589, resulting in questioned costs of $1,018. • Proper verification of life insurance policies was not obtained for one recipient. The worker approved the recipient for Medicaid prior to obtaining adequate documentation to support the amount of life insurance declared on the application. The worker initially received one policy statement that supported a portion of the premiums being withdrawn from the checking account and a portion of the declared policy value. After Medicaid was approved on February 8, 2022, verification was obtained on March 22, 2022, for two additional policies showing the countable value exceeded the $4,000 resource limit. The Agency did not close the Medicaid case, citing the continued enrollment requirement during the COVID-19 Public Health Emergency. However, per the DHHS COVID-19 FAQ document and Title 42 CFR § 433.400(b), if an individual was enrolled due to agency error, that individual was not validly enrolled, and the case should close. For the claim tested for May 2023 services, the recipient was over resources by $1,545. The entire claim is questioned, resulting in questioned costs of $4,045. Additionally, for this recipient, the May 2023 budget included the railroad retirement amount for calendar year 2022. The Agency did not obtain verification of the amount for calendar year 2023. An increase in income would increase the share of cost and lower the amount paid by Medicaid. For one recipient, the payment of seven days of nursing home care was made prior to the completion of the Level II preadmission screening and resident review (PASRR). The recipient entered the nursing facility on June 22, 2022, and the Level II PASRR was not completed until June 29, 2022. The days paid from June 22, 2022, through June 28, 2022, were not allowable, resulting in questioned costs of $532. For one recipient who entered a nursing home in January 2023, the Agency did not complete the required five-year look back for potential deprivation of resources. According to documentation provided by the Agency, only two years were reviewed. The applications submitted in December 2022 and February 2023 for the recipient denied that any substantial property was sold in the last five years. However, information received from the Douglas County assessor website noted that the recipient sold a home for $144,000 in May 2018. Since the Agency did not review the required five years of bank balances, no information was obtained regarding the sale of the house and where any proceeds from the sale were deposited and how the funds were spent to ensure there was no deprivation of resources. The entire claim is questioned resulting in questioned costs of $6,232. Federal payment errors noted in the sample were $12,579 and additional out-of-sample questioned costs of $7,574. The Federal sample tested was $118,651, and the total Federal long-term care facility expenditures during the fiscal year were $299,652,791. Based on the sample tested, the case error rate was 24% (6/25). The dollar error rate was 10.6% ($12,579/$118,651), which estimates the potential dollars at risk for fiscal year 2023 to be $31,763,196 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. We further recommend the Agency improve procedures to ensure adherence to State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 447.253(b)(1)(i) (October 1, 2022) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR § 447.253(g) (October 1, 2022), “The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.” The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. American Institute of Certified Public Accountants (AICPA) Professional Standards AU-C Section 520.07 states, “If analytical procedures performed in accordance with this section identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor should investigate such differences by a. inquiring of management and obtaining appropriate audit evidence relevant to management's responses and b. performing other audit procedures as necessary in the circumstances.” AICPA Professional Standards AU-C Section 500 states that audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference, and using electronic information may require the auditor to perform additional audit procedures to establish reliability. A good internal control plan requires desk audits to include testing a sample of expenses to supporting documentation. Condition: Desk audit procedures could be improved. A similar finding was noted in the prior audit. Repeat Finding: 2022-041 Questioned Costs: Unknown Statistical Sample: No Context: Agency procedures require a desk audit on each annual cost report provided by long-term care facilities that receive Medicaid funding and a field audit on facilities identified by the Agency as high risk. The Agency contracted with an accounting firm to complete the desk audits of nearly all facilities in Nebraska and any necessary field audits. The contractor completed 16 field audits on cost reports from 2018 through 2021. As of June 30, 2023, the contractor had not yet completed the risk assessments for the 2022 cost reports or identified high-risk facilities for 2022. We reviewed 20 desk audits and noted that limited procedures were performed. Costs were traced to the facilities’ trial balance, but no underlying supporting documentation was obtained for significant costs, such as salaries, food, or supplies. In many of the desk audits, large increases in costs were attributed to the COVID-19 health emergency, without gaining any additional support to verify the higher costs. The contractor did request verbal explanations for large variances; however, appropriate audit evidence was not requested to verify the explanations. For example, one facility had a 31% increase in "Other" costs for $608,641, which was explained as supply cost and engineering contract increases, while another facility had an increase of 451% or $1,328,713 in Purchase Services - Direct care, which was explained as due to a decrease in direct staff; however, direct staffing costs decreased only $603,499. In neither example did the contractor obtain any underlying invoices to determine if the increased costs for supplies and services were accurate, nor any documentation to support that the number of direct staff had decreased. Additionally, looking at variances alone would not support that expenses are accurate and not misstated from year to year. This is especially critical on the fiscal year 2022 cost reports, as these reports will be used to base rates for the next four years, starting with fiscal year 2024 rates. The total Federal share of long-term care facility expenditures during fiscal year 2023 was over $299 million. Cause: The contract does not require the accounting firm to obtain underlying support for expenses. Effect: When facilities do not have adequate desk audits performed, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency ensure desk audits provide reasonable assurance that cost reports are accurate. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program; AL 93.767 – Children’s Health Insurance Program (CHIP) – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR § 455.104(b)(4) (October 1, 2022), the State Medicaid Agency must require the disclosing entity provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 CFR § 455.101 (October 1, 2022): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21) Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of “managing employee” under § 455.101, their information is required to be disclosed. MPEC Section 1.4.1C states further the following: However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of “managing employee” under § 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors . . . . If a corporation has, for instance, a Director of Finance who is not a member of the board of directors, he/she would not need to be disclosed as a director/board member. However, as discussed in section C., below, to the extent he/she meets the definition of “managing employee” under § 455.101; he/she would have to be disclosed as a “managing employee.” Per 42 CFR § 455.436 (October 1, 2022), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration’s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR § 75.303 (October 1, 2022) requires the Agency to “[e]stablish 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.” Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Two of 25 providers tested did not include disclosure requirements for managing employees. Repeat Finding: 2022-042 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that two providers, both non-profit corporations, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these two providers. Cause: The Agency relies on each provider’s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR § 438.3(m) (October 1, 2022), “The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards.” A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed in accordance with Federal regulations. Condition: The Agency does not have adequate policies and procedures to ensure that required managed care financial audits are completed in accordance with Federal regulations. The MCO and PAHP audited financial reports for year ended December 31, 2022, were not conducted in accordance with generally accepted accounting principles (GAAP). A similar finding was noted in the prior audit. Repeat Finding: 2022-044 Questioned Costs: Unknown Statistical Sample: No Context: Nebraska Total Care, Inc., Community Care Health Plan of Nebraska, Inc., United Healthcare of the Midlands, Inc., and MCNA Insurance Company had audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements for the MCOs were prepared using “accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.” The PAHP audit was prepared using “accounting practices prescribed or permitted by the Texas Department of Insurance . . . .” The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners’ (NAIC) manual. Cause: The MCO and PAHP audited financial reports are completed for the Nebraska Department of Insurance, which does not require the audit to be conducted in accordance with GAAP. Amendments to the contracts have been drafted to incorporate GAAP requirements and should be in place prior to January 1, 2024. Effect: When the financial audits completed by the MCOs and PAHP are not conducted according to GAAP, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO and PAHP financial audits to be conducted in accordance with GAAP. Management Response: The Agency agrees.

Program: AL 93.778 – Medical Assistance Program – Special Tests and Provisions Grant Number & Year: All open, including 2305NE5MAP, FFY 2023 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR § 455.1 (October 1, 2022) sets forth requirements for a State fraud detection and investigation program, including a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency’s Program Integrity (PI) and Special Investigations Units (SIU) perform these functions. Per 42 CFR § 455.14 (October 1, 2022): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. The Nebraska Medicaid State Plan, Section 4.5 (Medicaid Agency Fraud Detection and Investigation Program), states, “The Medicaid agency has established and will maintain methods, criteria and procedures that meet all requirements of 42 CFR 455.13 through 455.21 and 455.23 for prevention and control of program fraud and abuse.” Under Program Integrity’s Policies and Procedures: Preliminary Investigations • Preliminary investigations of referrals will be completed within 70 days of the opening of the case. • Preliminary investigations of cases identified through exception profiling will be completed within 90 days of the opening of the case. • Preliminary investigations of cases identified through projects will be completed within 120 days of the opening of the case. This includes cases that are sourced from another case. Full investigations • Each month, investigators will review their cases and use their professional judgment to determine the prioritization of their active cases. The following guidelines will be considered in this review: o The investigation of a provider for termination due to a finding on annual or monthly screening is a HIGH priority o Client health & safety influences the priority of a case o Definitive interpretation of regulations influences the priority of a case o Cases in the preliminary investigation phase are of a moderate priority A good internal control plan requires procedures to ensure cases are reviewed, adequately collected on, and appropriate dispositions are made in a timely manner. Condition: Procedures should be improved to ensure cases are investigated timely, and steps taken are adequately documented. Repeat Finding: 2022-045 Questioned Costs: Unknown Statistical Sample: No Context: Program Integrity (PI) is tasked with, among other things, investigating cases of potential provider fraud in the Medicaid Program. Cases received are delegated to investigators who track their activity notes and documentation in one central Investigative Case Management system (ICM). Substantial cases with a large amount of money that may be due back will be referred to the Attorney General’s Medicaid Fraud and Patient Abuse Unit (MFPAU). In cases that are not referred and accepted by MFPAU, PI can sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. The Special Investigations Unit (SIU) investigates allegations of suspected recipient fraud. We tested 20 PI cases and 6 SIU cases and noted the following: • One SIU case did not get assigned to an investigator when it was initially received. The original reporter mentioned both Medicaid and Medicare, so it was assumed that the case was for Medicare fraud. However, there was no support to show that any review was done to confirm Medicaid was not involved, nor any support to show that the case was referred to Medicare. Medicaid paid $8,824 in managed care capitation payments for the recipient during the fiscal year. After APA discussed this with SIU, a case was opened. • Four PI cases did not have adequate and timely follow-ups once they were opened: o Based on a brief review, the Federal Bureau of Investigation (FBI) brought one case to the Nebraska Attorney General regarding a counseling office that may have been overbilling. The PI investigator declined to interview the source of the referral and reviewed only claim data to see if there was any obvious overbilling for one provider at the counseling office. No other investigative work was done. No documentation was requested from the provider to support the charges billed, such as time sheets to show when providers were working to agree to hours and dates billed. o One case was opened in June 2022 for a provider billing for Applied Behavioral Analysis (ABA) services and services for children under three years of age, when the provider did not have appropriately licensed practitioners for such services. The opening notes on the case indicated the investigator was going to educate the provider and request a refund; however, neither of those steps had been taken as of July 2023 because the investigator was waiting to see if the State legislature passed a bill related to ABA services. No real actions had occurred on the case for nearly seven months. o One case was referred to PI by a Managed Care Organization (MCO) for a provider potentially overbilling for Mental Health services and concerns of crossing boundaries with a patient. It was unclear if Medicaid claims were reviewed to see if the Provider was overbilling other MCOs. It was also unclear if the proper authorities, such as the Licensure Unit, were notified about the allegation for crossing boundaries with a patient, so a proper investigation could take place. o One case was opened in December 2022 regarding a provider billing for Personal Care and Companion Services that were allegedly not being rendered. The client reported to have text messages supporting that services were not provided. The investigator requested the text messages in February 2023, but no further follow up was completed on the case until we asked about it in August 2023. According to the program administrator, this case was not a high priority due to no risk of health and safety. Medicaid paid the provider $2,996,377 for claimed services in fiscal year 2023. Additionally, we noted that PI was not following current policies and procedures for identifying potential fraud, waste, and abuse. Its policies and procedures indicated it would review the statewide SURS (surveillance and utilization review subsystem) report quarterly and “a minimum of three provider and three recipient cases will be opened from the SURS Ranking Reports.” After December 2022, no cases were opened from the SURS report. The Agency confirmed this and stated, “One of the issues the Program Integrity Team has been facing for the past two years is vacant positions. With the number of staff decreased, focusing on cases based on allegations and NMEP removals was prioritized. Those are cases that had a greater concern for patient health and safety. . . . The procedures will be updated." Cause: The Agency did not follow proper procedures, including supervisor reviews of cases, to ensure Medicaid cases were properly and timely worked. The Program is understaffed. Effect: When potential fraud cases are not adequately and timely pursued, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency strengthen procedures to ensure cases are properly and timely reviewed, and appropriate dispositions are made. Management Response: The Agency agrees.

Program: AL 17.225 – Unemployment Insurance – State – Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2022-046 Questioned Costs: $36,869 Statistical Sample: No Summary: Audit Finding 2023-014, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total sample tested was $22,178, and questioned costs for payments tested were $4,493. Total benefit payments for the fiscal year ended June 30, 2023, were $62,550,014. Based on the sample tested, the dollar error rate for the sample was 20.26% ($4,493/$22,178), which estimates the potential dollars at risk for fiscal year 2023 to be $12,672,633 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $32,376. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper Unemployment Insurance (UI) benefits by ensuring compliance with applicable State and Federal requirements. At a minimum, those procedures should ensure the following: 1) proper adjudication actions – including wage crossmatches, investigations into suspect separation from employment information, and separation information requests being sent to employers – are undertaken; and 2) neither ineligible State employees nor other ineligible claimants receive benefit payments. Management Response: The Department acknowledges the finding but notes that the funds at issue are comprised entirely of unemployment benefit overpayments. The Department questions the categorization of benefit overpayments as Questioned or Disallowed Costs. Regular state unemployment benefit payments are made from Nebraska taxes collected by the Department as part of the unemployment program and deposited to the federal Unemployment Trust Fund (UTF) for the payment of state unemployment benefits. Those UTF monies are never intermingled with administrative grant funds awarded to the Department for the administration of the Nebraska unemployment program. Previous final determinations of the United States Department of Labor have found the errant payment of benefits to be disallowed but not subject to Federal debt collection. The Department understands the importance of quality unemployment insurance adjudication and is taking to steps to correct the findings noted above. APA Response: State unemployment tax revenues must be deposited to the Unemployment Trust Fund in the U.S. Treasury. Therefore, as noted in the OMB Compliance Supplement, expenditures from State UI funds must be included with Federal funds on the Schedule of Expenditures of Federal Awards (SEFA). Costs included on the SEFA that are not supported at the time of the audit or are a result of a violation or possible violation of a statute are considered questioned costs, as defined by the Uniform Guidance at 2 CFR § 200.1.

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-21-2-1001, FFY 2021; W91243-22-2-1001, FFY 2022; W91243-22-2-1002, FFY 2022; W91243-22-2-1005, FFY 2022; W91243-22-2-1007, FFY 2022; W91243-22-2-1021, FFY 2022; W91243-22-2-1023, FFY 2022; W91243-22-2-1031, FFY 2022; W91243-23-2-1001, FFY 2023; W91243-23-2-1003, FFY 2023; W91243-23-2-1005, FFY 2023; W91243-23-2-1010, FFY 2023; W91243-23-2-1021, FFY 2023; W91243-23-2-1023, FFY 2023; W91243-23-2-1024, FFY 2023; W91243-23-2-1031, FFY 2023. Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2023), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2023): 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. Title 2 CFR § 200.302 (January 1, 2023) requires financial management systems of the State be sufficient to permit both the preparation of required reports and tracing of funds to expenditures adequate to establish that the use of these funds was in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Title 2 CFR § 200.305(a) (January 1, 2023) states, in part, “For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 . . . .” Title 31 CFR Part 205 (July 1, 2022) implements the CMIA and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2022, through June 30, 2023, allows the program to request Federal funds in accordance with the monthly draw funding technique, which bases the amount requested on costs estimated to be incurred in the next month. Master Cooperative Agreement (October 2022), Article V – Payment, Section 503, Payment by Advance Method, states, “The advance payment method shall be according to procedures established in current NGB-AQ policy, NGR 5-1 Chapter 11 or successor CNGB I & M, and 2 CFR §200.305.” National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. Instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a, “Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients.” Title 2 CFR § 200.511(b) (January 1, 2023) states in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. A good internal control plan would include procedures to ensure that the times between the drawdown of Federal funds and the disbursements thereof are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2022-050 Questioned Costs: None Statistical Sample: No Context: We tested 25 drawdowns of Federal funds to support the Agency’s operations and noted the following: • Eleven drawdowns were not in compliance with NG Policy 5-1. The draws were expended from 48 to 166 days after the drawdown of Federal funds. The table below provides a summary of the 11 draws: See Schedule of Findings and Questioned Costs for chart/table. • In addition, five draws were not in compliance with CMIA Agreement requirements. Advance amounts were requested based on estimated costs to be incurred during the month covered by the requests. To determine the reasonableness of the estimates, the APA determined the time it took the Agency to expend amounts advanced (without consideration of any cash on hand). Five draws were expended between 48 and 111 days after the drawdown of Federal funds. • For 23 of 25 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an underreporting of $45,247 to an overreporting of $1,143,496, with a net total overreporting of expenditures by $5,104,828 for the 25 reports tested. A similar finding was noted during the previous audit. In the Summary Schedule of Prior Audit Findings, the Agency stated the following as a reason for the recurrence: The requirement per the CMIA Agreement which requires the program to request Federal funds in accordance with the pre-issuance funding technique and that such funds are to be requested and deposited in a state account not more than three business days prior to disbursement of funds is not a reasonable standard for the National Guard Military Operations and Maintenance Program. The Agency stated further that it will seek a modification to the CMIA Agreement. However, under the State’s fiscal year 2022 and 2023 CMIA Agreements, the program is no longer required to follow the pre-issuance funding technique and instead follows the monthly draw funding technique. Thus, the Summary Schedule of Prior Audit Findings is not accurate. Cause: Inadequate procedures for estimating cash needs for the upcoming month. Regarding SF-270 reporting, the Agency stated that it did not plan to implement corrective action until State fiscal year 2024. Effect: The Agency is not in compliance with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and advance state requirement functionalities. The State Services Support Division has simultaneously been prioritizing workloads due to staffing shortages persistent through the first quarter end of fiscal year 2023-2024.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance – Allowability & Eligibility & Period of Performance Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023): 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. 2 CFR § 200.403 (January 1, 2023) states, in part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 2 CFR § 200.405(d) (January 1, 2023) states the following, in relevant part: If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, notwithstanding paragraph (c) of this section, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Per 2 CFR § 1108.285 (January 1, 2023): Period of performance means the time during which a recipient or subrecipient may incur new obligations to carry out the work authorized under an award or subaward, respectively. Question 7 in the Frequently Asked Questions (FAQ) guidance document (Revised July 27, 2022), issued by the U.S. Department of the Treasury, for the Emergency Rental Assistance program, states the following: For both ERA1 and ERA2, other expenses related to housing include relocation expenses (including prospective relocation expenses), such as rental security deposits, and rental fees, which may include application or screening fees. It can also include reasonable accrued late fees (if not included in rental or utility arrears), and Internet service provided to the rental unit. . . . All payments for housing-related expenses must be supported by documentary evidence such as a bill, invoice, or evidence of payment to the provider of the service. Question 4 of the same FAQ guidance document also states the following: The statute establishing ERA1 provides that grantees may determine income eligibility based on either (i) the household’s total income for calendar year 2020, or (ii) sufficient confirmation of the household’s monthly income at the time of application, as determined by the Secretary of the Treasury (Secretary). . . . In order to provide assistance rapidly, during the public health emergency related to COVID-19 the grantee may rely on a self-attestation of household income without further verification if the applicant confirms in their application or other document that they are unable to provide documentation of their income. If a written attestation without further verification is relied on to document the majority of the applicant’s income, the grantee must reassess the household’s income every three months, by obtaining appropriate documentation or a new self-attestation. The Emergency Rental Assistance (ERA1): Closeout Resource (September 16, 2022), also promulgated by the U.S. Department of the Treasury, contains the following: The end date of the award period of performance is the last day for a grantee to obligate funds for ERA1 activities (September 30, 2022 for award funds received pursuant to the grantee’s initial allocation and December 29, 2022 for reallocated funds). Funds statutorily available for administrative costs are not considered to be “automatically” obligated; therefore, grantees must obligate award funds by the end of the award period of performance to cover their administrative costs for closeout activities. Good internal control requires procedures to ensure that adequate supporting documentation is obtained and utilized during the application review process. Good internal control also requires procedures to ensure compliance with Federal regulations. Condition: Procedures were inadequate to ensure that payments were allowable, and individuals were eligible for assistance. A similar finding was noted in the prior audit. For one contract payment tested, the costs had neither been obligated nor occurred prior to the end of the period of performance for the ERA1 program. Additionally, the costs were associated with multiple programs but charged only to the ERA1 program. Repeat Finding: 2022-052 Questioned Costs: $172,809 known Statistical Sample: No Context: We noted that 7 of 25 assistance payments tested had errors or inadequate support, as follows: • One payment lacked documentation to support the tenant’s 2020 income or monthly income at the time of the application. • Five payments were for rent assistance for October and/or November 2022, which is after the period of performance. • One payment was for late fees; however, the lease agreement provided did not contain a late fee clause. Federal payment errors for the sample tested were $7,809. The total sample tested was $35,575, and assistance payments for the fiscal year totaled $4,678,044. Based on the sample tested, the dollar error rate for the sample was 21.95% ($7,809/$35,575), which estimates the potential dollars at risk for fiscal year 2023 to be $1,026,831 (dollar rate multiplied by the population). We tested three contract payments made after January 1, 2023. One payment for $165,000 was to obtain licenses to access ServiceNow for the period October 7, 2023, to January 31, 2026. This item was added to the contract on January 13, 2023. Additionally, it was noted that this access was purchased to access information related to other programs, along with ERA1. Therefore, these costs were not incurred or obligated prior to the end of the period of performance for ERA1, and the costs were not allocated to all benefitting programs as required. Cause: Inadequate review. Effect: Increased risk of loss or misuse of funds and non-compliance with Federal guidelines. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period, adequately documented, and comply with Federal requirements. Management Response: Coordination with the contractor is ongoing. Audit findings are shared and revised as training and management attention was discussed. There are many checks and balance steps that continue to be discussed and revised on a weekly basis during call in monitoring and reporting session.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023) the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR § 200.331 (January 1, 2023) states the following, in relevant part: The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section. (a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition of Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. (b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with the contractor. See the definition of contract in § 200.1 of this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: (1) Provides the goods and services within normal business operations; (2) Provides similar goods or services to many different purchasers; (3) Normally operates in a competitive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons. (c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract. 2 CFR § 200.511(b) (January 1, 2023) states, as is relevant, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit's schedule of findings and questioned costs. . . . (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must be described in the summary schedule. Condition: The Agency did not properly consider the Nebraska Investment Finance Authority (NIFA) to be a subrecipient. Additionally, the Agency did not properly complete the Summary Schedule of Prior Audit Findings. Repeat Finding: 2022-055 Questioned Costs: None Statistical Sample: No Context: In the previous fiscal year, the Agency considered NIFA to be a subrecipient and reported $451,581 in subrecipient expenditures on the Schedule of Expenditures of Federal Awards (SEFA). During the fiscal year ended June 30, 2023, the Agency paid NIFA $92,255 for ongoing Homeowner Assistance Fund (HAF) program administration. These payments were not reported as subrecipient expenditures because the Agency changed its determination and now considers NIFA to be a contractor rather than a subrecipient of the program. The APA disagrees with the Agency’s position that NIFA should be considered a contractor, as NIFA determines, to a substantial degree, the eligibility of applicants and, through that determination, informs State Accounting of which assistance payments are to be made and to whom. Additionally, NIFA is required to adhere to applicable Federal program requirements in the Federal award, and NIFA is administering the HAF program for a public purpose, not for the benefit of the Agency. Further, the position that NIFA is a contractor, rather than a subrecipient, of the HAF program does not reflect the Agency’s position in the Summary Schedule of Prior Audit Findings. The Schedule notes the following partial action taken: The Military Department will use subrecipient policies and procedures it has in place to continue to monitor the performance of NIFA and ensure that Federal guidelines are followed, and requirements are met. The Schedule also noted the following corrective action planned: The Military Department will modify the memorandum of Understanding between the parties to identify NIFA as a subrecipient and advise them of any additional requirements. The Agency’s position that NIFA is not a subrecipient of the HAF program was not properly communicated in the Summary Schedule of Prior Audit Findings as required by 2 CFR § 200.511(b)(2). Cause: Agency oversight. Effect: Noncompliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to review Federal guidelines to ensure subrecipients are properly identified, and that the Summary Schedule of Prior Audit Findings is completed properly. Management Response: Due to the Agency’s turnover recently, the response to this audit finding was in error. We agree with the finding and consider NIFA to be a Sub-Recipient.

Program: AL 21.026 – COVID-19 Homeowner Assistance Fund – Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR § 1000.10 (January 1, 2023), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. Per 2 CFR § 200.303 (January 1, 2023) states, in part, the following: 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. . . . 2 CFR § 200.403 (January 1, 2023) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (g) Be adequately documented. Condition: The Agency lacked adequate procedures for ensuring that payments were allowable. Repeat Finding: No Questioned Costs: $215 known Statistical Sample: No Context: We tested 25 assistance payments. One payment tested was for the incorrect amount. Per supporting documentation reviewed, the applicant owed $257 in past due utilities; however, a payment of $472 was issued to pay this outstanding balance, resulting in an overpayment of $215. The total sample tested was $50,612, and total assistance payments for the fiscal year were $27,300,898. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate for the sample was 0.42% ($215/50,612), which estimates the potential dollars at risk for fiscal year 2023 to be $114,664 (dollar rate multiplied by the population). Cause: Staff errors and inadequate review. Effect: Increased risk for errors or fraud. Recommendation: We recommend the Agency improve procedures for ensuring that payments are proper. Management Response: The agency recognizes the findings and agree with staff errors.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability & Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2022) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (C) Assistance to nonprofit organizations including programs, services, or capital expenditures, including loans or grants to mitigate financial hardship such as declines in revenues or increased costs, or technical assistance[.] 31 CFR § 35.6(c) (July 1, 2022) states the following: A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID–19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID–19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker's residing State's or county's average annual wage for all occupations as defined by the Bureau of Labor Statistics' Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID–19 public health emergency (such as a description of the eligible workers' duties, health, or financial risks faced due to COVID–19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2022) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID–19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designed to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 3. Negative Economic Impacts, c. Assistance to Nonprofits, states the following, in relevant part: (Page 4380) The interim final rule provided for, and the final rule maintains, the ability for recipients to provide direct assistance to nonprofits that experienced public health or negative economic impacts of the pandemic. Specifically, recipients may provide direct assistance to nonprofits if the nonprofit has experienced a public health or negative economic impact as a result of the pandemic. For example, if a nonprofit organization experienced impacts like decreased revenues or increased costs (e.g., through reduced contributions or uncompensated increases in service need), and a recipient provides funds to address that impact, then it is providing direct assistance to the nonprofit as a beneficiary under Subsection (c)(1) of Sections 602 and 603. Direct assistance may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID–19 public health emergency. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, b. Capital Expenditures, Overview of General Standards, states the following, in relevant part: (Page 4391) Large capital expenditures intended for general economic development or to aid the travel, tourism, and hospitality industries—such as convention centers and stadiums—are, on balance, generally not reasonably proportional to addressing the negative economic impacts of the pandemic, as the efficacy of a large capital expenditure intended for general economic development in remedying pandemic harms may be very limited compared to its cost. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2023), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non- Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR § 200.303 (January 1, 2023) states, in relevant part, the following: 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. Per 2 CFR § 200.403 (January 1, 2023), costs must be necessary, reasonable, and adequately documented. Good internal control and sound business practices requires procedures for ensuring that: 1) grants issued to beneficiaries are reasonable and proportional to the harm identified; 2) premium pay is correctly calculated; and 3) all expenditures of funds are for allowable purposes. Condition: The State lacked procedures for ensuring that grants issued to beneficiaries for worker retention and incentives were used for such purposes. The State lacked both procedures and the requisite knowledge to ensure that the premium charged to the grant was allowable. The State lacked procedures to ensure that grants to nonprofits were proportional to the negative economic harm incurred. The State lacked subrecipient monitoring procedures. The State possibly made fraudulent payments under the State’s nursing scholarship program. Repeat Finding: No Questioned Costs: $23,452,594 Known Statistical Sample: No Context: We noted the following: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment Nebraska Legislative Bill (LB) 1014 (2022), section 23, appropriated $20,000,000 from the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) grant to the Department of Health and Human Services (DHHS) for state fiscal year 2023 to be used for Developmental Disability (DD) provider rate increases for the purpose of enhancing employee retention and recruitment at the DD providers. DHHS implemented a 9% rate increase for select DD services in state fiscal year 2023. During the fiscal year, DD claims were paid out using State and Federal funds in accordance with the applicable Federal matching percentage (FMAP). In June 2023, DHHS made a journal entry to transfer $19,995,679 in expenditures from the State and Federal General Funds to the CSLFRF grant in accordance with the FMAP rates. LB 1014, section 27, appropriated $5,462,800 from the CSLFRF grant to DHHS for State fiscal year 2023 to be paid out to assisted-living facilities for the following: 1) “Incentives for staff members employed by the licensed assisted-living facility in order to enhance employee recruitment and retention”; and 2) “Assistance with costs for supplies and equipment purchased by the licensed assisted-living facility.” DHHS paid out $5,068,000 to assisted-living facilities during state fiscal year 2023. LB 1014, section 28, appropriated $20,000,000 from the CSLFRF grant to DHHS for state fiscal year 2023 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $20,000,000 to nursing facilities during state fiscal year 2023. During a testing of a random sample of 25 CSLFRF payments, we tested seven payments to nursing facilities, totaling $1,304,915. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014; however, DHHS acknowledged lacking procedures to ensure that the beneficiaries were using the funds for eligible recruitment and retention purposes. Additionally, DHHS failed to provide the required documented assessments per the Final Rule. Given the lack of procedures to support that funds were being used for allowable purposes, all seven payments of the $1,304,915 tested are considered questioned costs. Additionally, the entire $20,000,000 paid out during the fiscal year are considered potential dollars at risk. Additionally, we tested one $110,400 payment to an assisted-living facility under LB 1014, Section 27. Similar to the nursing facility payments tested, DHHS lacked procedures for ensuring that the assisted-living facilities were using the funds for eligible recruitment and retention purposes. Therefore, the $110,400 payment tested is considered a questioned cost. Lastly, we tested the journal entries transferring $19,995,679 in expenditures to the CSLFRF grant for DD provider rate increases. Again, DHHS lacked procedures for ensuring that the DD providers were using the funds for eligible recruitment and retention purposes. Therefore, the journal entries tested for $19,995,679 are considered questioned costs. We also noted that, due to an oversight error, one nursing facility that had certified Medicaid beds did not receive its proportional allocation of $43,138. Instead, that amount was split among the other nursing facilities that received payments. Premium Pay LB 1014, section 12, appropriated $3,546,602 to the Department of Veterans’ Affairs (DVA) from the CSLFRF grant to be used for premium pay. In September 2022, the DVA posted journal entries to move payroll costs of $3,546,602 to the CSLFRF grant. However, we noted that the DVA did not review the premium pay eligibility requirements, which resulted in the following errors: • The DVA moved $357,039 of payroll costs associated with individuals who had earnings of more than 150% of the applicable average wage for all occupations and were not exempt from the Fair Labor Standards Act overtime provisions, which is not allowable. • $145,205 of the payroll costs moved were for premium pay that exceeded $25,000 per person, which is not allowable. • The DVA moved payroll costs that were not for premium pay and were not in addition to wages the workers were already receiving. From a detail test of 25 employees, $371,683 out of $585,901 of payroll costs were not related to premium pay. After the errors noted above were communicated to the DVA, the DVA recalculated the amount to charge the CSLFRF grant for premium pay, and the DVA calculated that only $1,518,092 should have been charged to the CSLFRF grant. We verified that, for the 25 employees previously tested, the DVA’s revised calculation agreed to our calculation. We verified also that the DVA’s revised calculation excluded individuals whose wages exceeded 150% of the applicable average wage for all occupations, and premium pay was capped at $25,000 for each employee. Therefore, the $2,028,510 difference between the $3,546,602 charged to the grant and the revised calculation of $1,518,092 is considered a questioned cost. Assistance to Nonprofits LB 1014, section 46, appropriated $100,000,000 to the Department of Economic Development (DED) from the CSLFRF grant to be used to provide grants to qualified nonprofit organizations to assist with capital projects that have been delayed due to COVID-19. In order to receive a grant, a nonprofit had to submit a grant application attesting to have experienced negative economic harm due to the public health emergency. During our testing, we noted that DED did not require nonprofits to submit documentation to substantiate having experienced a negative economic impact due to the pandemic that was equivalent or reasonably proportional to the grant award. We also noted that, for two of the nonprofit payments selected for testing, the two nonprofits received grant awards of $12,664,600 each to be used solely for the purpose of construction and development of sports complexes for competitive sports and economic growth. Per the CSLFRF Final Rule, large capital projects intended for general economic growth are not generally proportional responses to negative harm. Therefore, if the nonprofits had not suffered an economic harm due to COVID-19, these projects would otherwise not be an eligible use of CSLFRF funds. We gave DED the opportunity to obtain documentation from the nonprofits to support that they experienced a negative economic impact proportional to the amount awarded. In all instances, DED was able to obtain documentation substantiating the negative economic harm in excess of the grant amounts awarded. University of Nebraska The University of Nebraska (University) was awarded $86,650,000 in a subaward to be used for a number of projects, including increasing the capacity of behavioral health care and rural health care. To monitor this subaward, the Military Department (Military) received and reviewed reports from the University and would have monthly meetings to discuss updates and whether deadlines were being met. Military stated that, beyond these monthly meetings, there were no planned procedures for reviewing any expenditures to ensure they were for allowable purposes and met the requirements of the Uniform Guidance, which is set out under 2 CFR Part 200 to establish uniform administrative requirements, cost principles, and audit requirements for Federal awards to non-Federal entities. We selected one CSLFRF expenditure recorded by the University. The payment was for $116,670 and made to a subrecipient of the University. The subrecipient was a behavioral health provider and was used to increase telehealth capacity. During review of supporting documentation, we noted that adequate documentation was not on file to support the salary and fringe benefits charged to the CSLFRF grant for the two subrecipient employees tested. The employees’ salary and fringe benefits had been allocated to the CSLFRF grant based on historical data and “prior experience with similar programs.” As noted in 2 CFR § 200.430(h)(8)(viii), however, “Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . .” Consequently, we consider the $8,090 in salary and benefits charged for the two employees to be questioned costs. The total salary and fringe benefits reimbursed on the payment tested amounted to $29,277. Nursing Scholarships During testing procedures, DHHS reported to us $5,000 in payments that were made due to fraudulent nursing scholarship applications submitted to, and accepted by, DHHS. Per DHHS’s subsequent review, the applicant fraudulently claimed on her application that she was enrolled in a nursing program during the spring and summer 2023 terms. DHHS has reported this to the U.S. Department of the Treasury. These $5,000 payments are considered questioned costs. Cause: The State had inadequate procedures to ensure that the grant was used for allowable purposes, and staff had inadequate knowledge of the requirements of the CSLFRF. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. We further recommend that the State take steps to recoup any payments for which either the beneficiary cannot support the proper use of the grant funds received or to the economic harm experienced. Management Response: Payments to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities for Employee Retention and Recruitment: Department of Health and Human Services (DHHS) disagrees with questioned costs of $21,410,994 ($1,304,915 Nursing Facilities, $110,400 Assisted Living Facilities, $19,995,679 Developmental Disabilities Providers). Payments made to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities followed federal regulations and were accurately distributed as directed by the legislature and signed legislation, LB1014. Payments to each facility were based on approved amounts in the legislative bill. In addition, DHHS properly passed requirements and regulatory information on to the providers. DHHS issued the following guidance document (as required by the legislation as well) https://dhhs.ne.gov/Grants%20and%20Contract%20Opportunity%20Docs/LB1014%20Guidance%20Document_DHHS%20DL%206-13-22.pdf#search=LB1014. If DHHS becomes aware of known unallowable activities, we will recoup applicable funds. Premium Pay: As noted in the Auditors Comments, NDVA made the necessary corrections to their workbooks to comply with these guidelines. However, the amounts reflected in the Auditors comments were only for eligible expenses through September of 2022 and did not take into consideration the entire Fiscal Year 2023. NDVA’s eligible expenses as of June 30, 2023, were $3,695,625, which exceeded the $3,546,602 appropriated in LB 1014 by approximately $148,460. Assistance to Nonprofits: DED acknowledges that with respect to its American Rescue Plan Act Shovel-Ready program in some cases it did not collect sufficient documentation to show the nonprofit organization suffered an economic harm related to and reasonably proportionate to DED’s award. University of Nebraska: NEMA continues to monitor the University of Nebraska (University) subaward through the review of reports and monthly progress meetings. APA Response: Per the CSLFRF final rule, the recipient, which is the State, must comply with the eligible use requirements and is ultimately responsible for the actions of its beneficiaries. No documentation was provided to support that the funds granted to Developmental Disability Providers, Assisted-Living Facilities, and Nursing Facilities were spent on allowable retention and recruitment efforts or that any applicable pre-analysis required by the CSLFRF final rule was completed. The journal entry prepared by NDVA was done in September 2022. It covers the premium pay given in November 2021 to June 2022. We were not provided a spreadsheet with updated calculations, nor did the Agency make any adjustments in the accounting system to show this as an offset of fiscal year 2023 expenses.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b)(4) (July 1, 2022) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b)(4) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was on file for all projects with expected capital expenditures over $1 million. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the quarters ending December 31, 2022, and June 30, 2023, Project and Expenditure Reports. We noted the following: Current and Cumulative Obligations Reported We selected for testing two of 21 projects from the quarter ending December 31, 2022, report and six of 57 projects from the quarter ending June 30, 2023. Two of the projects tested did not have current obligations or cumulative obligations reported correctly. The State reported cumulative obligations of $116,897,124 under project 72652020 (Shovel Ready). The Department of Economic Development (DED) was the agency responsible for administering this project. DED provided documentation showing that cumulative obligations were only $113,411,816 at December 31, 2022. Consequently, the December report was overstated by $3,485,308. However, we also noted that the State Legislature appropriated only $100 million in CSLFRF funds to be used on the Shovel Ready projects. Per discussion with DED, the difference between the amount of obligation and the amount of CSLFRF appropriations will be covered by State funds. Therefore, only $100 million in CSLFRF funds were obligated to the Shovel Ready project, so the report was overstated by a total of $16,897,124. We also reviewed the June 2023 report and noted that cumulative obligations were still being overstated by $13,503,516. Additionally, DED had obligated the funds for this project prior to October 1, 2022; however, the report incorrectly showed all these funds as obligated during the current period. Current period obligations were properly reported as $0 on the quarter ending June 30, 2023, report. We also noted that the cumulative obligations and current period obligations for Project 33209901 (State Park System Lagoon Projects) were not properly reported on the quarter ending June 30, 2023, report. The State reported cumulative obligations of $6,893,694. The Nebraska Game & Parks Commission was the agency responsible for administering this project. The supporting documentation provided by Game & Parks showed that only $6,786,249 was obligated at June 30, 2023. Additionally, a change order for $61,362 during the quarter was not included with the current-period obligations, resulting in current-period obligations being underreported. Capital Expenditures We noted five projects that either did not properly report expected capital expenditures, or the required written justification was not on file. • Project 72652021.1.12 (Mental Health Services) – The State reported no expected capital expenditures for this project. The project is comprised of four $10 million awards that DED made to entities for the purpose of expanding behavioral health services. Originally, when reporting this project, DED considered these payments to be beneficiary payments to the behavioral health service providers, not capital expenditures. After further discussion with DED, it was determined that these should have been treated as subawards, and expected capital expenditures should have been reported. Even though the expected capital expenditures were not reported correctly, DED did have written justification on file for capital expenditures of the project. • Project 25580005 (Improve Infrastructure) – The State reported $4,856,106 in expected capital expenditures for this project. However, the Department of Health and Human Services (DHHS) treated each subaward under this project separately when determining if written justification was required. As no single subaward was for $1 million or more, DHHS did not document any written justification. • Project U5991971490 (NE Rural Healthcare Education) – The State reported $0 in expected capital expenditures for this project, which was for the construction of a new rural healthcare education building. DAS stated that this was reported in error, and the actual amount of expected capital expenditures would be $50,000,000. Even though the expected capital expenditures were not reported correctly, written justification was on file for the capital expenditures of this project. • Project 48697142 (Workforce Development Center at Northeast) was reported as having no expected capital expenditures. Through discussion with the Coordinating Commission on Post-Secondary Education, the project had at least $1 million in expected capital expenditures and should have been reported as such on the quarterly report. Written justification for the capital expenditures of the project was on file. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report. Not all information reported by the agencies was accurate. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file. Management Response: As of the reporting period ended December 31, 2023, DED obligations under the Shovel Ready project are reflected as $100 million, which agrees to federal ARPA funds appropriated by the Legislature. State Park System Lagoon Project obligations are provided by Game and Parks for each quarterly report. DHHS partially agrees with the finding. We have the written justification but did not provide to the APA timely for the audit.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Subrecipient Monitoring Grant Number & Year: All open, including 4420-DR-NE, declared March 21, 2019 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 200.332 (January 1, 2023) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 2 CFR § 200.501(b) (January 1, 2023) states, in relevant part, the following: “A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 . . .” Per Chapter VII, Section B, of the Agency’s 2023 Annual Administrative Plan for the Public Assistance Program, it is the State’s responsibility to review Single audits completed by subrecipients and to ensure appropriate action is taken for adverse findings. A good internal control plan requires procedures to ensure subrecipient audits are reviewed timely. Condition: The Agency did not ensure subrecipient Single Audits were obtained timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency utilizes a spreadsheet to track whether subrecipients obtain Single Audits when required. Additionally, the Agency sends letters to all subrecipients requiring them to respond on whether they were required to obtain a Single Audit. However, the Agency did not complete these processes during fiscal year 2023. We selected six subrecipients for testing that would have required a Single Audit be issued during State fiscal year 2023 based on the amount of funds they received from the Agency. For all six subrecipients tested, the Agency had not verified whether or not the subrecipients obtained Single Audits prior to our inquiry in December 2023. One of the six subrecipients appears to have required a Single Audit because it received $1,261,565 in disaster grant funds passed through the Agency during fiscal year 2022, but it did not obtain one. Cause: According to Agency representatives, the process was not completed due to a severe lack of staffing. Effect: Without adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure subrecipient audits are reviewed timely. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 97.036 – Disaster Grants - Public Assistance (Presidentially Declared Disasters) – Reporting Grant Number & Year: 4420-DR-NE, declared March 21, 2019; 4521-DR-NE, declared April 4, 2020; 4641-DR-NE, declared February 23, 2022; 4662-DR-NE, declared July 27, 2022 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR § 170, Appendix A I. (January 1, 2023) states, in relevant part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure that all subawards subject to Federal Funding Accountability and Transparency Act (FFATA) reporting are submitted on time. Condition: FFATA reporting was not submitted for one of 22 subawards tested. FFATA reporting was not submitted timely for 21 of 22 subawards tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had 215 subawards obligated during the fiscal year ended June 30, 2023. We tested 22 of the subawards. One of those subawards was not reported as of January 30, 2024. The subaward should have been reported by February 28, 2023. The subrecipient has not obtained a unique identifying number. The Agency first followed up with the subrecipient regarding the need to register for a unique identifying number over 10 months after funds were obligated to the subrecipient. Additionally, the Agency did not submit the other 21 subawards tested timely. The subawards were reported between 105 and 435 days late. See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were not properly implemented to ensure that all subawards were reported as required. Effect: Without adequate procedures, there is an increased risk that subawards will not be reported timely, if at all. Recommendation: We recommend the Agency improve its procedures to ensure that all subawards are reported as required. Management Response: Due to the Agency’s extreme staffing shortage which has persisted for two years, NEMA has had to prioritize workload. This has been particularly acute with Federal Aid Administrators to whom the tasks of subrecipient monitoring fall. Several projects slipped the normal timeframes for completion.

Program: AL 20.509 – Formula Grants for Rural Areas – Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-013-00, Performance End FFY 2023; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.403 (January 1, 2023) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR § 200.332(d) (January 1, 2023) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR § 200.430(i)(1) (January 1, 2023) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 2 CFR § 200.431(b) (January 1, 2023) states the following, in relevant part: Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: * * * * (2) The costs are equitably allocated to all related activities, including Federal awards . . . . 2 CFR § 200.467 (January 1, 2023) states the following: Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. Per 2 CFR § 200.405(a) (January 1, 2023), “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.” Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2022-057 Questioned Costs: $82,967 known (NE-2019-013-00 $82,121; NE-2022-019-00 $846) Statistical Sample: No Context: During the fiscal year, the Agency paid 58 subrecipients a total of $10,974,293. We selected 24 payments to subrecipients for testing. The Agency performed financial reviews for subrecipients; however, the reviews tested did not always include all necessary supporting documentation. When additional documentation was needed, we gave the Agency the opportunity to obtain additional support from the subrecipient; however, adequate support was not always obtained or able to be provided. Our random sample included an operating assistance reimbursement to North Fork Area Transit (NFAT). As identified in both the prior Single audit and a separate letter sent to the Agency, dated August 7, 2023, reimbursements for questionable expenditures were made to NFAT during the period April 1, 2022, to November 30, 2022. The former NFAT director was alleged to have committed fraud during this period. Our current testing included the reimbursement for NFAT’s August 2022 expenditures. The payment tested reimbursed NFAT $201,438 in Federal dollars. Of that amount, $78,348 was questioned, as follows: • NFAT was reimbursed $21,665 for nonoperating personnel when the timesheets supporting the time worked were all copies of the same timesheet. • NFAT was reimbursed $29,072 for operating personnel hours worked that did not appear reasonable. We noted nine employees whose hours for the four-week period were between 234.6 to 321.12 hours. This averages from 58.65 to 80.28 hours per week for each employee. Such large weekly averages give rise to concerns about not only the reasonableness and necessity of these payments but also possible compliance issues with labor standards – not to mention safety issues for riders. This was also identified in the letter dated August 7, 2023, in which employees were identified as working excessive overtime. An additional $376 was questioned, as the number of work hours for which one employee received compensation did not agree to those listed on his timesheet. • NFAT was reimbursed $12,874 for vendor payments that never appear to have cleared the bank. Invoices and checks were provided to support the maintenance expenses reimbursed; however, the checks provided never cleared the bank. This was also identified in the letter dated August 7, 2023, which noted that the Director appeared to have written the checks but not paid the vendors. • NFAT was reimbursed $14,361 for a duplicate payment. An invoice and check were provided to support the reimbursement of an insurance expense; however, this same expense was also submitted and reimbursed by the Agency in NFAT’s September 2022 request for reimbursement. We also noted issues with 12 of the 24 subrecipient payments tested, amounting to $4,619 in questioned costs, due to the following: • For eight subrecipients tested, documentation was inadequate to support that personnel charges were allowable and in accordance with Federal cost principles, resulting in questioned costs of $2,705. Specifically, we noted the following: o Payments for employee leave was not equitably allocated based on time worked. o One subrecipient had wages reimbursed based on budgeted amounts. o One subrecipient was reimbursed for health insurance for two employees who had elected to receive wages in lieu of such insurance. o One subrecipient requested reimbursement for wages that did not agree with the amount paid to employees. • For six subrecipients tested, questioned costs of $1,914 were identified due to inadequate support for capital and nonoperating costs. Questioned costs included the following: o One subrecipient was reimbursed for carpet adhesive that was later returned to the store. The subrecipient reimbursed the Director for the purchase of the carpet adhesive on her personal credit card, but the Agency was unable to identify a subsequent reimbursement request that reduced the amount sought for the returned items. Additionally, the subrecipient paid the Director for travel to another state to purchase the carpet adhesive, which not only could have been obtained from a more nearby merchant but also was ultimately returned. o Unreasonable travel reimbursements were noted. Among those was reimbursement for costs incurred by the subrecipient’s Director to travel to a meeting of an unaffiliated organization’s Board of Directors upon which she served as a member. That travel to attend a separate Board meeting was unrelated to the transit program. o A subrecipient was reimbursed for fees related to obtaining a trademark, which appears to have been a marketing expense that was not approved by the Federal awarding agency. o One subrecipient was reimbursed for an administrative fee that was not supported. The payment tested included a 7% administrative fee that was not specified in the agreement. o One subrecipient was reimbursed for unreasonable items, such as Christmas décor and Christmas candy. o One subrecipient was reimbursed for bookkeeping expenses; however, the subrecipient did not provide documentation to support that the amount allocated for that purpose was reasonable. Based on the sample tested, we estimate the potential dollars at risk for the fiscal year to be $501,670, as detailed below: See Schedule of Findings and Questioned Costs for chart/table. Cause: Procedures were inadequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT concurs with the findings and has revised reimbursement guidelines for subrecipients, clarifying allowed expenses and required documentation. Over the next 6-12 months, NDOT will conduct training sessions with subrecipients and collaborate with internal auditors on compliance matters. The establishment of the “Federal Oversight” unit within the Transit Section aims to improve monitoring, consistency, and compliance with federal requirements for all subrecipients.

Program: AL 20.509 – Formula Grants for Rural Areas – Subrecipient Monitoring Grant Number & Year: NE-2021-011-00, Performance End FFY 2024; NE-2022-019-00, Performance End FFY 2024 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR § 1201.1 (January 1, 2023), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR § 200.332 (January 1, 2023) requires all pass-through entities to do the following: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. . . . Required information includes: (1) Federal award identification. * * * * (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date[.] Good internal control requires procedures to ensure that subrecipients are informed of all required information. Condition: The Agency did not communicate all required information to subrecipients. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: During the fiscal year, 58 subrecipients received Federal funding. We tested six subrecipients and noted that the Agency did not properly communicate to them the FAIN, the Federal award date, or the subaward period of performance start and end dates. For the six subrecipients tested, the Agency provided a supplemental agreement that identified the availability of new Federal funding; however, the supplemental agreement did not communicate all necessary Federal award information. Subrecipient expenditures totaled $10,974,293 during the fiscal year. Cause: The supplemental agreement sent to all subrecipients did not include the FAIN, the Federal award date, or the subaward period of performance start and end dates. Effect: When subrecipients are not informed of all required information, there is an increased risk for subrecipient noncompliance, including with audit requirements. Recommendation: We recommend the Agency strengthen subrecipient agreements to ensure that subrecipient program agreements include all information required to be communicated. Management Response: NDOT acknowledges all findings and has incorporated Federal Identification details into the updated supplemental agreement template, intending to include all FAIN information in future supplemental agreements.

Program: Various, including AL 93.778 ? Medical Assistance Program ? Allowable Costs/Cost Principles Grant Number & Year: Various, including #2105NE5ADM, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR ? 200.403 (January 1, 2022) and 45 CFR ? 75.403 (October 1, 2021) state, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR ? 200.405(b) (January 1, 2022) and 45 CFR ? 75.405(b) (October 1, 2021) state, in relevant part, the following: All activities which benefit from the non-Federal entity?s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR ? 200.444(a) (January 1, 2022) and 45 CFR ? 75.444(a) (October 1, 2021) state, in relevant part, the following: For states, local governments, and Indian Tribes, the general costs of government are unallowable ?.Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . [.] (2) Salaries and other expenses of a state legislature . . . [.] 2 CFR ? 200, Appendix V, subsection (G)(2), (January 1, 2022) and 45 CFR ? 75, Appendix V, subsection (G)(2), (October 1, 2021) state the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR ? 200, Appendix V, subsection (G)(4), (January 1, 2022) and 45 CFR ? 75, Appendix V, subsection (G)(4), (October 1, 2021) state, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. These adjustments will be made through one of the following adjustment methods: (a) a cash refund including earned or imputed interest from the date of transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations to the Federal Government for the Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c) adjustments to future billing rates, or (d) adjustments to allocated central service costs. A good internal control plan requires: ? Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure such charges are appropriate for the services provided. ? Maintenance of adequate documentation to support both rates charged and the approval of those rates. ? Periodic review of internal service fund balances to ensure revenues are not in excess of expenses. ? Internal service rates that are published and available for State agency review and applied consistently for all State agencies. Condition: The Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates. Additionally, the Agency?s Material Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding was noted in prior audits since 2015. Lastly, the Accounting Internal Service Fund balance was greater than 60 calendar days for cash expenses for normal operations incurred. A similar finding was noted in the prior audit. Repeat Finding: 2021-024 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Building Division The rental rate charged to agencies for building space includes an allocation for indirect costs for administration, grounds keeping, security, and energy management. We noted that neither the State Capitol nor the Governor?s residence were allocated any costs for security, even though there is security at both locations. Because these locations were not allocated any security costs, Federal programs could be overcharged. Additionally, security costs to the State Capitol and the Governor?s residence are general costs of government and, therefore, not allowable. The fiscal year 2022 indirect allocations for security totaled $884,797. Material Division We tested three Print Shop billings and noted the following: ? In prior audits, we noted that 24 Print Shop rates were based on calculations from fiscal year 2008, and 3 other Print Shop rates were based on calculations from fiscal year 2011. The Print Shop increased all the rates by 10% in fiscal year 2019, then increased the rates by an additional 5% in fiscal year 2020. In 2022, the rates were decreased by 5%. No support was provided to show that the current rates are reasonable. ? The Agency?s published markup price for special purchases, paper costs, plate material, special order supplies, and colored ink was 35%. The Agency did not have adequate documentation to support the reasonableness of the markup percentage rate. Receipts from sales of print shop services during the fiscal year ended June 30, 2022, totaled $2,835,540. Accounting Division Per the Agency?s calculation, as of June 30, 2021, the Accounting Services Internal Service Fund Balance for allowable costs was $4.528 million; however, the allowable reserve was only $1.007 million, a difference of $3.521 million, more than triple the allowable reserve. The Agency has not completed its calculation for June 30, 2022. The Auditor of Public Accounts (APA) estimate of the fund balance, per review of the accounting system, as of June 30, 2022, was $4.388 million, and the APA estimate of the allowable reserve was $1.007 million, a difference of $3.381 million. Therefore, the Agency appears to be charging too much for services. Cause: Inadequate procedures. Effect: When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs will be overcharged for services, and the Agency?s internal service funds will exceed the allowable threshold per Federal regulations. Recommendation: We recommend the Agency review its allocation of security costs to ensure that such costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. Lastly, we recommend the Agency implement procedures to ensure fund balances do not exceed the allowable threshold. Management Response: The Building and Grounds security allocation is based on a management business decision. The Print Shop lacked the data needed to substantiate current rates at the individual service line level. In response to the prior year finding, the Print Shop purchased a Cost Rate Advisor license to support future rate setting methodology at the individual service line level. The Print Shop expects to finalize its analysis by July 2023. State Accounting Rates were reduced by $450,000 in fiscal year 2021, and from that level reduced another $132,000 in fiscal year?s 2022 and 2023 (current biennium). Further offsets of $700,000 are planned for each year of the coming biennium, and planned expenditures will exceed billed revenues by $1.7 million to bring the cash balance to within a 60-day operating level by June 2025.

Program: Various, including AL 93.767 ? Children's Health Insurance Program, AL 93.778 ? Medical Assistance Program ? Reporting Grant Number & Year: Various, including #2105NE5021, FFY 2021; #2105NE5ADM, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented. Title 45 CFR ? 75.510(b) (October 1, 2021) and Title 2 CFR ? 200.510(b) (January 1, 2022) state, in part, the following: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program . . . (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. ? 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne (E1) is the official accounting system of the State. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified Administrative Services of the errors, and the SEFA was subsequently adjusted. A similar finding was noted in the prior audit. Repeat Finding: 2021-025 Questioned Costs: None Statistical Sample: No Context: Administrative Services is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. Administrative Services compiles the SEFA from information obtained from the individual agencies, which is then submitted to the APA. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including underreporting AL 93.767 by $16,394,237 and overreporting AL 93.778 by $13,908,580. The Department of Military underreported AL 97.036 by $41,491,068. The Department of Labor overreported AL 17.225 by $5,286,008. Several agencies did not properly identify COVID-19 expenditures. Twenty-seven programs for various State agencies needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: Administrative Services lacked adequate procedures for ensuring the accuracy of amounts not obtained directly from the accounting system. Administrative Services established a specific account code for aid to subrecipients, but not all agencies utilized this code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not being audited that should be. Recommendation: We recommend Administrative Services improve procedures to ensure the SEFA is complete and accurate. Management Response: We will continue to work with State teammates to ensure the SEFA is accurate and complete. The original total SEFA expenditures were 99.3% accurate.

Program: Various, including AL 84.010 ? Title I Grants to Local Educational Agencies; AL 93.568 ? Low-Income Home Energy Assistance (LIHEAP); and AL 93.659 ? Adoption Assistance ? Cash Management Grant Number & Year: Various Federal Grantor Agency: Various Criteria: 31 CFR ? 205.12 (July 1, 2021) states, in part, the following: (a) We and a State may negotiate the use of mutually agreed upon funding techniques. We may deny interest liability if a State does not use a mutually agreed upon funding technique. Funding techniques should be efficient and minimize the exchange of interest between States and Federal agencies. (b) We and a State may base our agreement on the sample funding techniques listed in paragraphs (b)(1) through (b)(5) of this section . . . . * * * * (3) Average clearance means that a Federal Program Agency, on the dollar-weighted average day of clearance of a disbursement, transfers to a State a lump sum equal to the actual amount of funds that the State is paying out. The dollar-weighted average day of clearance is the day when, on a cumulative basis, 50 percent of the funds have been paid out. The dollar-weighted average day of clearance is calculated from a clearance pattern, consistent with ?205.20. Per 31 CFR ? 205.19(e) (July 1, 2021) states, in part, the following: A State may use actual data, a clearance pattern, or statistical sampling to calculate interest. A clearance pattern used to calculate interest must meet the standards of ? 205.20. Per 31 CFR ? 205.20 (July 1, 2021): States use clearance patterns to project when funds are paid out, given a known dollar amount and a known date of disbursement. A State must ensure that clearance patterns meet the following standards: * * * * (b) A clearance pattern must accurately represent the flow of Federal funds under the Federal assistance programs to which it is applied. Per 31 CFR ? 205.22(b) (July 1, 2021): An authorized State official must certify that a clearance pattern corresponds to the clearance activity of the Federal assistance program which it is applied. An authorized State official must re-certify the accuracy of a clearance pattern at least every five years. . . . A State can begin to use a new clearance pattern on the date the new clearance pattern is certified. Condition: The Agency lacked adequate procedures to ensure that Federal funds were drawn in compliance with the Treasury Service Agreement (TSA). Repeat Finding: No Questioned Costs: N/A Statistical Sample: No Context: Twelve programs for the State use ?Average Clearance? to request Federal funds. For Average Clearance, the funds are requested so that they are deposited on the dollar-weighted average day of clearance for the disbursement. Clearance patterns are recalculated every five years. The Agency uses historical data to determine the number of days each check was outstanding (clearance time). The clearance time is multiplied by the percentage of total disbursements for those checks, and a dollar-weighted average day of clearance is determined by summing the clearance factor for each day. A clearance pattern of 3.43 days would have 57% of funds deposited on day three and 43% deposited on day four. On December 14, 2021, the Agency and the U.S. Department of the Treasury signed the TSA, establishing the Letter of Credit clearance patterns to be used for the period of July 1, 2021, through June 30, 2022. As of the date of the APA?s review in November 2022, however, the Agency had not yet updated the Delay of Draw (DOD) system to reflect these clearance patterns. Consequently, the Agency continued to draw Federal funds using the fiscal year 2021 clearance patterns, some of which were last calculated in fiscal year 2016. The APA identified three Federal programs that were drawing Federal funds at a faster rate than allowed by the TSA. ? AL 84.010 draws funds through multiple DOD #?s, including DOD #0999. DOD #0999 was not properly updated from a 3-day clearance pattern to the certified clearance pattern of 3.43 days for fiscal year 2022. This resulted in the early draw of 43% of AL 84.010 funds drawn through DOD #0999. ? AL 93.568 draws funds through multiple DOD #?s, including DOD #2761. DOD #2761 was not properly updated from a 3-day clearance pattern to the certified clearance pattern of 3.37 days for fiscal year 2022. This resulted in the early draw of 37% of AL 93.568 funds drawn through DOD #2761. ? AL 93.659 draws funds through multiple DOD #?s, none of which were properly updated from a 3-day clearance pattern to the certified clearance pattern of 4.24 days. This resulted in the early draw of AL 93.659 funds by 1.24 days. During testing of 25 Federal deposits, we noted the following: ? For one deposit tested, the Agency drew down $117,779 more in Federal funds than there were recorded as expenditures in E1, the State?s accounting system. The Agency held these funds throughout the fiscal year, continuing to do so until the APA raised concerns about them. See Schedule of Findings and Questioned Costs for chart/table. ? Due to the previously noted error in updating the DOD system, for 2 of 25 Federal draws tested, the APA noted that the Agency drew Federal funds earlier than were allowed under the TSA. As the State would have been entitled to the overdrawn funds the following day, there are no questioned costs. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review of drawdowns. Agency staff stated that they had not had time to update the clearance patterns in the DOD system. Effect: Without adequate procedures to ensure that Federal drawdowns comply with the TSA, there is an increased risk of noncompliance with Federal requirements, which could lead to interest penalties and sanctions. Recommendation: We recommend the Agency strengthen its procedures for ensuring that clearance patterns are updated in a timely manner to comply with the TSA, and draws are supported by expenditures in the accounting system. Management Response: Management agrees with the finding and has updated clearance patterns to align with the most recent TSA agreement.

Program: AL 21.027 ? COVID-19 ? Coronavirus State and Local Fiscal Recovery Funds ? Allowability Grant Number & Year: NA Federal Grantor Agency: U.S. Department of the Treasury Repeat Finding: No Questioned Costs: $12,392,009 known Statistical Sample: No Summary: Audit Finding 2022-007, included in Part II of this report, relates to both the financial statements and Federal awards. In June 2022, the Department of Corrections (NDCS) performed journal entries, moving payroll costs of $20,395,464 from the State General Fund to the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) grant. The transfer included an $8 per hour wage increase for Corrections Corporals, Sergeants, and Unit Caseworkers. The transfer also included overtime, shift differential, and on-call hours for all staff. The amount for overtime, shift differential, and on-call hours was not in accordance with Federal regulations for SLFRF, which allows only for the portion of employee?s time spent responding to COVID-19, and was not in accordance with Legislative Bill 1014 (April 13, 2022). Section 12 of LB 1014 states that the funds are ?related to premium pay for Public Health and Public Safety positions as a result of COVID-19 conditions . . . .? Unallowable costs totaled $12,392,009 ($20,395,464 less premium pay allowed of $8,003,455). Recommendation: We recommend NDCS implement procedures to ensure that Legislative Bills and Federal regulations are adhered to. Management Response: As indicated in an email to the APA dated December 2, 2022, NDCS does not agree with the APA's finding regarding overtime, shift differential and on-call hours. NDCS believes these are allowable expenses under the federal regulations for CSLFRF and the Final Rule. COVID conditions resulted in significant vacancies in NDCS' facilities. Mandatory overtime was necessary for the majority of staff, especially those who had direct contact with inmates. This included those who provided medical/mental health, food service and other services to inmates, as well as those who oversaw administrative and support roles. Daily staffing decisions/assessments were made to maintain safe and secure operations for inmates, team members and the public at all times, since these facilities require staffing 24/7/365. Further, NDCS submitted additional documentation to the APA for the $8 wage increase incurred during FY 2023. As indicated by APA, the $8 wage increase was an allowable expense. As referenced in the information sent to the APA, under State of Nebraska accounting policies and procedures, any federal funds received in a prior fiscal year carryover into the next fiscal year. We remain confident the documentation submitted by NDCS meets federal regulations. APA Response: The ?Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule,? issued by the U.S. Department of the Treasury (Department) in January 2022, states clearly, on page 26 thereof, the following: SLFRF funding may be used for payroll and covered benefits for public safety, public health, health care, human services and similar employees of a recipient government, for the portion of the employee?s time spent responding to COVID-19. (Emphasis added.) Likewise, on page 27 of that same document, the following reiteration is provided: SLFRF funding may be used for payroll and covered benefits for the portion of the employees? time spent on COVID-19 response, as calculated above, through the period of performance. (Emphasis added.) As noted in audit finding 2022-007, moreover, page 4385 of the Final Rule contains the following: At the same time, many public health and safety workers perform roles unrelated to COVID?19; coverage of all roles would be overbroad compared to the workers responding to COVID?19 in actuality. For this reason, the final rule maintains the interim final rule?s approach to permitting SLFRF funds to be used for public health and safety staff primarily dedicated to responding to COVID?19. (Emphasis added.) Despite these explicit and unambiguous directives, NDCS attempts to defend its questioned expenditure of SLFRF funds by stating, ?All public safety workers are presumed to have worked in a COVID capacity.? In addition to risking precisely the type of ?overbroad? coverage warned against, such an outlook flies in the face of the Final Rule?s requirement that a proper allocation of SLFRF funds must be based upon a periodic documented assessment showing that any employee or unit/division receiving such grant monies has been ?primarily dedicated? to responding to COVID-19. This is explained in detail on page 4384 of the Final Rule, which includes the following: Recipients are generally required to be able to support uses of SLFRF funds as eligible, including, in this instance, maintenance of records to support an assessment that public health and safety staff are primarily dedicated to responding to COVID?19. (Emphasis added.) An unsubstantiated presumption, such as that relied upon by NDCS, is insufficient to meet this plain requirement. Furthermore, we noted that overtime, shift differential, and on-call hours paid during the six-month period prior to the pandemic were almost indistinguishable from those paid during the pandemic; this indicates that the staffing issues faced by NDCS were not caused primarily by COVID-19. The APA did not test documentation related to FY2023 that was received subsequent to our testing of the FY2022 transactions. State policies do allow for carryover of General Fund appropriations with certain restrictions; however, State policies do not allow for the charging of expenditures prior to the date of the obligation. FY2023 wages were not an allowable FY2022 expenditure per State or Federal policies.

Program: AL 84.010 ? Title I Grants to Local Educational Agencies ? Allowability and Subrecipient Monitoring Grant Number & Year: S010A190027, FFY 2020; S010A200027, FFY 2021 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 3474.1 (January 1, 2022), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR ? 200.102(a) and 200.207(a). Per 2 CFR ? 200.403 (January 1, 2022), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2022) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . . ; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity . . . . ; and * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Enclosure A of the ?Letter to Chief State School Officers on Granting Administrative Flexibility for Better Measures of Success? (September 7, 2012) provides guidelines for local educational agencies (LEAs), using a substitute system for time-and-effort reporting. Enclosure A states, in relevant part, the following: (3) Employee schedules must: a. Indicate the specific activity or cost objective that the employee worked on for each segment of the employee?s schedule; b. Account for the total hours for which each employee is compensated during the period reflected on the employee?s schedule; and c. Be certified at least semiannually and signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee. 2 CFR ? 200.332 (January 1, 2022) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: * * * * (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient . . . . A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to follow up with subrecipients to ensure they are correcting deficiencies and in compliance with applicable regulations. Condition: The Agency lacked procedures to ensure that subrecipients documented their use of Federal awards appropriately. Repeat Finding: No Questioned Costs: $145,101 known (S010A190027, $8,041; S010A200027, $137,060) Statistical Sample: No Context: We randomly selected 25 subrecipient payments and also chose the largest subrecipient payment for testing. We noted the following: ? Several employees? salaries and benefits were included in the reimbursement requests; however, the Agency did not require subrecipients to submit documentation for these expenditures, other than reports from their accountings systems, at the time of reimbursement. We provided the Agency with an opportunity to request documentation from its subrecipients to support that their salaries and benefits expenses were allowable and in accordance with Federal cost principles; however, two of the subrecipients did not provide adequate support to show that their salaries and benefits were allocable to the grant, resulting in $8,041 sample questioned costs and $137,060 non-sample questioned costs. ? The Agency?s procedure is to perform fiscal reviews of each subrecipient at least once every three years. We reviewed the most recent fiscal reviews for the same 26 subrecipients selected for testing above. For five of these reviews, the Agency noted that the subrecipient did not maintain adequate documentation for salaries and benefits. When we inquired with the Agency regarding what had been done to follow up on its findings, the Agency replied that the findings did not require follow-up. Payment errors noted for the sample tested were $8,041. The total sample tested was $1,494,006. Subrecipient aid payments for the fiscal year ended June 30, 2022, totaled $91,043,602. The sample population was $84,396,850 (total population $91,043,602 less $6,646,752 to largest subrecipient that was separately determined to be allowable). Based on the sample tested, the case error rate was 8% (2/25). The dollar error rate for the sample was 0.54% ($8,041/$1,494,006), which estimates the potential dollars at risk for fiscal year 2022 to be $455,753 (dollar rate multiplied by the population). Cause: Inadequate procedures. Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to monitor subrecipients, including reviewing detailed supporting documentation for payroll expenses and following up with subrecipients to ensure that they correct errors noted. Management Response: The Department agrees the two subrecipients sampled did not complete one time and effort certification semi-annually (rather completed annually instead) or with all language suggested in the guidelines from the U.S. Department of Education. However, the Department disagrees with the reimbursement being questioned costs as the time and effort certifications demonstrated adequate documentation to support the employees? activities were allowable for the Title I grant. In the absence of this information, the Department submitted affidavits from the two LEA?s supervisory staff with personal knowledge of the work performed consistent with the U.S. Department of Education?s audit resolutions practices; whereas the APA does not consider documentation after the fact to be adequate to eliminate the finding. The findings noted in the subrecipient fiscal monitoring exit letters were identified for technical assistance purposes only and not considered to have met a level of materiality that required a corrective action plan. Corrective action plans are clearly noted in subrecipient fiscal monitoring exit letters when issued and proper follow-up action is taken when this occurs. Technical assistance was provided to each of the subrecipients at the time of the monitoring review as well as to all subrecipients periodically throughout the year. APA Response: Per the Uniform Guidance, questioned costs include expenditures that lack adequate supporting documentation at the time of the audit. 2 CFR ? 200.430(i)(1) (January 1, 2022), as referenced in the report comment, says that such documentation must ?accurately reflect the work performed? and be ?supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.? Affidavits dated February 27, 2023, some 18 months after the salary and benefit expenses occurred, cannot possibly satisfy either of these requirements and are, therefore, not acceptable. As the documentation provided did not meet the minimum requirements set forth in Uniform Guidance and guidance issued by the U.S. Department of Education, the expenditures at issue must be considered questioned costs. Moreover, the Uniform Guidance requires the Agency, as the pass-through entity, to ensure that the subrecipient takes timely and appropriate action to address deficiencies identified not only during audits but also from the Agency?s own reviews. The Agency has noted issues similar to those addressed by the APA ? namely, that the subrecipients have lacked adequate supporting documentation for salary and benefit expenses. The Agency performs subrecipient fiscal monitoring for most subrecipients only every third year. Thus, effective follow-up procedures, as required by 2 CFR ? 200.332 (January 1, 2022), are needed to ensure that subrecipients implement the technical assistance provided by the Agency.

Program: AL 93.575 ? Child Care and Development Block Grant - Allowable Costs/Cost Principles Grant Number & Year: 2201NECCDD, FFY 2022 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: 45 CFR ? 75.403 (October 1, 2021) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also ?? 75.300 through 75.309. Per 45 CFR ? 75.303 (October 1, 2021): 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. 45 CFR ? 75.302 (October 1, 2021) requires financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. 45 CFR ? 75.511(b) (October 1, 2021) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. A good internal control plan also requires that Federal reports be reconciled to accounting records, and adjustments and reconciling items be resolved in a timely manner. Condition: The Agency did not have adequate procedures to ensure administrative costs charged through the Cost Allocation Plan (CAP) were properly reconciled, and adjustments to the CAP were proper. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2021-030 Questioned Costs: $38,730 known Statistical Sample: No Context: At the end of each quarter, the Agency performs a fund mix adjustment (FMA) between State and Federal funds based upon expenditures recorded on the accounting system and how costs should be recorded according to the Agency?s cost allocation plan. We tested three journal entries to reconcile expenditures to the CAP. For one Child Care and Development Block Grant FMA tested, multiple cost centers were erroneously excluded from the calculation, resulting in the Agency improperly charging $38,730 in expenditures to Federal funds when State funds should have been used. Cause: Inadequate procedures to ensure that all cost centers are reconciled, and adjustments to the CAP are proper. Effect: Unallowable expenditures were charged to Federal funds. When costs are not reconciled accurately, there is an increased risk for errors, fraud, and non-compliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure reconciling entries are complete and accurate. We further recommend the Agency strengthen review procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees.

Program: Various, including AL 10.561 ? State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.558 ? Temporary Assistance for Needy Families; AL 93.566 ? Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 ? Child Care and Development Block Grant ? Allowable Costs/Cost Principles Grant Number & Year: Various, including 202121S251443, FFY 2021; 202222S251443, FFY 2022; 1901NETANF, FFY 2019; 2101NERCMA, FFY 2021; 2201NERCMA, FFY 2022; 2201NECCDD, FFY 2022 Federal Grantor Agency: U.S. Department of Agriculture and U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2021) states, in relevant part, the following: 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. 45 CFR ? 75.403 (October 1, 2021) requires costs to be necessary, reasonable, and adequately documented. 45 CFR ? 75.302 (October 1, 2021) requires financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. 45 CFR ? 75.405(a) (October 1, 2021) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per 2 CFR ? 400.1 (January 1, 2022), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. 2 CFR ? 200.303 (January 1, 2022) states, in part, the following: 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. 2 CFR ? 200.403 (January 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.405(a) (January 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR ? 75.511(b) and 2 CFR ? 200.511(b) (January 1, 2022) state, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Good internal control requires procedures to ensure that amounts charged to Federal programs are proper. Condition: The Agency did not properly charge Federal programs for seven allocations tested. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2021-031, 2021-032 Questioned Costs: $44,356 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: For seven of 14 allocations tested, we noted the following: ? We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended September 30, 2021, which is allocated based on Time & Effort reports. The payroll costs for 85 employees were charged to the cost center; however, four of the employees? payroll costs should not have been charged to the cost center. The four employees tested included a Federal Aid Administrator, a Program Accuracy Specialist, and two Office Specialists. The supervisors they worked with were not charged to this cost center, and the employees were not employed as Resource Developers, which was the job title of most of the employees included in this cost center. As a result of these employees being charged to the Resource Development cost center instead of their appropriate cost centers, Child Care and Development, Foster Care, Adoption Assistance, Guardianship Assistance, and Medicaid were not charged correctly, ranging from undercharges of $2,653 to overcharges of $2,402. Additionally, we were unable to determine how the payroll costs of $9,858 to the Federal Aid Administrator should have been allocated. The Resource Development cost center allocated $1,444,162 for the quarter ended September 30, 2021. A similar finding was noted in the prior audit. ? We tested the allocation of cost center 25C20680 Legal Services General Legal Teams for the quarter ended June 30, 2022, which is allocated based on Time & Effort reports. The payroll costs for a Legislative Coordinator were recorded to this cost center during the quarter. However, these costs should have been recorded to cost center 25C20720 Communications and Legislative Services Administration. As a result, this employee?s payroll costs of $15,777 during the quarter were not allocated to Federal programs correctly. We were unable to determine how these payroll costs should have been allocated. The Legal Services General Legal Teams cost center allocated $1,332,052 for the quarter ended June 30, 2022. ? We tested the allocation of cost center 25C21960 Field Office Social Services Casework for quarter ended September 30, 2021, which is allocated based on random moment time studies (RMTS) results. The Bridges to Independence program and Guardianship Assistance program should have been allocated $1,464 each from this cost center; however, the Agency did not include these programs in the allocation. As a result, the Federal grants for Refugee and Entrant Assistance, Child Care and Development, Foster Care, Adoption Assistance, Temporary Assistance to Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and Medicaid were overcharged, ranging from $3 to $982, and the Guardianship Assistance grant was undercharged $732. The Field Office Social Services Casework cost center allocated $8,099,617 for the quarter ended September 30, 2021. ? We tested the allocation of cost center 25C21920 Field Office Child Protection & Safety Services for the quarter ended June 30, 2022, which is allocated based on RMTS results. The Agency began using a new RMTS system in January 2022; however, the Agency did not set up the quarterly summary reports correctly. Below are the issues noted: o RMTS observations for Trial Home Visits were not included in the allocation. As a result, State programs were undercharged, and Federal programs were overcharged. o The RMTS observations for Child Protection Initial Assessment were not properly allocated. As a result, Foster Care was overcharged, and Adoption and Guardianship were undercharged. o The RMTS observations for Before or After Work Hours were incorrectly included in the State?s allocation. As a result, Federal programs were undercharged. In total, Federal grants for Adoption Assistance, Foster Care, and Guardianship Assistance were undercharged $28,560, $113,762, and $1,990, respectively. The Field Office Child Protection & Safety Services cost center allocated $12,429,881 for the quarter ended June 30, 2022. ? We tested the allocation of cost center 25C21910 Field Office Administration for the quarter ended June 30, 2022, which is allocated based on labor hours. The Agency did not include all of the applicable labor hours for the Medicaid program. As a result, the Federal grants for Adoption Assistance, Foster Care, Guardianship Assistance, Refugee and Entrant Assistance, Child Care and Development, TANF, and SNAP were overcharged, ranging from $265 to $30,556, and the Medicaid grant was undercharged $235,906. The Field Office Administration cost center allocated $3,236,547 for the quarter ended June 30, 2022. ? We tested the allocation of cost center 25C20990 IST Application NFOCUS Applications for the quarter ended September 30, 2021, which is allocated based on client counts per NFOCUS/MMIS reports. We noted that the Foster Care and TANF recipient counts used in the allocation did not agree to support. The Foster Care count included 71 clients that were paid with State funds, resulting in $265 being overcharged to the Foster Care grant, and the TANF count included 48 clients that were paid with State funds, resulting in $358 being overcharged to the TANF grant. Additionally, we were unable to trace the member counts to documentation that supported allocating $1,853,284 to Medicaid and $283,190 to the Children?s Health Insurance Program (CHIP). The Agency did not maintain the member count reports used at the time of the allocation. The Agency was able to generate a historical report; however, while the report amounts were similar, they did not agree with the counts used in the allocation. The Agency did maintain system summary reports at the time of the allocation, and the total counts on the summary reports did agree to amounts used for the allocation. However, as the summary reports used did not maintain the detail of members counted, we could not verify the accuracy of the reports used. The IST Application Services NFOCUS Applications cost center allocated $3,800,340 for the quarter ended September 30, 2021. ? We tested the allocation of cost center 25C23823 iServe IAPD H971 ? Shared for the quarter ending June 30, 2022. The Agency is developing the new iServe Nebraska Portal, which is an application for Nebraskans to apply for benefits from Federal and State programs. This application will be replacing ACCESSNebraska, the current application used by Nebraskans to apply for benefits. For the implementation phase of the project, the Agency was only allocating costs to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that will utilize the iServe application. We asked for documentation to support that these were the only four programs that were benefiting from this stage of the project. The Agency provided correspondence from its Federal contacts, which stated: ?As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State?s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan.? We asked again for documentation, such as internal planning documents, to support that these were the only four programs benefiting from this stage of the project. The Agency replied that it did not have the documentation at this time. The iServe IAPD H971 ? Shared cost center allocated $6,019,121 for the quarter ended June 30, 2022. We were unable to determine questioned costs as we were not able to determine which Federal and State program should receive an allocation, and the basis for how the costs would be allocated to these programs. Cause: Inadequate procedures to ensure that system reports were set up correctly, employees coded their time correctly, and allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1, system reports are set up correctly, and costs are properly allocated and charged. Management Response: The Agency agrees.

Program: AL 93.558 ? Temporary Assistance to Needy Families; AL 10.561 ? State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.658 ? Foster Care Title IV-E ? Allowable Cost/Cost Principles Grant Number & Year: 1901NETANF, FFY 2019; 2101NEFOST, FFY 2021; 2201NEFOST, FFY 2022; 202121S251443, FFY 2021; 202222S251443, FFY 2022 Federal Grantor Agency: U.S. Department of Agriculture and U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2021): 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. 45 CFR ? 75.403 (October 1, 2021) requires costs to be reasonable, necessary, and adequately documented. 45 CFR ? 75.405(a) (October 1, 2021) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per 2 CFR ? 200.303 (January 1, 2022): The non-Federal entity must: (a) Establish and maintain effective internal control 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. 2 CFR ? 200.403 (January 1, 2022) requires costs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.405(a) (January 1, 2022) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per the CAP, ?The RMTS Administrator is an employee of the Division of Children and Family Services and is responsible for . . . . verification that all forms are submitted to the Completed Surveys database, review of the worker entries to validate consistent practice among participants . . . .? Per the CAP, ?Each worker should be trained in the completion of the observation form and to the importance of providing accurate and timely responses.? According to RMTS Explanations: 1. Case Work ? Select this item if you were working on a specific case at the observation time. If you select this item you will be asked to enter the NFOCUS master case number. If there is not an NFOCUS master case, use any other number or description that can be used to identify the case . . . . According to the RMTS Instructions for the Worker: ?After the observation form has been submitted and validated (if selected for validation), it is reviewed by a member of the CFS and Cost Accounting Office for consistency.? According to the RMTS Instructions for the Supervisor: ?If you agree with the worker?s selections, you can click the ?VALIDATION? button. If you do not agree with the worker?s selections, you need to confer with the worker on the selection process and reach agreement on the proper selections for the form. Make updates as needed, and click the ?VALIDATION? button to attach the supervisor?s electronic signature and validate the form.? Good internal control and sound accounting practices require procedures to ensure that staff know how to complete accurate random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure the accuracy of the RMTS. A similar finding was noted in the prior audit. Repeat Finding: 2021-033 Questioned Costs: $14,131 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The RMTS is conducted on an ongoing basis to provide data for the allocation of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. We tested 48 validated RMTS observations and noted that inadequate documentation was provided on 11 of them. We noted the following: ? For two of four Foster Care IV-E observations tested, the observations should have been reported as Foster Care Non IV-E per the documentation in the case files. For one of these observations, the case worker noted in the comments that she selected the wrong option. However, it was still validated without correction. ? For five of 21 SNAP observations tested, the RMTS observation form appeared to have been completed incorrectly by the case worker. For two of these observations, the case worker selected the SNAP program; however, per the case files, the case worker appeared to be working on other programs along with SNAP at the time of the observation or was not working on SNAP at all at the time of the observation. As we could not confirm from the documentation on file what the case worker was working on, the questioned costs are unknown. For the other three observations, the case workers did not document which cases they were working on. ? For four of 12 TANF observations tested, the RMTS observation forms appeared to have been completed incorrectly by the case workers. The case workers selected the TANF program; however, per the case files, the case workers appeared to be working on other programs along with TANF at the time of the observation, or, for one case, not working on TANF at all. As we could not confirm from the documentation on file what the case worker was working on, the questioned costs are unknown. Total known Federal payment errors, amount tested, error rate (amount of errors/ amount tested), total dollars charged via RMTS, and potential dollars at risk (dollar rate multiplied by the population total dollars charged) are summarized below by program: See Schedule of Findings and Questioned Costs for chart/table. The APA also inquired with Agency staff to determine if they were provided training in how to complete the random moment time studies. For one individual, the Agency was unable to provide documentation to support that the employee selected had completed RMTS training. Cause: The Agency?s training of staff and supervisory reviews of RMTS observations were not sufficient to ensure the observations were accurately completed. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random observations will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS observations are not accurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment observations are accurate and adequately reviewed. Management Response: The Agency agrees.

Program: AL 93.069 ? Public Health Emergency Preparedness (PHEP); AL 93.889 ? National Bioterrorism Hospital Preparedness Program (HPP) ? Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039, Project Period through 6/30/2024; U3REP190555C, Project Period through 6/30/2024; U3REP190555B, Project Period through 6/30/2024 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2021) requires a pass-through entity to: ?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.? 45 CFR ? 75.302(a) (October 1, 2021) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? Good internal control requires procedures to ensure financial activity is properly recorded in the accounting system. 45 CFR ? 75.403 (October 1, 2021) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR ? 75.405(a) (October 1, 2021) states the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR ? 75.430(i)(1) (October 1, 2021) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . 45 CFR ? 75.431(c) (October 1, 2021) states the following: The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker's compensation insurance (except as indicated in ? 75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2021-035 Questioned Costs: $221,944 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency made 213 aid payments, totaling $5,444,562, during the fiscal year ended June 30, 2022. This included payments to 32 subrecipients. Subrecipient reimbursement requests include an invoice and Budget Workbook showing expenses by category; however, no source documentation, such as invoices and timesheets, were submitted. The Agency has subrecipient monitoring procedures that include financial monitoring, such as desk reviews; however, no financial monitoring was performed during the fiscal year. We selected a sample of 22 payments, totaling $721,921, and offered the Agency the opportunity to gather supporting documentation from subrecipients. Documentation submitted was not adequate for 16 of 22 payments tested. We noted the following: ? Thirteen payments lacked adequate documentation to support that payroll and fringe benefits charged to the grant were allowable and in accordance with Federal cost principles. In some cases, timesheets were not provided. In other cases, timesheets were provided, but there was not adequate documentation to support the employees? salaries or benefits received. ? Six payments did not have adequate documentation to support non-payroll charges. o Allocated costs for facilities, phones, storage, and other charges did not have adequate support for the amount allocated to the grant. For example, the cost of an audiovisual system for the subrecipient?s conference room was charged 53.8% to the PHEP grant, which did not appear reasonable given that only 0.5 FTE was charged to the grant. The subrecipient indicated that funds were pulled from PHEP because PHEP had money left to spend. This is not allowable, as Federal cost principles require costs to be charged in accordance with the relative benefits received. o We also noted a contract that was not charged at the hourly rate per contract terms, and various travel charges that were not supported. Aid payments for the fiscal year ended June 30, 2022, totaled $5,444,562. Federal payment errors noted were $221,944. The total sample tested was $721,921. The dollar error rate for the sample was 30.74%. This estimates the potential dollars at risk for the fiscal year to be $1,673,658 (dollar error rate multiplied by the population). Cause: The Agency?s procedures for subrecipient monitoring were not followed. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure both the allowability of costs and adherence to Federal regulations. Management Response: The Department partially agrees with the condition. The FTE position with primary monitoring responsibilities for the PHEP and HPP program areas was vacant during this period, restricting the degree of financial monitoring performed. While there were costs within the APA?s sample which appear inadequately supported by subrecipient records, there are included in APA?s questioned costs examples of payroll costs which DHHS believes it will receive partial or complete support for. The Department will work with subrecipients to determine which costs have additional support and which do not. For costs ultimately found unsupported, it will request repayment. APA Response: As noted above, no financial monitoring was performed by the Agency during the fiscal year. The Agency was allowed over three weeks to obtain documentation from the subrecipients; however, $221,944 of the sample remained unsupported.

Program: AL 93.069 ? Public Health Emergency Preparedness ?Matching and Reporting Grant Number & Year: NU90TP922039-02, Budget Period through 6/30/2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.302(a) (October 1, 2021) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non- Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR ? 75.306(b) (October 1, 2021) states, in part, the following: For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity?s cost sharing or matching when such contributions meet all of the following criteria: * * * * (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; 45 CFR ? 75.403(a) requires costs to be ?necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.? 45 CFR ? 75.405(a) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. 45 CFR ? 75.430(i)(1) states, in part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. A good internal control plan requires procedures to ensure the adequacy of documentation to support that matching funds are in accordance with Federal requirements. Condition: The Agency lacked documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. A similar finding was noted in the prior audit. Repeat Finding: 2021-036 Questioned Costs: Unknown Statistical Sample: No Context: For the NU90TP922039-02 grant, the Agency reported $8,666,524 in Federal grant expenditures and $866,652 in State matching expenditures. The matching expenditures included State General Fund payroll expenditures for various employees. The Agency lacked adequate documentation to support the salary percentages used for PHEP matching. We reviewed the four employees with over $100,000 included in PHEP matching, as detailed in the following table: See Schedule of Findings and Questioned Costs for chart/table. Based on their job titles, it appears unreasonable for any of the four employees to have spent so much of their time solely on PHEP activities. Cause: Inadequate procedures Effect: Non-compliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and in accordance with Federal requirements. Management Response: The Agency does not agree. The sample included in this finding does not align with the match currently reported for PHEP budget period 2 on the Department's federal financial reporting. The Department achieved the 10% match requirement in BP2 with unrecovered indirect costs under two subawards with UNMC, which has been documented and approved by the federal partner. Only one of the staff included in APA's sample is claimed as match in any period for PHEP. Angela Ling served as DHHS Incident Commander exclusively during the COVID-19 pandemic. This position reported directly to the DHHS CEO and had direct supervisory authority over PHEP. DHHS provided a job description for this role, which the Department views as 100% in alignment with PHEP domains for the duration of the COVID-19 pandemic. For these reasons, the state-supported payroll costs of this position were included in the state's 10% match documentation for BP3. APA Response: Unrecovered indirect costs by the University of Nebraska Medical Center (UNMC) would cover only $427,977 of the $866,652 match, leaving $438,675 still needed. The job description for the Incident Commander refers to ?Incidents? without specifying whether any such event would pertain solely to a public health emergency. The Incident Commander is charged to both Program 261, which is General Operations, and the same Business Unit as the Chief Information Officer, which would not be exclusively public health emergency. Also, there are no timesheets to support that the Incident Commander was working specifically on public health emergencies. Furthermore, the Incident Commander would cover only $129,551, leaving $309,124 still unsupported. There are no time records supporting the salary percentages used for matching.

Program: AL 93.323 - COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases ? Allowability & Subrecipient Monitoring Grant Number & Year: NU50CK000547-02-03, project period ending 7/31/24; NU50CK000547-01-05, project period ending 7/31/24 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure payments are allowable and in accordance with contract provisions and Federal requirements. Sound accounting practices and a good internal control plan require that contracts terms be specific, and agencies hold contractors accountable to the contractual terms. 45 CFR ? 75.403 (October 1, 2021) requires costs to be reasonable, necessary, and adequately documented. 45 CFR ? 75.404 (October 1, 2021) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. Subaward 56800 (signed 09/2020), Section 2.4, ?BUDGET CHANGES,? states, in part, the following: If funds are reassigned between line items, prior approval from DHHS is required for cumulative budget transfer requests for costs exceeding fifteen percent (15%) of the current total approved budget. Budget revision requests shall be submitted in writing to DHHS. DHHS will provide written notification of approval or disapproval of the request within thirty (30) days of its receipt. 45 CFR ? 75.302(a) (October 1, 2021) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? 45 CFR ? 75.352(d) (October 1, 2021) requires a pass-through entity to: ?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.? The contract with North End Teleservices (North End) for contact tracing services required all contract employees providing services to complete approved Health Insurance Portability and Accountability Act of 1996 (HIPAA) and privacy training. Condition: The Agency lacked adequate documentation to support that Epidemiology & Laboratory Capacity for Infectious Diseases (ELC) expenditures were allowable and in accordance with Federal requirements. Repeat Finding: 2021-038, 2021-039 Questioned Costs: $804,686 known (NU50CK000547-02-03, $770,515; NU50CK000547-01-05, $34,171) Statistical Sample: No Context: ELC expenditures for the fiscal year totaled $46,707,314, of which $42,444,330 was for payments greater than $50,000. We randomly selected 15 of 148 transaction lines over $50,000 for testing and noted that seven payments tested were not adequately supported. We also tested the two largest journal entries. We noted the following: ? The State was paying a surcharge on services by Nomi Health regarding the COVID-19 testing sites. The State paid service and management fees to Nomi Health that were not outlined in the contract, nor was any amount or percentage of costs agreed upon in the contact. Among six invoices reviewed, $4,186,297 was paid to Nomi Health. Of this amount, $588,582 was for management and service fees. Without contractual language defining these costs, there is not adequate support that the costs are reasonable, necessary, or allowable for the grant. ? For two payments tested to a COVID-19 test kit supplier, there was not adequate support on file to provide assurance that all the test kits ordered were received. Between the two payments, 825 boxes of tests were ordered, costing $201.01/box. The Agency was able to provide a delivery confirmation spreadsheet with tracking numbers that confirmed delivery of a shipment; however, there was no support to show the number of tests or boxes of tests received. Therefore, we question both payments, totaling $165,833. ? The State entered a contract with Ford Storage for providing warehousing, order fulfillment, inventory, and shipping services of personal protective equipment (PPE) and COVID tests. We tested one month?s payment for storage and services. The invoice included $128,800 for storage of 7,001-8,000 pallets for the month; however, the support provided by the Agency was for only 6,730 pallets, which should have been charged at $112,700. Therefore, we question $16,100. The Agency noted that it was working through contractual performance issues with the contractor, including noncompliance on inventory tracking; lack of timely order shipping/delivery; lack of timely response to communications; and concerns regarding the quality of inventory storage. The Agency also noted that payments have been withheld after the June 2022 invoice. Payments made to this contractor under the ELC program during the fiscal year totaled $2,418,470. ? For one subrecipient payment tested, the Agency was reimbursing a Local Health District (LHD) for work related to COVID-19 contact tracing. The subaward was to cover costs of hiring contact tracers for COVID-19 cases in the LHD?s service area. The approved subaward budget included wages and benefits. The payment tested reimbursed the LHD for wages and benefits of $22,459 and contract costs of $34,171. The contract was between the LHD and a Local Community Health Center to provide disease investigators, which was consistent with the purpose of the subaward. However, no additional review or monitoring appears to have been completed to support that the costs were accurate, allowable, in accordance with the contract, and agreed to LHD financial records. Therefore, we question $34,171. Additionally, contractual payments were not included on the original budget of the subaward, which totaled $80,000 of the $240,000 subaward, which is well over the 15% threshold. The Agency confirmed that no amendments to the subaward budget were approved in writing. ? We tested one payment to North End Teleservices for contact tracing services. The vendor provided a spreadsheet with hours worked, related to the invoice period, but did not include any employee identifiers. Because no employee identification was provided for the contact tracers, it was impossible to determine if those workers had completed required HIPAA training. Questioned costs for the random sample amounted to $328,572, and the total sample tested was $3,201,222. The dollar error rate for the sample was 10.26%, which estimates the potential dollars at risk for the fiscal year to be $4,354,788 (dollar error rate multiplied by sample population). We noted an additional $476,114 questioned costs on journal entries tested. Cause: Inadequate control procedures over contractual payments and subrecipient monitoring. The COVID-19 pandemic led the program to managing unprecedented amounts of PPE and test kits shipments and inventory. Verbal arrangements were made with contractors and subrecipient awardees, but those agreements were never put in writing. Effect: Without adequate controls, there is an increased risk for misuse of funds and abuse or fraud to occur. Recommendation: We recommend the Agency implement procedures to ensure that costs are necessary, reasonable, and in accordance with Federal requirements and contract provisions. Management Response: The Agency partially agrees with the finding. The Nomi contract was originally executed through an emergency procurement process by the Agency of Administrative Services in April 2020. State emergency response needs rapidly evolved throughout 2020. Amendment 2, section 2.2.7.h incorporated updated needs and an expansion of scope of this contract, including but not limited to the provision of temporary structures for testing and call center services. This amendment notes that these services were variable. The management fees associated with this work were to cover Nomi?s support and coordination services. While the contractual language could have been more explicit in this respect, the Agency considers these costs reasonable and necessary for the performance of the expanded testing site services, the allowable activity included within the ELC cooperative agreement budget. The Agency retained records of test kit counts included in purchase orders and associated shipping confirmations from the vendor. Test counts included on the bills of lading align with the counts and shipments included on the delivery confirmation spreadsheet noted above The Agency agrees that no formal amendment had been made to the Local Health District (LHD) subaward to explicitly approve the local health Agency to contract with a local hospital for staff support the project, however, all work performed was consistent with the subaward?s purpose and is allowable under the ELC cooperative agreement. With this information provided, we believe $788,586 of the questioned costs to be allowable. APA Response: Regarding the Nomi Contract, as noted above, the additional service and management fees were paid on top of the costs outlined in the Agency-referenced ?Amendment 2, section 2.2.7.h? and were not defined in writing. Without documentation detailing the services received, we could not determine that the $588,582 was reasonable. The delivery confirmation for the test kits did not include the number of tests received, so $165,833 remains questioned. For the subaward payment, there was no review or monitoring performed of the $34,171 to support that the costs were allowable and in accordance with Federal requirements. The question of allowability for these items remains.

Program: AL 93.558 ? Temporary Assistance for Needy Families (TANF) ? Reporting Grant Number & Year: Various, including 2001NETANF, FFY 2020; 2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2021), the non-Federal agency must: 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. 45 CFR ? 265.9(a) (October 1, 2021) requires, ?Each State must file an annual report containing information on the TANF program and the State's MOE [maintenance-of-effort] program(s) for that year.? 45 CFR ? 265.9(c) details the information required to be reported for each State program for which the State claims MOE expenditures. Per 45 CFR ? 265.10, the annual report is due at the same time as the fourth quarter TANF Data Report, which is 45 days after the end of the quarter, or November 14. 2 CFR ? 170, Appendix A I. (January 1, 2022) states, in part, the following: a. Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . . . . . 2. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. . . . . e. 4. Subaward: i. This term means a legal instrument to provide support for the performance of any portion of the substantive project or program for which you received this award and that you as the recipient award to an eligible subrecipient. . . . . iii. A subaward may be provided through any legal agreement, including an agreement that you or a subrecipient considers a contract. 45 CFR ? 75.211 (October 1, 2021) states the following: (a) In accordance with statutory requirements for Federal spending transparency (e.g., FFATA), except as noted in this section, for applicable Federal awards the HHS awarding agency must announce all Federal awards publicly and publish the required information on a publicly available OMB-designated government-wide Web site (at time of publication, www.USAspending.gov). (b) All information posted in the designated integrity and performance system accessible through SAM (currently FAPIIS) on or after April 15, 2011 will be publicly available after a waiting period of 14 calendar days . . . . Good internal control requires procedures to ensure all required reports are submitted on time. Condition: The ACF204 Report for FFY 2021 was required to be submitted by November 14, 2021; however, it was not submitted until November 8, 2022, after it was requested by the auditors. FFATA reporting was not submitted for the largest TANF subrecipient. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: Federal reports were not submitted as required, as noted below. ACF204 On September 29, 2022, we requested the ACF204 report for FFY 2021. On October 20, 2022, Agency staff responded that they were unable to find the report in the system and it did not appear it was submitted. The Agency subsequently submitted the report on November 8, 2022, and provided it to the auditors, almost one year after the report was due. FFATA For fiscal year ended June 30, 2022, the Agency paid subrecipients $13,735,054, which included $9,459,670 to Equus Workforce Solutions for Employment First service coordination. We tested FFATA reporting for the three largest subrecipients. We noted that no FFATA report was submitted for Equus Workforce Solutions. We reviewed the subaward history, including renewals and amendments. The renewal was signed May 31, 2022, for $20,060,504 for fiscal year 2023, and was due for FFATA reporting by June 30, 2022, but it was not submitted. We also reviewed https://www.usaspending.gov, the public facing website that provides the reported FFATA information, and not only did the Agency fail to report the subaward renewal during our audit period, but also it never reported the subaward in effect for fiscal year ended 2022. Cause: Inadequate procedures to ensure that required reports are submitted by the reporting deadline. There was employee turnover for the ACF204 report. According to Agency staff, the subaward was considered a hybrid contract/subaward and was missed for FFATA reporting. Effect: Noncompliance with Federal requirements, which could lead to sanctions. Recommendation: We recommend the Agency implement procedures to ensure all required reports are submitted timely. We further recommend the implementation of procedures to ensure that all subawards are reported to FFATA accurately and in a timely manner. Management Response: The Agency agrees.

Program: AL 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020; 1901NETANF, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2021), costs must be necessary, reasonable, and adequately documented. Per Nebraska?s Combined State Plan (Program Years 2020-2023): DHHS will use TANF funds to support an array services to assist needy families with children so that children can be cared for in their own homes . . . . The eligibility criteria will be needs based as indicated by the family?s program eligibility status for Aid to Dependent Children (ADC), Supplemental Nutrition Assistance Program (SNAP), SSI or Medicaid. Medicaid eligibility will be based on parent income and not state ward status of an identified child. Per 45 CFR ? 75.302(a) (October 1, 2021): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR ? 75.303 (October 1, 2021), the non-Federal agency must: 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. Good internal control requires procedures to ensure compliance with Federal regulations. Condition: Child welfare claims paid with TANF funds were not in accordance with State and Federal requirements. Repeat Finding: No Questioned Costs: $5,589 known (2001NETANF, $5,548; 1901NETANF, $41) Statistical Sample: No Context: The State Plan allows for payment of certain child welfare costs from Federal TANF funds. To identify eligible claims the Agency performs a query of the NFOCUS system to pull claims for certain services (e.g., family support services, intensive family preservations and drug testing) for families in an active TANF, SNAP, or Medicaid case or SSI. The Agency transferred $5,596,250 from State general funds to Federal TANF funds for 16,728 claims. We selected 10 claims, totaling $5,760, for testing and noted that one $2,461 claim was not allowable. There was no active TANF, SNAP, or Medicaid case or SSI for the family; therefore, per the State Plan, the family was ineligible. We reviewed the NFOCUS detail and noted 4,000 claims, totaling $1,331,698, charged to TANF identified as no active TANF, SNAP, or Medicaid case. We selected 10 of these claims, totaling $3,128, and reviewed the case eligibility information on NFOCUS. None of the 10 claims tested had an active TANF, SNAP or Medicaid case or SSI for the time of service and were, therefore, not allowable. The known questioned costs for the claims tested was $5,589 ($2,461 + $3,128). The potential dollars at risk is $1,331,698 identified as no active TANF, SNAP, or Medicaid case. Cause: Inadequate review procedures. The NFOCUS details active program cases, but the Agency failed to exclude those cases that were not active for TANF, SNAP, or Medicaid. Effect: Without adequate controls to ensure claims are paid per Federal requirements, there is an increased risk for loss or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure compliance with the Federal requirements. Management Response: The Agency agrees.

Program: AL 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability & Eligibility Grant Number & Year: 2001NETANF, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 264.1(a)(1) (October 1, 2021): Subject to the exceptions in this section, no State may use any of its Federal TANF funds to provide assistance (as defined in ? 260.31 of this chapter) to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 8 U.S.C. Section 1611(a) states that any individual receiving assistance must be a ?qualified alien? or a U.S. citizen. Title 468 NAC 2-002(2)(a) (Rev. July 8, 2014) states a qualified alien is ?An alien who was admitted as a lawful permanent resident (LPR) and has resided in the United States for at least five calendar years from the date of entry or who has worked or can be credited with 40 qualifying quarters of work.? Title 468 NAC 2-20.10A (Rev. January 9, 2017) states, ?TANF received from another state will apply towards the family?s 60-month lifetime limit.? A good internal control plan requires eligibility determinations and payments to be accurate. Condition: One of 25 TANF cash assistance payments tested was not in compliance with State and Federal requirements. Repeat Finding: No Questioned Costs: $849 known Statistical Sample: No Context: For one case tested, verification of eligibility was not documented, resulting in $182 sample questioned costs and $667 in non-sample questioned costs. There was no documentation at the time of the initial application in October 2021 to ensure the parent receiving assistance was a qualified alien. Additionally, the Agency did not verify whether the family received TANF benefits in the state in which they had previously lived. Federal questioned costs in the sample were $182. The total Federal sample tested was $9,456, and the total Federal cash assistance for the fiscal year was $13,954,157. Based on the sample tested, the case error rate was 4% (1/25). The dollar rate for the sample was 1.92% ($182/$9,456), which estimates the potential dollars at risk for fiscal year 2022 to be $267,920 (dollar error rate multiplied by population). Cause: Worker error. Effect: Increased risk that Federal funds will be paid to ineligible individuals. Recommendation: We recommend that the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: The Agency agrees.

Program: AL 93.558 ? Temporary Assistance for Needy Families (TANF) ? Reporting Grant Number & Year: 2101NETANF, FFY 2021; 2201NETANF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.302(a) (October 1, 2021): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR ? 75.303(a) (October 1, 2021), the non-Federal agency must: 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. Per 42 USC 611, each State must collect on a monthly basis, and report to the Secretary on a quarterly basis, case record information on the families receiving TANF assistance. 45 CFR ? 265.3(a) (October 1, 2021) states: (1) Each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). (2) Each State that claims MOE expenditures for a separate State program(s) must collect on a monthly basis, and file on a quarterly basis, the data specified in the SSP-MOE Data Report. 45 CFR ? 265.7(a) (October 1, 2021) states: Each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), and the SSP-MOE Data Report) must be complete and accurate and filed by the due date. TANF Data Report instructions state, in part: For purposes of completing this report, include all TANF eligible families receiving assistance (i.e., families funded under the TANF block grant and State MOE funded TANF families) as families receiving assistance under the State (Tribal) TANF Program. All counts of families and recipients should be unduplicated monthly totals. * * * * Instruction: Enter the number of families receiving assistance under the State (Tribal) TANF Program for each month of the quarter. A. First Month: B. Second Month: C. Third Month: Good internal control requires procedures to ensure reports are accurate, and any issues are resolved in a timely manner. Condition: The Agency was unable to provide a detail of cases to support the Section Three Total Number of Families reported and the Total Number of SSP-MOE Families. Also, issues noted during the Agency?s review were not resolved timely. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested 10 Federal assistance cases reported on the ACF-199 and five State (SSP-MOE) cases reported on the ACF-209 and tested all items identified as key line items on the OMB Compliance Supplement. We also tested the total number of families reported on each report for November 2021 and April 2022. We requested the Agency to provide the detail of unduplicated families for those months. The Agency provided four Notepad text files for each month. The auditor copied the files to Excel and removed duplicate cases; however, the number of families per the Notepad files did not agree to the number of families reported. The auditor also reviewed the State?s general ledger for TANF payments and compared the number of unduplicated payees to the reports. Although some variances might be expected, the number of payees per the general ledger was 5% to 7% less than that in the 199 report and 6% to 13% less than that in the 209 report. See Schedule of Findings and Questioned Costs for chart/table. Program staff review a sample each month of three 199 reports and three 209 reports. Issues noted were sent to the Agency IT staff. One of the issues noted was that closed cases appear on the reports. This issue was noted prior to May 2021 but remained unresolved by the IT staff as of October 2022. In response to our inquiry, the IT Analyst replied on October 31, 2022, ?There are currently 2 separate pending SCR?s documented for research and various fixes to the ACF 199 / 209 reports logic . . . . Target dates for those have not been assigned.? Cause: Adequate resources were not devoted to correcting reporting errors noted. Effect: Increased risk for inaccurate reporting and non-compliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure reports are accurate, and any system issues are resolved in a timely manner. Management Response: The Agency agrees.

Program: AL 93.568 ? COVID19 ? Low-Income Home Energy Assistance (LIHEAP); AL 93.568 ? Low-Income Home Energy Assistance ? Eligibility Grant Number & Year: 2101NEE5C6, end 9/30/2022; 2201NELIEA, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2021) states: Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. 476 NAC 2-002, ?Eligibility,? states: To qualify for the Low Income Home Energy Assistance Program, a household must: (A) Be considered an economically-vulnerable household; (B) Meet income guidelines according to household size; (C) Meet citizenship and residency requirements; and (D) Not otherwise be disqualified or ineligible. 476 NAC 1-004.6 defines ?ECONOMICALLY-VULNERABLE HOUSEHOLD? as follows: A household that is unprotected from increases in energy costs, and, therefore, must use its own resources to meet energy cost increases. 476 NAC 3-002.01, ?Provider,? states: The Department makes payment on behalf of an eligible household directly to a provider. To ensure payment, a household must provide the Department with the applicable provider name and account number. Neb. Rev. Stat. ? 68-1215 (Supp. 2021) states: For purposes of determining eligibility of a household for the low-income home energy assistance program pursuant to section 68-1201 as administered by the State of Nebraska pursuant to the federal Energy Policy Act of 2005, 42 U.S.C. 8621 to 8630, the Department of Health and Human Services shall apply a household total annual income level of one hundred fifty percent of the federal poverty level published annually by the United States Department of Health and Human Services or such successor agency which publishes the federal poverty level. Per the 2021 Poverty Guidelines (Published by the U.S. Assistant Secretary for Planning and Evaluation), the federal poverty level for a household of three individuals was $21,960. 476 NAC 2-002.01, ?Income Guidelines,? states: For purposes of calculating and treating income for Low Income Home Energy Assistance Program eligibility, the Department applies the rules and regulations from the Supplemental Nutrition Assistance Program, Title 475 Nebraska Administrative Code (NAC). 475 NAC 3-002.02(A), ?Earned Income,? states: Earned income includes all the following: (i) All gross wages and salaries of an employee including wages earned by a household member that are garnished or transferred by an employer and paid to a third party for household expenses, such as rent; 475 NAC 3-002.03(D), ?Verification of Income,? states: Before initial certification, the Department will verify gross non-excluded income. At the time of recertification, earned income will be verified again. Additionally, unearned income will be verified if the amount or the source has changed. Good internal control requires procedures to ensure that adequate documentation is maintained to support that households meet eligibility requirements and payments are issued to the proper providers. Condition: The Agency lacked adequate procedures to ensure that LIHEAP applicants met eligibility requirements prior to issuing aid payments. A similar finding was noted in the prior audit. Repeat Finding: 2021-041 Questioned Costs: $2,610 known (2101NEE5C6, $2,390; 2201NELIEA, $220) Statistical Sample: No Context: We tested 40 payments and noted the following: ? For one payment tested, the Agency did not consider all sources of income when determining household eligibility. The Agency calculated the household?s annual income to be $26,178/year; however, this did not include the income of one household member. The Agency did not verify the member?s income at the time of application; however, we observed that the individual had earnings of $16,145 during the program year. This would increase household income to $42,323/year, which is more than 150% of the Federal poverty level. We question the $300 supplemental payment tested in the sample, as well as the 2nd supplemental of $545 issued in June 2022 and the original $220 heating payment issued in November 2021. ? For another payment tested, the Agency did not verify that the household was economically vulnerable or verify the applicant?s provider account information when determining eligibility. The only provider-verified information on file was a utility bill addressed to the applicant?s personal business, which did not agree to the applicant?s home address as reported on their LIHEAP application. As such, it could not be determined that the household was economically vulnerable to energy costs or that the payment was issued to the correct provider. We question the $300 supplemental payment tested in the sample, as well as the 2nd supplemental payment of $545 issued in June 2022 and the original $700 heating payment issued in October 2021. Payment errors noted for the sample tested were $600. The total sample tested was $17,686, and total LIHEAP assistance payments for the fiscal year were $63,388,746. The dollar error rate for the sample was 3.39% ($600/$17,686), which estimates the potential dollar risk for fiscal year 2022 to be $2,148,878 (dollar rate multiplied by the population). We also noted $2,010 of questioned costs on other payments for the applicants tested. Cause: Inadequate review procedures. Effect: When Agency staff fail to properly verify household information, there is increased risk of fraud, loss of Federal funds, and noncompliance with Federal and State regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure compliance with State and Federal requirements. Management Response: The Agency agrees.

Program: AL 93.568 ? Low-Income Home Energy Assistance (LIHEAP) ? Reporting Grant Number & Year: Various, including 2101NELIEA, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2021) requires ?fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .? 2 CFR 170 (January 1, 2022), Appendix A, Section I, ?Reporting Subawards and Executive Compensation,? states, in relevant part: (a) Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . . . . . (2)(ii) For subaward information, report no later than the end of the month following the month in which the obligation was made. 45 CFR 96.82(a) (October 1, 2021) states: Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97?35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1?September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. 42 U.S.C 8624(c)(1)(G) requires a plan that does the following: [S]tates, with respect to the 12-month period specified by the Secretary, the number and income levels of households which apply and the number which are assisted with funds provided under this subchapter, and the number of households so assisted with ? (i) one or more members who had attained 60 years of age; (ii) one or more members who were disabled; and (iii) one or more young children; . . . . The ?Instructions for the LIHEAP Household Report for FFY 2021?Long Form? (Published October 21, 2021, by the U.S. Division of Energy Assistance) states, in part: Gross Household Income Adjusted by Household Size A household?s gross annual income and/or household size can change during the fiscal year. If a household received two benefits or services under the same type of LIHEAP assistance, use that household's gross annual income and household size at the time of the initial determination of benefits or services in calculating that household's poverty level for statistical reporting. Uniform Counting and Reporting Annual gross household incomes, adjusted by the number of household members (household size), are to be used in computing household poverty percentages, using the 2020 HHS Poverty Guidelines that were in effect at the beginning of FFY 2021 (October 1, 2020). Condition: The Agency lacked adequate procedures to ensure that required Federal Funding Accountability and Transparency Act (FFATA) reports were submitted, and Household Report information reported was complete and accurate. Repeat Finding: 2021-042 Questioned Costs: N/A Statistical Sample: No Context: During review of Federally required LIHEAP reports, we noted the following: FFATA Reporting Neither the Agency nor the Nebraska Department of Environment and Energy (NDEE), which distributes weatherization subawards, filed the required FFATA reports in a timely manner. NDEE issued multiple subawards to Nebraska community action partnerships, as well as the Habitat for Humanity ? Omaha, that exceeded the $30,000 reporting requirement, but none were reported until August 2022. The APA tested six awards and award amendments issued during the fiscal year and noted that all six awards were submitted from 61 to 303 days after they were required to be submitted. During fiscal year 2022 NDEE issued subawards totaling $6,143,036. See Schedule of Findings and Questioned costs for chart/table. The eight subrecipients during the fiscal year were paid a total of $2,866,620. Households Report In its LIHEAP Household Report for FFY2021, the Agency reported 671 applicant households for the weatherization program. This information for weatherization applicant households was provided by NDEE, which obtained the figures from its subrecipients. No documentation was provided to support the number or type of weatherization applicant households. The 671 applicants were also reported by poverty level, as shown in the table below. See Schedule of Findings and Questioned costs for chart/table. Due to the lack of data provided for the weatherization applicant households, we were unable to verify the accuracy of the applicants reported. We selected a sample of 15 households included on the FFY2021 Household Report as LIHEAP-assisted households, LIHEAP applicant households, or weatherization-assisted households. Three of 15 households tested were not properly reported or classified, as follows: ? One LIHEAP applicant household was reported at the ?Under 75% Poverty? income level. However, the household should have been reported at the ?Over 150% Poverty? income level. ? One LIHEAP applicant household was reported at the ?Under 75% Poverty? income level. However, the household should have been reported at the ?75% - 100% Poverty? income level. ? One LIHEAP applicant household was reported at the ?75% - 100% Poverty? income level. However, the household should have been reported at the ?Under 75% Poverty? income level. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures to ensure that reports contain accurate information and are submitted timely, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure that all participants of the LIHEAP program are reflected properly in the Household Report. We also recommend the Agency review its procedures for FFATA reporting to ensure compliance with Federal requirements. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Allowability & Eligibility Grant Number & Year: G2101NECCDF, FFY 2021; G2101NECCDM, FFY 2021; G2201NECCDF, FFY 2022; G2201NECCDM, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 42 USC ? 9858k(b) (1992) states, ?With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for ? (1) any services provided to such students during the regular school day[.]? To be eligible for services, 45 CFR ? 98.20 (October 1, 2021) requires a child to be under 13 years of age, a citizen, and reside with a family whose income does not exceed 85% of the State?s median income. 45 CFR ? 98.55 (October 1, 2021) states: (a) Federal matching funds are available for expenditures in a State based upon the formula specified at ? 98.63(a). (b) Expenditures in a State under paragraph (a) of this section will be matched at the Federal medical assistance rate for the applicable fiscal year for allowable activities, as described in the approved State Plan, that meet the goals and purposes of the Act. 45 CFR ? 98.67(a) (October 1, 2021) states ?Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.? Title 392 NAC 3-004.01(A) (Eff. 9/15/2020) states, ?The Department pays by attendance, not enrollment. Providers do not receive payment when the provider is on vacation, is ill, or is not providing care for some reason unrelated to the child or recipient.? Title 392 NAC 3-004.01(A)(i) (Eff. 9/15/2020) states, ?The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.? Title 392 NAC 3-001.02(D) (Eff. 9/15/2020) states, ?The recipient and child care provider must ensure that the services are delivered as authorized.? Title 392 NAC 4-002. (Eff. 9/15/2020) states, in relevant part, ?Before furnishing any service, each provider must sign an enrollment form agreeing: (A) No payments will be made for child care provided to a child before the service authorization date;? and ?(G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]? Title 392 NAC 2-011.02 (Eff. 9/15/2020) states, in part, ?The parent of a child who is a ward of the Department or the parent of a tribal ward who attests the parent is unable to receive child care services from the tribe, is eligible for services without regard to income . . . .? Title 392 NAC 1-001 (Eff. 9/15/2020) provides the following definitions for age levels of care: 001.13 INFANT. A child age six weeks to 18 months. 001.21 PRESCHOOLER. A child age 36 months to school-age. 001.26 SCHOOL-AGED CHILD. A child who attends kindergarten or above. 001.31 TODDLER. A child age 18 months to 36 months. Neb. Rev. Stat. ? 68-1206 (Supp. 2021) provides, in part, the following: (2)(a) [T]he department shall participate in the federal child care assistance program under 42 U.S.C. 9857 et seq., . . . and provide child care assistance to families with incomes up to (i) one hundred eighty-five percent of the federal poverty level prior to October 1, 2023 . . . . (b) [I]n determining ongoing eligibility, if a family?s income exceeds one hundred eighty-five percent of the federal poverty level prior to October 1, 2023, . . . the family shall receive transitional child care assistance through the remainder of the family?s eligibility period or until the family?s income exceeds eighty-five percent of the state median income for a family of the same size as reported by the United States Bureau of the Census, whichever occurs first. . . . The amount of such child care assistance shall be based on a cost-shared plan between the recipient family and the state and shall be based on a sliding-scale methodology. A recipient family may be required to contribute a percentage of such family?s gross income for child care . . . . The Child Care Provider Handbook (Handbook), issued by the Agency in January of 2008, states, in relevant part, ?You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour[.]? (pg. 10) The Handbooks defines ?Full Day of Care? as follows: ?Five hours and 46 minutes (6 hours) through 9 hours (9 hours and 59 minutes) unless the child care program defines its day as more than 9 hours.? (pg. 1) The Handbook also states, ?Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units[.]? (pg. 8) Good internal control requires procedures to ensure that payments are in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2021-043 Questioned Costs: $9,556 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 25 child care claims paid with Federal funds and 5 child care claims paid with matching general funds. We noted 11 claims with errors. Some payments had more than one type of error. ? For seven claims tested, there were discrepancies between the attendance sheet and the claim billed: o For one claim, the provider billed a day of child care when the provider was closed in observation of the July 4th holiday. o For one claim, the provider billed an absent day on a Saturday when the child did not normally attend on weekends. o For three claims, the provider billed for more hours and/or days than what was recorded on the child?s attendance sheet: ? One provider billed 36 hours and one day, while the attendance sheet showed the child attended 32 hours and one day. ? One provider billed for 12 days of care, while the attendance sheet showed only 11 days of care. ? One provider billed for 16 days when the attendance sheet showed only 15 days of care. o For two claims tested, the providers billed a full day of care when only 5.75 hours should have been billed. One provider did this for four different days on the claim. ? For two claims tested, the rate charged for child care was higher than what is allowed per the child?s age: o For one claim, the child started kindergarten in August 2021 and should have been billed at the school age rate; however, the provider was billing at the preschool rate. Child care was billed at the preschool rate through the end of the fiscal year, and the child was still authorized at a preschool rate at the time of testing in September 2022. o For one claim, the child should have been billed at a preschool rate but was billed at a toddler rate through our audit period. ? For one claim, the provider charged for a full day of care on a school day that the child would have been in school. ? For one claim, the provider billed more child care than what was authorized. A maximum of 25 hours of care were authorized per week; however, the provider billed care 5 days a week (i.e., 30+ hours/week) for the child. ? On one claim, there was a Child Support Court Order requiring child care expenses to be split 48/52 between the mother and the father of the child, respectively. Therefore, the mother should be responsible for only 48% of the child care costs, and the State should be providing subsidy assistance for only her portion of the costs (as she was the only parent applying for benefits). Instead, 100% of the remaining child care costs were being subsidized, after the family fee was applied. ? For one claim tested, the family?s income was calculated incorrectly, and the family should not have qualified for child care until March 2022, when the mother quit her job. The Agency should have calculated the mother?s monthly income as $2,728. Instead, the Agency used $0 for the mother?s income, even though she was employed by the Agency. Had the correct income been used, the family would not have been eligible for the child care subsidy program. ? One child was in Tribal Court custody and had been placed with a foster parent. There was no attest from the foster parent indicating that she could not receive child care services from the tribe. Federal payment errors noted for the sample tested were $471. The total Federal sample tested was $8,086, and total child care Federal assistance claims for the fiscal year were $37,138,666. The dollar rate for the sample was 5.82% ($471/8,086), which estimates the potential dollar risk for the fiscal year 2022 to be $2,161,470 (dollar rate multiplied by the population). In addition to the $471 Federal questioned costs noted on the sample items tested, we also noted $2,093 of Federal questioned costs on other line items of the claims reviewed and $3,317 questioned costs used to meet match, which resulted from miscalculated budgets, service authorizations exceeded, and incorrect rate charges. Unusual Claims Tested We reviewed the detail of child care claims for unusual items, such as over 300 hours billed in a month, more than 31 days billed in a month, and duplicate claims. We noted the following issues with the claims tested for the following three providers: Provider 1 This provider billed for 300 hourly units for several children during October and November 2021. The provider incorrectly billed hourly units instead of daily units, inflating the payment amount received. The Agency reviewed the provider?s attendance calendars for August 2021, September 2021, and October 2021 and established overpayments on January 22, 2022, totaling $10,595 for this incorrect billing. However, the Agency failed to identify a second provider that also billed for one of the families in October and November 2021. We reviewed the attendance calendars for both providers and identified the following issues: ? There were 336.75 hours in October and 175.5 hours in November 2021 that overlapped between the two providers. The following chart includes an example of overlapping hours billed on October 1, 2021. See Schedule of Findings and Questioned Costs for chart/table. ? Hours of care provided exceeded the service authorizations. The service authorizations covering October 2021 for both providers stated that child care was authorized up to 40 hours per week. A new service authorization issued for November 2021 authorized child care up to 45 hours per week, and hours were to be split between the primary and secondary provider. Provider 1 billed full-time for all four children during October and November 2021, with weekly hours billed ranging from 60 hours up to 126 hours. The following chart shows the total number of weekly hours each child was in care for both providers in October 2021. See Schedule of Findings and Questioned Costs for chart/table. ? The hours of care billed were not reasonable. In October 2021, the client was authorized for job search; however, hours of care began at 6:00 a.m. and ended at midnight on school days, up to 18 hours of care. The provider billed every day of the month for both October and November 2021. The provider also billed 10 hours of care on November 31, which does not exist. ? The provider did not calculate correctly the number of hours provided. For two children in November 2021, the provider billed 10 hours of care for hours from 2:00 p.m. to 11:00 p.m., which is only 9 hours. The Agency did not review the November 2021 attendance calendars, and there were two additional families for which the provider billed hourly units instead of daily units. We also noted that this provider, which is licensed for 10 children, received over $146,000 in subsidy payments during Fiscal Year 2022, as well as $46,500 in Child Care Stabilization grant funds, despite the billing issues, being placed on probation, and large overpayments. Provider 2 The same ?Provider 2? included above was paid $2,332 for 55 daily units for the period of September 16, 2021, through September 30, 2021. This is impossible, as there are only 15 days during this period. A review of the attendance calendar supported 55 hours of care. The provider should have billed 55 hours at $7 per hour or $385. Provider 3 This provider submitted two claims for the same time period for the same child and received two payments of $330 and $385.90 for those duplicate claims. Both claims included 10 days of care from January 1, 2022, through January 15, 2022. The daily rate paid for one claim was $33, and the daily rate paid for the second claim was $38.59, which is the correct daily rate as of January 1, 2022. The issues noted above accumulated to $6,992 in Federal questioned costs. We also noted $2,430 in questioned costs used to meet match funds and $6,065 in general fund questioned costs. Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency take the necessary action to recover the overpayments. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: Various, including G2201NECCDF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.41 (October 1, 2021), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2021-044 Questioned Costs: None Statistical Sample: No Context: We tested 15 child care centers subject to fire and sanitation inspections. We noted the following: The Agency received a waiver for inspections for the period March 13, 2020, to September 30, 2021; however, for eight child care centers tested, a required inspection due during the waiver period still had not been performed as of the end of fieldwork on November 1, 2022. The Agency has made timely referrals for the fire and sanitation inspections; however, the inspections are overdue, and the Agency is ultimately responsible for ensuring that these inspections are performed. See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshal or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. Management Response: The Agency partially agrees with the finding. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020, 2021 and 2022; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that ?per 45 CFR ? 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training.? DHHS disagrees that: ?The Agency did not have adequate procedures in place to ensure health and safety requirements were met for childcare providers.? Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. It is important to note that if serious fire safety and sanitation concerns are observed at any inspection that may endanger the health and safety of children in care, it is standard practice to work with the appropriate authority to request an immediate inspection. Fire and sanitation have always responded timely to these requests. This has been a long standing policy and procedure in Children's Services Licensing specific to Family Child Care Homes I and II and is part of the child care licensing regulations. 391 NAC Chapters 1-5: 1-005.08 Inspection by Other Entities 2-005.09 Inspection by Other Entities 3-005.09 Inspections by Other Entities 4-005.09 Inspections by Other Entities 5-005.09 Inspections by Other Entities APA Response: The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 ? Child Care and Development Block Grant ? Period of Performance Grant Number & Year: G1901NECCDF, FFY 2019; G2001NECCDF, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(d) (October 1, 2021): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (5) Obligations may include subgrants or contracts that require the payment of funds to a third party (e.g., subgrantee or contractor). However, the following are not considered third party subgrantees or contractors: (i) A local office of the Lead Agency; (ii) Another entity at the same level of government as the Lead Agency; or (iii) A local office of another entity at the same level of government as the Lead Agency. According to 45 CFR ? 75.511(a) (October 1, 2021), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2019 grant and FFY 2020 grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2021-045 Questioned Costs: $1,752,798 known ($50,227 #G1901NECCDF; $1,702,571 #2001NECCDF) Statistical Sample: No Context: The FFY 2019 Child Care Discretionary grant must be obligated by September 30, 2020. The Agency charged $5,275,001 to the FFY 2019 grant after September 30, 2020. We tested a payment to the Nebraska State Patrol paid in August 2021. The payment tested totaled $50,227 for background checks in June 2021. As other State agencies are not considered a third party, these costs were not obligated by September 30, 2020, and are considered questioned costs of $50,227. The FFY 2020 Child Care Discretionary grant must be obligated by September 30, 2021. We noted $1,702,571 paid from October 6, 2021, through June 29, 2022, for Agency employee payroll. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: The Agency agrees.

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: All open, including #G2201NECCDF, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(i) (October 1, 2021), ?Lead Agencies shall recover child care payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud.? Per 45 CFR ? 98.68(b) (October 1,2021), ?Lead Agencies are required to . . . (1) Identify fraud or other program violations . . . . (2) Investigate and recover fraudulent payments and to impose sanctions on clients or providers in response to fraud.? A good internal control plan requires procedures to ensure that cases are reviewed, and appropriate dispositions are made in a timely manner. Condition: Three of nine Child Care Special Investigation Unit (SIU) cases tested were not investigated in a timely manner. A similar finding was noted in the prior audit. Repeat Finding: 2021-046 Questioned Costs: Unknown Statistical Sample: No Context: Three SIU Child Care cases were not worked timely, as follows: ? One case was not worked between November 2020 through November 2021, or 13 months. ? A second case was not worked from December 2020 through February 2022, or 15 months. SIU was waiting for the overpayment to be established by the Fiscal Compliance Analyst. The overpayment totaling $9,075 was established in March 2022, and on June 9, 2022, the client was found guilty of the intentional program violation and disqualified from child care for 12 months. ? A third case was not worked between April 2021 through January 2022, 10 months. On April 7, 2022, the client was found guilty of the intentional program violation and disqualified from child care for 12 months. Cause: The Agency did not devote adequate resources to ensuring that child care fraud cases were worked in a timely manner. Effect: When cases are not completed timely, there is an increased risk of fraud or misuse of Federal funds. Failure to pursue potential fraud cases adequately results in noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that cases referred to the SIU are reviewed timely, and appropriate dispositions are made. Management Response: The Agency partially agrees with the finding. In regard to the cases in question, DHHS disagrees that no work was completed on the identified cases during the timeframes noted. DHHS acknowledges that it could not provide documentation of the work to prove actions were being completed. We would also like to point out that in the second case, the investigations unit was at the mercy of the overpayment team to establish the overpayment to finish the case. The investigations unit has no authority to direct the timeliness of the overpayment team. APA Response: The investigations unit and the overpayment team are within the same agency, so the investigations unit should notify management if there are issues with the overpayment team.

Program: AL 93.575 ? COVID-19 Child Care and Development Block Grant ? Special Tests and Provisions Grant Number & Year: 2101NECSC6, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 98.67(a) (October 1, 2021) states, ?Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.? Per CCDF-ACF-IM-2021-02, issued 5-10-2021: Determining Stabilization Subgrant Award Amounts Child care provider subgrant amounts must: (1) be based on a provider?s stated current operating expenses, including costs associated with providing or preparing to provide child care services during the pandemic, and (2) to the extent practicable, cover sufficient operating expenses to ensure continuous operations for the intended period of the subgrant. Lead agencies have wide discretion on how subgrant amounts are formulated. To stabilize the child care sector during and after the COVID-19 public health emergency, lead agencies should limit the burden and bureaucracy on child care providers and ensure subgrants are sufficient in size and duration to support continuous operation. Lead agencies have several options for determining the operating costs of providers and the grant amounts, but should take into account the true cost of providing high-quality child care, including the costs of attracting and retaining a qualified and skilled workforce and the challenges of stable operations under the changing pandemic landscape. Some examples include: * * * * Use lead agency formulas based on general cost estimates for enrollment and age of children and region of operation. Enrollment and capacity should be used to estimate cost rather than attendance. Child care providers may provide enrollment and capacity data. Lead agencies may also already have some of this data through licensing systems and can prepopulate this data as part of a provider?s application. Child care providers must still confirm the data as part of the application. Good internal control requires that documentation be maintained to support the enrollment and capacity data used to determine subsidy amounts. Good internal control also requires procedures to ensure payments are in accordance with Federal and State requirements. Condition: The Child Care Stabilization Grant payment made to 4 of 25 providers tested was incorrect. Repeat Finding: No Questioned Costs: $16,000 known Statistical Sample: No Context: Section 2202 of the American Rescue Plan Act (ARPA) of 2021 provided states Federal funding in order to stabilize the child care sector in response to the COVID-19 public health emergency (PHE). The Agency issued over $98,000,000 in subgrants to eligible child care providers during fiscal year 2022. The subgrant funds were to be made available to qualified and eligible providers regardless of whether they had previously participated in the child care subsidy program. The Agency created a grant funding formula based on factors supporting those in underserved and lower-income areas of the state. This included providing additional funding for those providers serving children from families with low incomes. The Agency?s funding formula included a base amount awarded to providers based on their licensed capacity. An additional amount was awarded for the number of subsidy children the provider billed for in June 2021. The provider received an additional $2,000 for each subsidy child billed for in June 2021. The Agency provided a funding formula spreadsheet for each provider tested, which included a total number of subsidy children billed in June 2021 to whom the $2,000 bonus was applied. We asked for documentation supporting those subsidy numbers and were provided with another spreadsheet containing subsidy data for June 2021, but those numbers did not agree to the number of subsidy spots in the funding formula spreadsheet for several providers. We reviewed the child care subsidy claims in NFOCUS and counted each child that was billed in June 2021 and compared those numbers to what was included on the supporting documentation. We identified the following: See Schedule of Findings and Questioned Costs for chart/table. Federal payment errors noted for the sample tested were $16,000. The total Federal sample tested was $1,604,300, and the total child care stabilization grant payments for the fiscal year were $98,653,900. Based on the sample tested, the case error rate was 16% (4/25). The dollar error rate for the sample was 1% ($16,000/$1,604,300), which estimates the potential dollar risk for fiscal year 2022 to be $986,539 (dollar rate multiplied by the population). Cause: Lack of adequate supporting documentation for number of child care subsidy children billed. Effect: A lack of adequate supporting documentation increases the risk of payments not being in accordance with State and Federal requirements, leading to a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure that payments are adequately supported and in accordance with State and Federal requirements. Management Response: The Agency agrees.

Program: AL 93.778 ? Medical Assistance Program; AL 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2105NE5MAP, FFY 2021; #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.302(a) (October 1, 2021), each state must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State?s own funds. Per 45 CFR ? 75.403 (October 1, 2021), costs must be necessary, reasonable, and adequately documented. Title 471 NAC 15-003.02(1) (effective June 2, 2004, through June 5, 2022) states that personal assistance services not documented in the service plan are non-allowable services. Title 471 NAC 15-006 (effective June 2, 2004, through June 5, 2022) requires that the provider bill only for services provided and authorized, perform the personal assistance services noted on the service plan, and accurately document services provided on Form MC-37 ?Service Provider Timesheet.? Title 471 NAC 15-006.06C (effective June 2, 2004, through June 5, 2022) requires that, after receiving a provider?s timesheet and billing document, the beneficiary?s social service worker or designee must verify that ?the hours worked and services provided fall within the parameters of those authorized? by the service needs assessment. Title 471 NAC 15-003.02(H) (effective June 6, 2022) requires that the provider perform the personal assistance services noted on the service plan, accurately document services provided in the Electronic Visit Verification (EVV) system, and confirm that services were received as authorized according to Agency procedures. The Provider?s Guide for Billing PAS Recap states, ?Gather participant?s signature at each visit in EVV APP.? A good internal control plan requires procedures to ensure services provided agree to the service needs assessment. Section 1903(l)(5)(A) of the Social Security Act states the following: The term ?electronic visit verification system? means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to ? (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Condition: During testing of personal assistance service (PAS) claims, we noted the following: ? Services provided lacked adequate supporting documentation. This included, among other related shortcomings identified, a lack of information from the EVV specifying the activities or tasks performed by the provider. ? Services billed exceeded the number of hours authorized under the service needs assessments. ? Providers billed for unreasonable amounts of time ? including, among other things, for more daily hours than are in a 24-hour period and for unfeasible scenarios, such as the supposed performance of a week?s worth of duties for one client in a single day. One provider received compensation, including overtime pay, for six months during which no client services appear to have been performed. ? Providers received overtime pay for unauthorized services, meaning that they were compensated at an increased rate for services ineligible for payment in the first place. ? Client guardians or parents were paid for providing services, which violates governing regulations prohibiting such arrangements. ? Providers received incorrect pay rates for services rendered, resulting in significant overpayments. A similar finding has been noted in prior audits since 2014. Repeat Finding: 2021-048 Questioned Costs: $51,331 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an electronic visit verification system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century CURES Act, passed by Congress in 2016. The EVV system electronically captured and verified provider visit information, and providers were required to submit claims to the Agency electronically through this application. We selected five provider payments for testing, and from there, one week of services submitted through the EVV system. A week of service billed by the provider may include multiple claims and clients. The Agency was unable to provide documentation from the EVV system of client signatures and the specific activities or tasks performed by the provider. Claim detail provided included the start and stop times and location of the visit, but there was no record of what tasks were provided on each day and for how long to ensure compliance with the SNA. Therefore, we questioned the entire claims initially selected for testing, resulting in questioned costs of $4,011. It should be noted these deficiencies were identified in the prior audit, and no enhancements have been made to the EVV system to address these issues. We also identified other issues with the billings submitted by each provider. Therefore, we reviewed additional claims submitted by the providers. We reviewed the claim information in NFOCUS that identified the total number of quarterly units billed each day. We noted the following issues with the five providers tested: Provider 1 The provider was authorized for up to 226 quarterly units or 56.5 hours of service per week. The provider billed and was paid for 25 hours of service on July 30, 2021, and for 24.5 hours of service on September 28, 2021. It is impossible for a provider to provide more than 24 hours of service in one day. The provider also billed for hours that exceeded the SNA limit for the claim tested and for an additional four weeks reviewed during the fiscal year. Below is a summary of the weeks that exceeded the SNA. See Schedule of Findings and Questioned Costs for chart/table. In addition to the services billed that exceeded the SNA, we also noted the provider was the client?s guardian and parent. Per CFR 42 ? 440.167, personal care services cannot be provided by a member of the individual?s family. A family member is defined as a legally responsible relative. The provider is a legally responsible relative of the client as the guardian and is not allowed to get paid for these services. The Nebraska Medicaid State Plan also states that services are provided by those who are not legally responsible relatives. Title 471 NAC 15-006.01A(3), effective through June 5, 2022, also stated that a legally responsible relative cannot provide services for the client. Therefore, all payments made during fiscal year 2022 are questioned. Along with the initial claim tested, the provider was paid an additional $20,944 that is not allowable. Provider #2 The provider was authorized 160 quarterly units or 40 hours of service per week. For the claim tested, the provider exceeded the SNA by 180 quarterly units or 45 hours. This included 24 hours of care billed on both October 20, 2021, and October 22, 2021. These hours were questioned above due to inadequate documentation. The provider exceeded the weekly authorized hours for 11 weeks reviewed and billed between 2 to 33.25 hours over the SNA each week, resulting in additional questioned costs of $980. We also noted that the provider worked full time at a public school during the school year; therefore, it is likely hours billed for PAS on weekdays overlap with time worked at the school. This provider was also noted as billing over the authorized limit during last year?s audit, and no overpayments were established and the overbilling has continued. Provider #3 The Agency authorized this provider to provide 486 quarterly units or 121.5 hours of service per week for four different clients. It is not reasonable to authorize this many hours of service for one provider, as it would take over 17 hours every day of the week in order to perform all the tasks noted on the SNA. For the week tested, the provider billed 476 quarterly units or 119 hours for the week. Each SNA of these clients included some services to be performed every day of the week. For one client, the provider billed a week of services on one day. As an example, 20 minutes for a bath or shower was authorized seven times for the week or once a day. It is not reasonable that seven baths or showers were provided on one day. For this same client, assistance with meal preparation was authorized three times per day for seven days. It is not reasonable that assistance with meal preparation was provided 21 times on one day. These claims were questioned above for inadequate documentation. We reviewed an additional two weeks of services, and the provider billed for tasks authorized for seven days per week but did not provide services each of the seven days a week for all clients. For example, if a client was authorized for a bath seven times for the week, but the provider performed services on only two days, we considered the hours charged for five baths to be overbilled. This resulted in additional questioned costs of $372. It should be noted that only these two weeks were reviewed, so there may be additional questioned costs for other weeks based on the frequency of tasks authorized. See Schedule of Findings and Questioned Costs for chart/table. The provider was also paid overtime hours for these two weeks. In addition to being overpaid due to billing for tasks that were not provided as authorized, the provider received overtime pay for this overbilling, resulting in an additional $183 in questioned costs. Providers are paid at time and one-half for services in excess of 40 hours each week. Per the Agency, there is a claims overtime team that reviews the service authorizations to ensure they are not exceeded. For the two weeks reviewed alone, the provider was paid for 78.45 and 63.27 hours of overtime. Provider 4 The provider was authorized 84 quarterly units or 21 hours for one client and 146 quarterly hours units or 36.50 hours per week for another. For the claims tested, the EVV claim detail supported the number of hours billed; however, six hours of service for one client was shown to be provided by another provider, and an additional two hours was shown as provided at the provider?s address. The claim was questioned above for inadequate documentation. We also noted that the incorrect rate was paid to the provider during all of fiscal year 2022, resulting in $22,800 additional questioned costs for fiscal year 2022. The agreement between the Agency and the provider could not be located in NFOCUS, and it was requested from the Agency on June 22, 2022, and was provided on June 29, 2022. Per a narrative in NFOCUS, the agreement was missing and was found in a file on a Resource Development worker?s laptop. The agreement was completed but not signed by the provider, so it was emailed to the provider, and the signed copy was returned on June 28, 2022. Per the agreement, the rate was $2.45 per quarterly unit or $9.80 per hour. This rate agrees to the quarterly hour rate for basic personal assistance care as of July 1, 2021, per Title 471 NAC 000-515. The rate for specialized personal assistance was $2.74 per quarterly hour as of July 1, 2021; however, no evidence was provided that the provider qualified for this rate. The provider?s agreement began on August 2, 2021. The following rates were paid: See Schedule of Findings and Questioned Costs for chart/table. Provider 5 This provider was authorized 584 quarterly units or 146 hours of service per week for four different clients. This is unreasonable as it would take over 20 hours every day of the week to perform all of the tasks noted on the SNA for all clients. The EVV claim detail supported the number of hours billed; however, the verification method noted ?NON? for each entry with manual edits. A provider who is manually entering visits in the provider portal through a computer can deny tracking of the location. Although the hours billed did not exceed the SNAs for the week tested, the provider billed 101.25 hours for the week with care up to 18 and 20 hours of service per day. This provider was tested during the prior-year audit with overlapping of services and billing over the SNA. We reviewed additional claims paid during the fiscal year. The provider overbilled 3.25 hours one week for a client with questioned costs of $22. The provider also billed over the SNA for a second client for 17 weeks from July 2021 through November 2021. This client was authorized to receive 79 quarterly units or 19.75 hours of service each week. The provider billed between 10.25 to 22.25 hours over the authorized hours, resulting in questioned costs of $2,019. We did not review the specific activities noted on the SNA and did not obtain actual time of services; therefore, there could be additional questioned costs for activities not performed according to the SNA. On November 5, 2021, during the PAS renewal, this second client told the Agency that the provider had not been in the client?s apartment in over a year. The service authorization for the client was open with the provider through December 4, 2021. Services were billed from June 2021 through November 22, 2021. Based on the client?s phone call with the Agency, the provider did not provide care from June 2021 through November 2021, so all those payments may be questionable. The provider was also paid overtime for most weeks that the provider overbilled for the two clients. As stated earlier, the overtime team reviews the claims paid and the service authorizations. It is evident the Agency was aware the provider was billing over the authorized hours for the two clients, because it only allowed overtime for hours provided or up to the maximum authorized hours, whichever was less, to be included in the weekly total. No overpayments were established for billing over the authorization for the two clients. Again, there could be additional questioned costs for overtime hours if the provider did not provide care for the second client from June 2021 through November 2021. Federal payment errors noted totaled $51,331. The Federal payments tested totaled $85,074, and the total Federal share of PAS payments for the fiscal year was $5,935,883. The total State share of PAS payments for the fiscal year was $3,462,220 for a total of $9,398,103. Due to the EVV system deficiencies, we consider all dollars to be at risk. Cause: Procedures were not adequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient?s needs, as well as a risk of services being billed but not provided. There is a significant risk for fraud or abuse occurring and not being detected. State and Federal funds appear to have been misspent. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency agrees with the finding.

Program: AL 93.778 ? Medical Assistance Program; AL 93.778 ? COVID-19 Medical Assistance Program ? Allowability and Eligibility Grant Number & Year: #2105NE5MAP, FFY21; #2205NE5MAP, FFY22 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2021): 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. Per 45 CFR ? 75.302(a) (October 1, 2021), ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds.? 45 CFR ? 75.403(g) (October 1, 2021) requires costs to be adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.05(A)(iii): A specified maximum may be disregarded if it is set aside for the purpose of paying burial expenses. Further, 477 NAC 23-003.05(A)(iii)(1)(b) states that for burial policies, ?If the client has irrevocably assigned more than the specified maximum in burial insurance, the excess is not an available resource but may be a deprivation of resources.? According to NAC Medicaid Eligibility Appendix 477-000-012, the maximum for a burial trust was $5,654, effective September 1, 2021. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. Per 477 NAC 23-003.05(B)(v)(1)(a): The disregard of any motor vehicle is not allowed when it has been determined a client residing in a nursing home or an assisted living facility and receiving services through Home and Community Based Services or Programs or All-Inclusive Care for the Elderly does not intend, or will not be able to return home if medical transportation is included in the payment to the facility[.] Per 477 NAC 23-003.07(B)(ii)(1), ?Ownership of a motor vehicle is verified by the title. The number of individuals on the title legally determines the percentage of ownership.? 477 NAC 23-003.04(A) defines a ?deprivation of resources? as follows: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant?s, client?s, or spouse?s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource. . . . 42 CFR ? 435.916(b) (October 1, 2021) requires the Agency to make a redetermination of eligibility in accordance with provisions of paragraph (a)(2) of that section, which states, ?The agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual?s account or other more current information available to the agency, including but not limited to information accessed through any data bases accessed by the agency . . . .? A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Condition: The Agency did not adequately verify the income and resources of individuals residing in long-term care facilities to ensure that limits were not exceeded, and the individuals were eligible. A similar finding was noted in the prior audit. Repeat Finding: 2021-049 Questioned Costs: $5,368 known (#2205NE5MAP $4,848; COVID-19 #2205NE5MAP $520) Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: ? One recipient?s budget from January 2020 through August 2022 was reduced by $65 for a dental insurance premium. However, the dental insurance policy was cancelled effective December 1, 2019, and no premiums were paid by the recipient. This resulted in an overpayment of $65, with a Federal share of $42 for the claim tested. ? For one recipient, the budget for February 2022 included the 2020 social security income amount of $873 rather than the 2022 social security income amount of $937, a variance of $64. This resulted in Federal share questioned costs of $41 for the claim tested. The budgets beginning October 2022 used the correct amount for calendar year 2022. ? For one recipient, the February 2022 budget was not updated with the 2022 social security income and pension amounts, resulting in an overpayment of $185, with a Federal share of $118. The Agency was unable to complete the Medicaid renewal process because requested verifications were not provided. Due to the COVID-19 Public Health Emergency, the case was not closed, and the renewal was extended for six months, and the prior income and resource amounts from 2021 were left in the budget. However, the social security income can be verified through the income and eligibility verification system (IEVS), and the budget could be updated with the correct income, causing an increase to the share of cost but not affecting overall eligibility. ? The April 2022 budget for one recipient included the incorrect amounts for the checking and savings bank accounts, resulting in the recipient being over the $4,000 resource limit by $3,228. The entire claim is questioned, resulting in Federal share sample questioned costs of $4,049. ? The budget for one recipient included two burial trusts for a total of $10,696. The Agency failed to obtain a copy of the burial contract to determine if there were countable assets related to this trust. Instead, the entire trust amounts were included in the recipient?s budget as a non-countable resource. Additionally, the resident trust account was not included as a resource. It is unknown if the recipient would have been under the $4,000 resource limit without this documentation; therefore, the claim is questioned, resulting in Federal share sample questioned costs of $1,074. ? Two providers billed the same day for one recipient. The recipient resided in an assisted living facility and was discharged on September 23, 2021, to a nursing facility. Both facilities were paid for services on September 24, 2021, resulting in non-sample Federal share questioned costs of $44. ? One recipient had title to eight vehicles that were not currently registered; however, none of these vehicles were included as resources. If the vehicles were still in the recipient?s possession, the value should have been included as an available resource, which may have affected Medicaid eligibility. The Agency failed to conduct an independent search for vehicles and consider their value as a potential resource if they were still in the recipient?s possession. Federal payment errors noted in the sample were $5,324. The total Federal sample tested was $103,839, and the total Federal long-term care facility expenditures during the fiscal year were $263,831,164. Based on the sample tested, the case error rate was 28% (7/25). The dollar error rate was 5.13% ($5,324/$263,831,164), which projects the potential dollars at risk for fiscal year 2022 to be $13,534,539 (dollar error rate multiplied by population). Cause: Worker error and inadequate review Effect: If income and resources are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure all resources are identified, verified, and adequately documented. Management Response: The Agency partially agrees with the finding. The agency disagrees with several findings as the APA noted, the agency could not complete renewals on several of the cases due to not having received all of the required information. However, the APAs findings indicate they believe the agency should have run budgets with only partial information (e.g. social security income) included. Outside of the public health emergency, the agency would have closed these cases. However, due to the public health emergency, the cases must remain open and per policy guidance, the renewal date should be extended rather than completing a renewal with incomplete information. The agency agrees with the findings regarding the lack of verification on file or worker error in entering information into the system. APA Response: Six of the seven exceptions noted were due to worker error. For the recipient noted in the third bullet, the social security income should have been updated using IEVS, and the pension income could have been verified by calling Veterans? Affairs.

Program: AL 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 447.253(b)(1)(i) (October 1, 2021) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR ? 447.253(g) (October 1, 2021), ?The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.? The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. AICPA Professional Standards AU-C Section 500, regarding audit evidence, states that audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference, and using electronic information may require the auditor to perform additional audit procedures to establish reliability. A good internal control plan requires field audits on long-term care facilities considered high risk to be completed as soon as possible to ensure issues are resolved timely and to reduce the risk for errors or abuse to occur. A good internal control plan also requires desk audits to include a testing sample of actual expenses. Condition: We noted that the Agency did not perform field audits on any long-term care facilities during fiscal year ended June 30, 2022. We also noted that procedures for desk audits did not obtain adequate evidence to ensure costs reported were accurate and proper. A similar finding was noted in prior audits. Repeat Finding: 2021-050 Questioned Costs: Unknown Statistical Sample: No Context: Agency procedures require a desk audit on each annual cost report provided by long-term care facilities that receive Medicaid funding, and a field audit on facilities identified by the Agency as high risk. We noted the following: ? We reviewed 20 desk audits and noted that limited procedures were performed. Costs were traced to the facilities? trial balance, but no underlying supporting documentation was obtained for significant costs, such as salaries, food, or supplies. In many of the desk audits, large increases in costs were attributed to the COVID-19 health emergency, without gaining any additional support to verify the higher costs. ? No field audits were completed during the fiscal year. Two facilities identified in fiscal year 2017 should have had field audits prior to the end of the fiscal year, but no field audits were performed. The Agency?s contractor identified 22 other facilities as high-risk between the fiscal year 2018 and fiscal year 2021 cost reports. Per the contractor, field audit work is to start in September 2022. The total Federal share of nursing facility expenditures during fiscal year 2022 was over $260 million. Cause: The contractor had not been engaged to complete the fiscal year 2017 field audits and will not start on the other field audits until September 2022. Effect: When facilities do not have proper desk audits and timely field audits, there is an increased risk for submitted cost reports to contain errors or fraud. Also, without adequate procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency devote adequate resources to field audits of long-term care facilities and ensure desk audits provide reasonable assurance that cost reports are accurate. Management Response: The Agency partially agrees with the finding. DHHS believes that the work done by Myers & Stauffer for the Desk Reviews is sufficient in determining accuracy and accountability of costs for providers. DHHS acknowledges that field audits should be performed but the delay in signing the Myers & Stauffer contract led to the delay in Field audits as the Desk Reviews for 2021 and 2022 were deemed to be a priority over the Field Audit work. APA Response: As noted above, no underlying supporting documentation was obtained for significant costs reported, and no support was obtained to verify the large increases in costs.

Program: AL 93.778 ? Medical Assistance Program; AL 93.767 ? Children?s Health Insurance Program (CHIP) ? Special Tests and Provisions Grant Number & Year: All open, including #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR ? 455.104(b)(4) (October 1, 2021), the State Medicaid Agency must require the disclosing entity to provide the following disclosures: The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Per 42 ? CFR 455.101 (October 1, 2021): Managing employee means a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency. Per the Medicaid Provider Enrollment Compendium (MPEC) (3/22/21), Section 1.4.1C: There are not exceptions to the managing employee disclosure requirement. To the extent any individual meets the definition of ?managing employee? under ?455.101, their information is required to be disclosed. Section 1.4.1C of the MPEC also contains the following: d. Non-Profit Entities Non-profit entities generally do not have owners unless state law permits such ownership. However, if a non-profit entity has managing employees, to the extent these individuals meet the definition of ?managing employee? under ? 455.101; they would have to be disclosed as such. In addition, as discussed further below, entities, including non-profit entities, that are organized as corporations must provide disclosures regarding their officers and directors. e. Government-Owned Entities There is not an exception for government-owned entities. Government-owned entities likewise need to disclose anyone meeting the definition of ?managing employee,? and would only need to disclose board members if the entity was organized as a corporation or if that individual meets the definition of ?managing employee.? See 1.4.C.1.d ?Managing Employee Disclosure.? Per 42 CFR ? 455.436 (October 1, 2021), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment; and (2) Check the LEIE and EPLS no less frequently than monthly. 45 CFR ? 75.303 (October 1, 2021) requires the Agency to ?[e]stablish 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.? 45 CFR ? 75.511(b) (October 1, 2021) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Three of 25 providers tested did not include disclosure requirements for managing employees. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2021-051 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted that three providers, a public school, a non-profit corporation, and a for-profit corporation, failed to disclose any managing employee. Therefore, no screenings for managing employees were performed for these three providers. Cause: The Agency relies on each provider?s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. Management Response: The Agency partially agrees with the finding. The federal regulations and MPEC require that the SMA obtain the disclosure of managing employees, that providers disclose the information, and that the SMA screen the information that is disclosed. The federal law and MPEC do not mandate that a provider must have at least one managing employee. When enrolling and revalidating their agreements, providers are directed to disclose owners and managing employees. If they fail to enter managing employee information and attempt to submit their agreement, they are directed to verify their entry and correct before submitting. It is up to the provider to determine if they have managing employees and disclose them. If the Department learns that a provider has managing employees that have not been disclosed, the provider will be directed to update their provider agreement or face sanctions. APA Response: It is not sufficient for the Agency to rely on the provider?s disclosures. Obvious errors and omissions should be reviewed to ensure compliance with Federal regulations.

Program: AL 93.778 ? Medical Assistance Program; AL 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2105NE5MAP, FFY 2021; #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303(a) (October 1, 2021) requires the Agency to ?[e]stablish 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.? Title 45 CFR ? 75.403(g) (October 1, 2021) requires costs to be adequately documented. The ? 1915(c) Home and Community-Based Services Waiver, effective October 1, 2020, through September 30, 2021, states, in part, the following: Individual programs must be specific and measurable and updated when not yielding progress, and data must be tracked and analyzed for trends. Monthly summary reports on progress or lack of progress must be made available upon request. Good internal control requires procedures to ensure that costs are in accordance with State and Federal requirements. Condition: We tested 25 claims paid from the Comprehensive Developmental Disability (CDD) Waiver and noted that two payments tested did not have adequate documentation. A similar finding was noted in the prior audit. Repeat Finding: 2021-052 Questioned Costs: $124 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: For two claims tested, we noted that monthly reporting of specific and measurable data used to analyze a recipient?s progress within the program was not on file or available upon request. Without such support we could not verify that proper services were provided. Federal payment errors for the sample tested were $124. The total Federal sample tested was $20,603, and the total of CDD payments for the fiscal year was $193,111,484. The dollar error rate for the sample was 0.60% ($124/$20,603), which estimates potential dollars at risk for fiscal year 2022 to be $1,158,669 (dollar error rate multiplied by population). Cause: Procedures were not adequate to ensure that monthly progress reports were properly completed and on file. Effect: Increased risk for unallowable charges and noncompliance with regulations. Recommendation: We recommend the Agency implement procedures to ensure that adequate documentation, including monthly progress reports, is maintained to support CDD payments. Management Response: The Agency agrees with the finding.

Program: AL 93.778 Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR ? 438.3(m) (October 1, 2021), ?The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards.? 42 CFR ? 438.602(e) states, ?The State must periodically, but no less frequently than once every 3 years, conduct, or contract for the conduct of, an independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by, or on behalf of, each MCO, PIHP or PAHP.? 42 CFR ? 438.602(g) directs this audit to be posted on the State?s website. A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed timely and in accordance with Federal regulations. Condition: The Agency does not have adequate policies and procedures to ensure that required managed care financial audits are completed timely and in accordance with Federal regulations. The MCO and PAHP audited financial reports for the year ended December 31, 2021, were not conducted in accordance with generally accepted accounting principles (GAAP). The required periodic audit of the MCOs and PAHP have not been conducted and posted on the Agency?s website. A similar finding was noted in the prior audit. Repeat Finding: 2021-053 Questioned Costs: Unknown Statistical Sample: No Context: Nebraska Total Care, Inc., Community Care Health Plan of Nebraska, Inc., United Healthcare of the Midlands, Inc., and MCNA Insurance Company had audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements for the MCOs were prepared using ?accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.? The PAHP audit was prepared using ?accounting practices prescribed or permitted by the Texas Department of Insurance . . . .? The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners? (NAIC) manual. The required periodic independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by or on behalf of each MCO, PIHP, or PAHP has not been conducted. The Agency executed a contract with Myers & Stauffer LLC on November 22, 2021, to conduct the required financial audit reports for the MCOs and PAHP. Per the Medicaid Deputy Director, the audits will be completed and posted to the Agency?s website during state fiscal year 2023. Cause: The MCO and PAHP audited financial reports are completed for the Nebraska Department of Insurance, which does not require the audit to be conducted in accordance with GAAP. The contract to conduct the financial audits of the MCO and PAHP was awarded to the outside vendor in November 2021, and the vendor is in the process of completing the audits. Effect: When the financial audits completed by the MCOs and PAHP are not conducted according to GAAP, and the independent audit of the MCOs and PAHP is not completed, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO and PAHP financial audits to be conducted in accordance with GAAP. We further recommend the Agency ensure the required audit of the accuracy, truthfulness, and completeness of the encounter and financial data of the MCOs and PAHP is completed timely and posted on the Agency?s website. Management Response: The Agency agrees with the finding.

Program: AL 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #2205NE5MAP, FFY 2022 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 455.1 (October 1, 2021) sets forth requirements for a State fraud detection and investigation program, including a method to verify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency?s Program Integrity and Special Investigations Units (SIU) perform these functions. Per 42 CFR ? 455.14 (October 1, 2021): If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation. 42 CFR ? 440.170(a)(4)(i) (October 1, 2021) states, in part, the following: Non-emergency medical transportation services may be provided under contract with individuals or entities that meet the following requirements: * * * * (B) Has oversight procedures to monitor beneficiary access and complaints and ensure that transportation is timely and that transport personnel are licensed, qualified, competent, and courteous. Title 471 NAC 2-005.01 (eff. 9/21/2020) states, in part, the following: The Department may, in its discretion, deny enrollment or sanction a provider for any of the following reasons: * * * * (37) The provider is the respondent of a protection order; * * * * (39) The provider, or household member(s) (if services are provided in the provider?s home), committed a crime: (i) Against a child or vulnerable adult; (ii) Of a nature, duration, or pattern that calls into question his or her regard for the law; (iii) Involving the illegal use, possession, or distribution of a controlled substance; or (iv) That, if repeated, could injure or harm the Medicaid program or a Medicaid client. Title 471 NAC 27-008.03 (eff.7/12/2021) provides the following: Provider staff must ensure criminal history checks are completed for each potential driver prior to providing services and annually thereafter. Any person whose result includes the driver being the respondent of a protection order, crimes against a child or vulnerable adult, drug-related crimes, or crimes that if repeated could harm a Medicaid client, must not be enrolled or allowed to provide transportation to Nebraska Medicaid clients. Program Integrity?s Policies and Procedures state the following: Providers with convictions and charges pending in the following areas should be referred into the State Queue: * * * * 3. Child Neglect, physical abuse, or sexual abuse * * * * 6. Driving Under the Influence; two of any combination of DUI charges pending or convictions (5 Years) * * * * 13. Currently the respondent of a protection order Other pending charges and convictions should be considered and weighted to similar offenses included in this list. Generally speaking, this includes charges and/or convictions which, if repeated, could injure or harm the Medicaid program or a Medicaid client. Good internal control requires procedures to ensure cases are reviewed, and appropriate dispositions are made in a timely manner. Condition: For 3 of the 20 Program Integrity cases tested, there was a lack of documentation to support that a proper review had been completed. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: Program Integrity is tasked with, among other things, investigating cases of potential Provider fraud in the Medicaid Program. If an investigation leads to valid findings, Program Integrity may refer the case to the Attorney General?s office, or it may sanction a provider, request a refund, provide education, and/or terminate the provider from the Medicaid Program. We tested 20 of 478 Program Integrity cases open or closed during the fiscal year and noted the following: ? One case, which was opened prior to January 2020 (no documentation was available to determine when the case was first opened), had no new information added to the case after January 9, 2020, and was closed on December 7, 2021, citing: ?Investigation failed to substantiate the allegation of not rendering services as billed.? The Agency?s department supervisor was unable to determine what was found during the investigation to warrant the case?s closure. ? One case, opened in February 2020, was to review a large increase in billings for a provider. The investigator was initially working with the managed care organization (MCO), WellCare, to verify why the billings increased. Ten months later, on December 22, 2020, the investigator?s case notes discussed referring the case and working with another MCO, Nebraska Total Care, for recouping costs. There were no clear notes in between the initial actions and the notes added later to indicate what was discovered during the investigation and how the investigator went from working exclusively with one MCO to another. The Agency could not clarify what happened during the case, and the Agency agreed that the case was ?missing lots of things.? The case was closed November 2, 2021, giving Nebraska Total Care permission to proceed with provider education and collection of overpayments of identified claims. ? For one case, opened in April 2021, documentation was not on file to support that the investigation was properly completed. The case opened because the owner of a transportation provider (i.e., taxicab) had pending child abuse charges, which is grounds for termination. Additionally, there appeared to be possible overbillings. The Agency determined that the owner was listed incorrectly on the State?s provider database; however, the Agency noted that the actual owner had two DUI charges and a charge for Possession of a Destructive Device. Based on the Agency?s guidelines, these alone could be grounds for sanctions or termination, especially if he was a driver. The Agency contacted the actual owner and requested a list of drivers and their screenings. Later, the Agency also requested support for the paid claims and informed the owner that he needed to update his information in the provider database. The program never received the support to determine if the owner was a driver or to verify that the provider was not overbilling on claims. The case was closed on December 6, 2021, before confirmation was obtained that the provider database had been updated. We also noted that, during the time the investigation was open, the owner was respondent to a harassment protection order and found guilty of charges on three separate cases: driving during revocation; violation of the protection order; and false reporting. Had the Agency performed a criminal background check before closing the case, these convictions would have been discovered and would have been further grounds for sanctions or termination, per Title 471 NAC 2-005.01. We also found that the owner had more recent charges, after the case was closed, including possession of a controlled substance and first-degree sexual assault (both of which were bound over to District court for probable cause) and driving during revocation (second offense), and was also current respondent to a harassment protection order. When the Auditor of Public Accounts (APA) inquired with the Agency about this case, the Agency indicated that the case would be reopened to ensure the provider database was updated with the correct owner listed. Cause: The Agency did not follow proper procedures, including supervisor reviews of cases, to ensure that Program Integrity cases were worked in a proper and timely fashion. Effect: When potential fraud cases are not pursued adequately and timely, there is an increased risk for misuse of funds and potential harm to individuals receiving services. Recommendation: We recommend the Agency implement procedures to ensure Program Integrity cases are reviewed properly and timely, and appropriate dispositions are made. Management Response: The Agency agrees with the finding.

Program: AL 17.225 ? COVID-19 ? Unemployment Insurance ? Federal; AL 17.225 ? Unemployment Insurance ? State ? Allowability & Eligibility Grant Number & Year: FFY 2021 and FFY 2022 Federal Grantor Agency: U.S. Department of Labor Repeat Finding: 2021-054 Questioned Costs: $73,746 known (17.225 ? COVID19 ? UI ? FPUC Federal, $1,500; 17.225 ? COVID19 ? UI ? PUA Federal; $3,216; 17.225 ? UI ? State, $69,030) Statistical Sample: No Summary: Audit Finding 2022-013 included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, inmates, individuals with high wages, and other payments. Our procedures revealed adjudication issues, improper payments to claimants, and other issues. The APA randomly selected 40 claimant benefit payments. The total sample tested was $19,579, and questioned costs for payments tested were $6,545. Total benefit payments for the fiscal year ended June 30, 2022, were $69,734,975. Based on the sample tested, the dollar error rate for the sample was 33.43% ($6,545/$19,579), which estimates the potential dollars at risk for fiscal year 2022 to be $23,312,402 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $67,201. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper unemployment compensation benefits. Those same procedures should also ensure compliance with State and Federal requirements, ensuring the following: 1) procedures are improved for identifying incarcerated individuals and identifying and assessing whether State employees are eligible for UI benefits; 2) employer responses to requests for separation information are adjudicated properly and followed up on; 3) investigations are created properly and completed in a timely manner; 4) benefit overpayments are established and recouped in a timely manner; and 5) verification of claimants? identity and employment or self-employment is performed properly and in a timely manner. Management Response: NDOL has multiple procedures in place to prevent and detect overpayments and conducts all crossmatches required by USDOL, including but not limited to the State and National Directories of New Hires and the Social Security Administration SSN, death and prisoner data bases. NDOL is meeting or exceeds federal requirements. The NCJIS prisoner crossmatch exceeds federal requirements. NCJIS records are supposed to contain all incarceration and release records for state and county correctional facilities. The one inmate in question was not listed as incarcerated in the SSA prisoner crossmatch and was reflected as released from incarceration in NCJIS records. The eligibility determination was based upon that NCJIS record. The state employee crossmatch is not federally required but is conducted as a best practice. NDOL will review the current state employee crossmatch process to determine if it is running as intended and whether adjustments to the process need to occur. Adjudicators are trained to review employer responses for separation in accordance with ETA Handbook 401, Edition 5. Adjudicator errors occur, but it is the result of human error rather than a systemic design flaw.

Program: AL 17.225 ? Unemployment Insurance ? Admin ? Special Tests & Provisions Grant Number & Year: UI-36202-21-60-A-31 grant period 1/1/2021 to 9/30/2022; UI-37991-22-60-A-31, grant period 1/1/2022 to 9/30/2023 Federal Grantor Agency: U.S. Department of Labor Criteria: Unemployment Insurance Program Letter (UIPL) 10-22 (January 21, 2022), Section 4.d., from the U.S. Department of Labor (USDOL) states the following, in relevant part: i. Required Engagement of UI Staff ? UI staff must be engaged in the administration of the RESEA program. This includes, but is not limited to: ? Participating in the planning, administration, and oversight of the RESEA program; * * * * ? Ensuring accurate data are provided in the RESEA-required reports[.] UIPL 10-22 also goes on to state, under section 4.d.v.B., the following: Performance reporting for FY 2022 consists of the ETA 9128, Reemployment and Eligibility Assessment Workload, and ETA 9129, Reemployment and Eligibility Assessments Outcomes; Office of Management and Budget (OMB) Control No. 1205-0456, expiration date 9/30/2022. . . . A state UI staff member must review these reports for accuracy each calendar quarter and prior to submission, in addition to being reviewed by the RESEA program lead (if a different staff member). The various grant agreements to which the State agreed state the following: In performing its responsibilities under this grant agreement, the awardee hereby certifies and assures that it will fully comply with all applicable Statute(s), and the following regulations and cost principles, including any subsequent amendments: Uniform Administrative Requirements, Cost Principles, and Audit Requirements: 2 CFR Part 200; Uniform Administrative Requirements, Cost Principles, and Audit Requirements[.] Additionally, per 2 CFR ? 2900.4 (January 1, 2022), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR ? 200.514(c)(3) (January 1, 2022), we, as the auditors, must test controls. AICPA auditing standards require that, in designing and performing tests of controls, the auditor should obtain more persuasive audit evidence the greater the reliance the auditor places on the effectiveness of a control, and inquiry alone is not sufficient to test the operating effectiveness of controls. Condition: Documentation was not maintained to verify that Unemployment Insurance (UI) staff were reviewing all the quarterly Reemployment Services and Eligibility Assessments (RESEA) performance reports prior to submission. Repeat Finding: 2021-056 Questioned Costs: None Statistical Sample: No Context: The Agency has a process for a UI staff member and a RESEA staff member to review the quarterly RESEA performance reports prior to submission. However, documentation of UI staff?s review was not maintained for the following reports: ? 9128 report quarter ending 3/31/2022 ? 9129 report quarter ending 9/30/2021 ? 9129 report quarter ending 12/31/2021 ? 9129 report quarter ending 3/31/2022 Cause: The Agency?s UI staff did not document its review for all RESEA performance reports. Effect: When documentation is not maintained to support the review of RESEA performance reports, there is an increased risk that inaccurate reports will be submitted. Additionally, there is no evidence the Agency complied with Federal requirements to review the reports prior to submission. Recommendation: We recommend the Agency implement a documented review of the RESEA performance reports by UI staff to demonstrate such review was completed prior to the submission of the reports. Management Response: The process currently being used by NDOL is that UI staff submit the RESEA report. In the USDOL Final Determination for FY 2021, USDOL stated that: In response to the Initial Determination (ID), the SON stated they have moved their report submission to a UI Program Supervisor. The grantee?s UI Program Supervisor is responsible for submitting all Federal unemployment reports. Prior to submitting the report, the program supervisor reaches out to the impacted program supervisors to verify accuracy of the report. This is done via e-mail with a deadline response time provided. Specific to this report, verification is done through the above process with both UI and Reemployment Services supervisors prior to submission. Determination: Based on the above, ETA has determined the finding is corrected. APA Response: During fieldwork, we asked the Agency multiple times for documentation that the four reports referenced herein were reviewed by UI staff prior to being submitted, but no such support was provided for any of the reports.

Program: AL 17.225 ? Unemployment Insurance ? Admin ? Special Tests & Provisions Grant Number & Year: UI-35660-21-55-A-31, FFY 2021; UI-37235-22-55-A-31, FFY 2022 Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR ? 2900.4 (January 1, 2022), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR ? 200.303(a) (January 1, 2022), the non-Federal entity must do the following: 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 Committed of Sponsoring Organizations of the Treadway Commission (COSO). Good internal controls require procedures to ensure that amounts owed are adequately tracked. Condition: We were not able to reconcile the subsidiary employer accounts with the State?s Unemployment Insurance (UI) general ledger control accounts. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency maintains accounts, or subsidiary ledgers, on State UI taxes received or due from individual employers and the UI Benefits charged to the employer. The Agency previously used the Tax Management System (TMS) to track employer accounts up to November 2021. Starting in December 2021, the Agency switched to the Geographic Solutions Unemployment System (GUS). The compliance supplement requires the auditor to reconcile, on a test basis, the subsidiary employer accounts with the State?s UI general ledger control accounts. Per the State?s Accounting system (EnterpriseOne), the Tax Contribution, Interest, and Penalties Receivable accounts were $3,587,459, $653,964, and $174,901. Only a report of the total Tax Contribution Receivables per the GUS system was provided, and the total per this report did not agree to the total Tax Contribution Receivables per EnterpriseOne. Therefore, we were unable to determine if the receivable amount in EnterpriseOne agreed to GUS, and we were unable to reconcile those subsidiary employer accounts with the State?s UI general ledger control accounts that had interest and/or penalties due. Cause: The Agency did not create a report for the total balance owed by employer when the new UI tax system was implemented. Effect: When there are not procedures to track amounts owed, there is an increased risk that amounts owed will not be collected. Recommendation: We recommend the Agency work with its vendor for the UI tax system to implement reports to track the amounts owed by employer. Management Response: The UI tax system currently tracks the amounts owed by individual employers and issues an ETA 581 report which lists aggregated employer liability data on quarterly basis. That aggregated data can be reviewed within the UI tax system on an employer, by employer basis. The Agency recognizes a desire for the Tax System to provide a specific report that can be run at any time and provide Tax Contribution Receivables. NDOL is working with the software vendor to provide additional employer liability reporting capabilities.

Program: AL 12.400 ? Military Construction, National Guard ? Suspension and Debarment Grant Number & Year: W91243-18-2-2001, FFY 2018; W91243-19-2-2001, FFY 2019 Federal Grantor Agency: U.S. Department of Defense Criteria: 2 CFR ? 180.300 (January 1, 2022) provides, in relevant part, the following: When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM [System for Award Management] Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Section 101.d of the State?s Military Construction Cooperative Agreements (MCCA) with the National Guard Bureau (NGB) states, ?Although this MCCA is not an appendix to the Master Cooperative Agreement (MCA) (October 2015 revision) which includes Attachment A thereto, the terms of the MCA are incorporated herein by reference. The MCA contains provisions required by federal law and regulation which apply to this MCCA and govern it.? Section 808 of the MCCA refers to Section 808 of the MCA for suspension and debarment requirements. Section 808 of the State?s MCA with the NGB provides the following: Non-federal entities and contractors are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. The grantee agrees to comply with the DOD implementation of 2 CFR Part 180 (at 2 CFR Part 1125) by checking the Excluded Parties List System (EPLS) at the current OMB website to verify contractor eligibility to receive contracts and subcontracts resulting from this Agreement. The grantee and subrecipients shall not solicit offers from, nor award contracts to contractors listed in EPLS. This verification shall be documented in the grantee and subrecipient contract files, and shall be subject to audit by the grantor and Federal/State audit agencies. A good internal control plan requires adequate procedures to ensure the Agency does not utilize contractors who are barred from participation in Federal programs due to improprieties. Good internal control also requires that procedures performed be adequately documented. Condition: For four of four contractors tested, the Agency did not have documentation on file to support that it verified the contractors were not excluded, suspended, or otherwise debarred from participation in Federal programs. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency stated that it reviews the SAM website to ensure contractors are not barred from participation in the program. However, the Agency did not have documentation on file to support that the review occurred. The Agency included clauses in its contracts requiring the contractors to verify that subcontractors were not debarred from participation in Federal programs. However, the contracts did not include clauses requiring the contractors to certify they were not debarred from participation in Federal programs. The contractors tested received a total of $21,294,705 in program funds during the fiscal year ended June 30, 2022. We reviewed the SAM website for the contractors tested, and none were excluded by the Federal government. Cause: Inadequate procedures. Effect: Increased risk for loss or misuse of funds. Recommendation: We recommend the Agency implement procedures to ensure it completes documented annual reviews of the SAM website for its contractors. Management Response: The Construction and Facility Maintenance Office concurs with the finding stated above.

Program: AL 12.401 ? National Guard Military Operations and Maintenance (O&M) Projects ? Cash Management & Reporting Grant Number & Year: Appendices ? W91243-20-2-1001, FFY 2020; W91243-21-2-1001, FFY 2021; W91243-21-2-1005, FFY 2021; W91243-21-2-1021, FFY 2021; W91243-22-2-1001, FFY 2022; W91243-22-2-1002, FFY 2022; W91243-22-2-1003, FFY 2022; W91243-22-2-1005, FFY 2022; W91243-22-2-1024, FFY 2022 Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR ? 1128.100 and 2 CFR ? 1128.200 (January 1, 2022), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR ? 200.303 (January 1, 2022): 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. Title 2 CFR ? 200.302 (January 1, 2022) requires financial management systems of the State sufficient to permit both the preparation of required reports and the tracing of funds to expenditures adequate to establish that the use of the funds was in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Title 2 CFR ? 200.305(a) (January 1, 2022) states, in part, ?For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 . . . .? Title 31 CFR Part 205 (July 1, 2021) implements the Cash Management Improvement Act (CMIA) and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2021, through June 30, 2022, allows the program to request Federal funds in accordance with the monthly draw funding technique by which the amount requested shall be based on estimated costs to be incurred in the next month. Master Cooperative Agreement (October 2020), Article V ? Payment, Section 503, Payment by Advance Method, states, ?The advance payment method shall be according to procedures established in current PARC policy, NGR 5-1 Chapter 11 or successor CNGB I & M, and 2 CFR ?200.305.? National Guard Regulation (NGR) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states in part, ?[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days)?. NGR 5-1 was in effect during the entire audit period but has since been superseded by CNGBI 9101.00, which went into effect on January 27, 2023. Instructions for OMB Standard Form 270 (REV. 1/2016) includes the following for line 11a, ?Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients.? A good internal control plan would include procedures to ensure that the time between the drawdown of Federal funds and disbursements are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2021-059 Questioned Costs: None Statistical Sample: No Context: We tested 25 drawdowns and noted the following: ? Fourteen drawdowns were not in compliance with NGR 5-1. Ten of the draws were expended from 46 to 334 calendar days after the drawdown of Federal funds. The other four draws had yet to be fully expended as of February 9, 2023. The table below provides a summary of the 14 draws: See Schedule of Findings and Questioned Costs for chart/table. ? In addition, four draws were not in compliance with CMIA Agreement requirements. Advance amounts were requested based on estimated costs to be incurred during the month covered by the requests. To determine the reasonableness of the estimates, the APA determined the time it took the Agency to expend amounts advanced (without consideration of any cash on hand). Four draws were expended between 64 and 110 days after the drawdown of Federal funds. ? For 24 of 25 SF 270?s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Military reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an underreporting of $56,356 to an overreporting of $2,310,585, with a net total overreporting of total program outlays by $10,983,232 for the 25 reports tested. Cause: Inadequate procedures for coding funds and estimating cash needs for the upcoming month. The Agency drew down funds from the wrong Federal program. The Agency has recorded expenditures for two capital construction projects dating back to December 2019. The Agency reports expenditures for the projects under the Military Construction program (AL 12.400), stating that the projects are Federally funded under AL 12.400. However, it drew down funds for the projects under AL 12.401. Regarding SF-270 reporting, the Agency thought that the report instructions requiring reporting of actual cash disbursements as total program outlays did not apply to it as an ?advance State? (a State that is authorized to request funds on an advance basis). Effect: The Agency is not in compliance with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure that the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard Regulations. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The United States Property and Fiscal Office (USPFO) concurs with the recommendation.

Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Allowability & Earmarking Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.403 (January 1, 2022) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. 2 CFR ? 200.404 (January 1, 2022) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm?s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award?s cost. 2 CFR ? 200.459 (January 1, 2022) states, in relevant part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. . . . (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. * * * * (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(2)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households . . . . Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(3) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of funds received by an eligible grantee from a payment made under this section may be used to provide eligible households with case management and other services related to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary, intended to help keep households stably housed. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(5)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. Per the amended Emergency Rental Assistance terms, dated March 26, 2021, ?The total of all administrative costs, whether direct or indirect costs, may not exceed 10 percent of the total amount of the total award.? The Reallocation Guidance from the U.S. Department of the Treasury (Treasury), dated March 30, 2022, states the following: A Grantee may spend up to 10% of its initial ERA1 allocation for administrative expenses only if the Grantee obligates at least 30% of its initial allocation for the provision of financial assistance and housing stability services on behalf of eligible households by September 30, 2022. If a Grantee has obligated less than 30% of its initial allocation providing financial assistance and housing stability services as of September 30, 2022, Treasury will presume that the Grantee?s administrative expenses were not attributable to such services ? and therefore were not permissible uses of ERA1 funds ? to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds, unless the Grantee can demonstrate that those costs are related to the delivery of the program. Condition: The contractual agreement to receive and evaluate applications for Emergency Rental Assistance (ERA) did not have adequate limitations or provisions to ensure costs were reasonable. A similar finding was noted in the prior audit. Repeat Finding: 2021-063 Questioned Costs: $3,580,007 known Statistical Sample: No Context: The State of Nebraska was initially awarded $158,572,581 for ERA to assist eligible households that have difficulty making timely payments of rent and utilities due to the COVID-19 pandemic. At least 90% of funds are to be earmarked for financial aid to eligible households. Not more than 10% of funds may be used for administrative costs. The Agency entered into a contract with Deloitte & Touche LLP (Deloitte) to provide program administration and case management. Eligibility determinations were made by Deloitte and then sent to the State for review and to process the aid payments to eligible recipients. Deloitte was paid $8,672,561 during the fiscal year ended June 30, 2022. We tested one payment for $531,314 and noted the following: ? Adequate support was not on file to allow for a determination as to whether the contracted amount was reasonable. There were no maximums or limitations other than the $14,627,160 cap specified in the contract. The contract was paid on an hourly rate and did not have any stipulations regarding the number of hours paid per application or performance measures to be achieved. ? Per guidance from Treasury, if the State obligates less than 30% of its initial allocation providing financial aid by September 30, 2022, Treasury will presume that the State?s administrative expenses were not attributable to the program, at least to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds. The State voluntarily reallocated $84,700,000 to local governments and was required to return an additional $11,716,548 for reallocation. Therefore, State administrative expenses would be limited to $6,215,603 (10% of awarded amount less reallocations). Administrative expenses in fiscal year 2021 and 2022 totaled $9,795,610. As a result, we question costs of $3,580,007 for administrative costs exceeding 10%. As of January 17, 2023, the Agency has spent $26,399,517 on financial aid, and $13,080,572 for administrative expenses, of which $12,563,227 was paid to Deloitte. This is 33.13% of the total amount paid as of January 17, 2023. Without spending 30% of its award on financial aid, the Agency will not meet the earmarking requirements per the guidance released from Treasury. Based on the amount of financial aid spent, the administrative costs appear unreasonable. Cause: The contract was not competitively bid, and contract provisions were not specific enough to ensure that amounts paid were reasonable. The Agency lacked adequate procedures to ensure adherence to earmarking requirements. Effect: Without such adequate procedures, there is an increased risk for misuse of Federal funds. The Agency did not meet earmarking requirements. Recommendation: We recommend the Agency improve its procedures for ensuring the reasonableness of contractual service payments. Management Response: The Military Department does not agree with this finding. Vendor Contract: The State performed procurement procedures soliciting Requests for Information from vendors in 2020 to support COVID-19 related tasks. A contractual agreement was completed with the vendor once the State determined the program costs, estimated level-of-effort, and key assumptions were reasonable based on the scope of services the State requested. In addition, the state complied with the procurement standards set forth in 2 CFR 200.317-200.327, including expected contract provisions, key program assumptions, and not-to-exceed thresholds. The contractual agreement was completed to enable the State to proactively monitor vendor performance and analyze detailed information on associated cost. Vendor performance was monitored through twice-weekly status meetings, bi-weekly executive status briefings with executives across multiple agencies, bi-weekly Executive Steering Committee meetings, and review of detailed invoices. The State as the Grantee is able to demonstrate that the administrative costs are related to the delivery of the program in a timely fashion and is aligned with US Treasury Guidance. APA Response: As of January 17, 2023, the Agency has spent $1 in administration costs for every $2 spent for aid. This does not appear reasonable and is not in accordance with earmarking requirements. Thus, in addition to the questioned administrative costs identified for 2022, the agency appears to be on track for incurring millions of dollars more in such questioned costs for 2023.

Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.303 (January 1, 2022) states, in relevant part, the following: 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. . . . Good internal controls require risk assessments to be performed, and procedures to verify the validity of applicants prior to payment. 2 CFR ? 200.403 (January 1, 2022) states, in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. The Nebraska ERA Program FAQ states, ?Who is eligible? You are eligible if you answer YES to ALL of the following: . . .Your landlord is not an immediate family member.? Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(k)(3)(A) of the Consolidated Appropriations Act, 2021, states that an eligible household is a household of one or more individuals that is obligated to pay rent on a residential dwelling. Good internal controls require procedures to verify the validity of applicants prior to payment. Condition: Procedures were not adequate to ensure that payments were allowable, and individuals were eligible for assistance. A similar finding was noted in the prior audit. Repeat Finding: 2021-064 Questioned Costs: $76,050 known Statistical Sample: No Context: During testing of 40 aid payments, we noted one payment, totaling $1,350, made to an applicant whose landlord was an immediate relative. The total sample tested was $87,526, and total assistance payments for the fiscal year were $17,456,087. The dollar error rate for the sample was 1.54% ($1,350/$87,526), which estimates the potential dollars at risk for fiscal year 2022 to be $268,824 (dollar rate multiplied by the population.) In the prior and current audit, we noted that the Agency identified likely fraudulent payments. As of January 9, 2023, the Agency had identified $155,360 and $822,188 of likely fraudulent payments in fiscal years ended June 30, 2021, and June 30, 2022, respectively. We reviewed five of these payments, totaling $74,700, in fiscal year 2022. For all five payments, we noted indicators of possible fraud, as information on the application provided was inconsistent with the information from other databases or systems. Examples of such indicators include the following: 1) the owner of the property per the County Assessors website not agreeing to the owner listed on the application; 2) generic and editable supporting documentation; and 3) tenants and landlords having out-of-state identification and telephone numbers. According to the Agency, these payments have been referred to the State Patrol for further investigation. Cause: The Agency had various procedures for ensuring that application information was accurate; however, verifying the property owner to County Assessor information was not required. Effect: There is an increased risk for fraudulent payments. Once fraudulent payments have been made, the likelihood of recouping them is low. Recommendation: We recommend the Agency improve its procedures for verifying the validity of applicants prior to payments. We further recommend the Agency continue to work with law enforcement to recoup improper payments. Management Response: The Military Department does not agree with this finding. The State has implemented a strong system of internal controls to determine program eligibility. These controls include detailed pre-payment and post-payment analytics to help identify applications at risk for fraud. As the ERA program progressed in Nebraska and nationally, program procedures continued to be enhanced to monitor for and prevent potentially fraudulent applications. During its life the program provided proactive fraud detection for over 56,000 tenant and landlord applications and prevented approximately $23M of funding from being paid out erroneously. Additionally, the State turns over any paid applications that have been subsequently determined at risk of being fraudulent to the State Patrol for further investigation and potential prosecution. APA Response: In addition to the one of 40 payments tested with errors, five payments we reviewed noted possible indications of fraud. Once fraudulent payments have been made, the likelihood of recouping them is low. 2 CFR ? 200.516 (January 1, 2022) requires reporting known or likely fraud affecting a Federal award.

Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.302(a) (January 1, 2022) states, in relevant part, the following: [T]he state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per the Treasury Emergency Rental Assistance (ERA) Quarterly Reporting Special Tip, issued on January 24, 2022, ?[A]mounts returned to Treasury, whether excess funds or voluntary reallocation, should be excluded from reporting since the funds are no longer available for obligation or expenditure.? A good internal control plan requires procedures to ensure that all required data is reported and documented and does not include excluded amounts. Condition: The Agency did not correctly report Cumulative Obligations to Date and Cumulative Expenditures to Date on the ERA Compliance Report for quarter ending June 30, 2022. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Cumulative Obligations to Date and Cumulative Expenditures to Date reported on the ERA Compliance Report for quarter ending June 30, 2022, were $137,087,293 and $127,949,502, respectively. The amounts reported included the $96,416,548 that had been returned to the U.S. Department of the Treasury for voluntary reallocation and excess funds. However, per the guidance issued by the U.S. Department of the Treasury on January 24, 2022, the $96,416,548 should have been excluded from the report. Cause: Employee oversight. Effect: The Cumulative Obligations to Date and Cumulative Expenditures to Date on the ERA compliance report for quarter ending June 30, 2022, were overstated. Recommendation: We recommend the Agency improve procedures to ensure reports are accurate. Management Response: The Military Department agrees with this finding. The State?s ERAP award could not be used to provide assistance to individuals residing in Omaha, Lincoln, Lancaster County, or Douglas County as those political subdivisions received separate ERAP awards. With the largest need being in those metropolitan areas of the State, $84.7 million was obligated to those communities through the Treasury reallocation process. An additional $11.7 million was paid back to U.S. Treasury as part of a recapture process. Those amounts were shown as cumulative obligations against the initial award of $158.5 million until the award amount was formally adjusted down by U.S. Treasury.

Program: AL 21.026 ? COVID-19 Homeowner Assistance Fund ? Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. U.S. Department of the Treasury Homeowner Assistance Fund Guidance states the following, in relevant part: HAF participants must have a reasonable basis under the circumstances for determining income for purposes of the requirements described above under ?Eligible Homeowners.? Two approaches for income verification are permissible: (1) the household may provide a written attestation as to household income together with supporting documentation?or (2) the household may provide a written attestation as to household income and the HAF participant may use a reasonable fact-specific proxy for household income, such as reliance on data regarding average incomes in the household?s geographic area. The Financial Assistance Agreement states that Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, as set out in 2 C.F.R. Part 200, are applicable to the award. Per 2 CFR ? 200.303 (January 1, 2022): 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. Good internal control requires procedures to ensure that participants are eligible and payments are proper. Condition: The Agency did not have adequate procedures to ensure that payments were allowable, and participants were eligible for assistance. Repeat Finding: No Questioned Costs: $981 known Statistical Sample: No Context: We tested 25 assistance payments. One $981 payment tested did not include the co-applicant. The applicant noted his marital status as married; however, the application was signed only by one individual, and the income verification review was performed only for the applicant and did not include the income of the spouse. The total sample tested was $116,341, and total assistance payments for the fiscal year were $5,015,888. Based on the sample tested, the case error rate was 4% (1/25). The dollar error rate for the sample was 0.84% ($981/$116,341), which estimates the potential dollars at risk for fiscal year 2022 to be $42,133 (dollar rate multiplied by the population.) Cause: Staff errors and inadequate review. Effect: Increased risk for errors or fraud. Recommendation: We recommend the Agency improve procedures for ensuring that applications are properly completed and reviewed, and eligibility requirements are met. Management Response: The Military Department agrees with this finding. Management agrees the spouse should have been added to the application, income verification completed for the spouse, and no letter of explanation was provided for excluding the spouse. However, adding the spouse?s name and income would not have changed the award decision.

Program: AL 21.026 ? COVID-19 Homeowner Assistance Fund ? Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.332 (January 1, 2022) states the following, in relevant part: All pass through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient?s unique entity identifier (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per ? 200.414. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR ? 200.333 (January 1, 2022) states the following: With prior written approval from the Federal awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in ?200.201. 2 CFR ? 200.201 (January 1, 2022) states the following, in relevant part: (b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through entities as permitted in ? 200.333, may use fixed amount awards (see Fixed amount awards in ? 200.1) to which the following conditions apply: (1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The Federal awarding agency or pass-through entity may use fixed amount awards if the project scope has measurable goals and objectives and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. . . . Good internal controls require procedures for the proper maintenance of program documents. Condition: The Agency lacked adequate procedures for monitoring subrecipients. Repeat Finding: No Questioned Costs: $451,851 known Statistical Sample: No Context: On November 2, 2021, the Agency signed a Memorandum of Understanding (MOU) with the Nebraska Investment Finance Authority (NIFA) to assist the Agency in carrying out the Homeowner Assistance Fund (HAF) Program. The Agency agreed to pay NIFA an amount not to exceed $1,200,000 for services during the initial contract period of November 1, 2021, through January 31, 2023. This included: 1) a flat fee of $78,348 for delivery of an accepted HAF Plan; 2) a flat fee of $90,700 for implementation of the Program, payable the month following program launch; and 3) $69,081 per month, beginning February 2022, for ongoing project administration. During the fiscal year ended June 30, 2022, the Agency paid NIFA $451,581. We noted the following: ? The Agency did not have controls and procedures in place to ensure that subrecipient requirements were met. ? The Agency did not communicate the Federal award identification items required by 2 CFR ? 200.332. ? NIFA was to be paid fixed amounts; however, prior written approval of these fixed-amount payments, as required by 2 CFR ? 200.333, could not be provided. In addition, the Agency did not have adequate support to ensure that the amounts paid were reasonable, as required by 2 CFR ? 200.201. Furthermore, per an Employee Time Summary report, the actual cost for February through June 2022 was $152,301, compared to the $345,404 billed and paid for monthly services. Cause: Inadequate procedures. Effect: Increased risk of fraud and non-compliance with Federal guidelines. Recommendation: We recommend the Agency implement procedures to ensure that Federal guidelines are followed, and controls are in place for subrecipient monitoring. Management Response: The Military Department disagrees with this finding. The Military Department does require NIFA to comply with 2 CFR 200 and executes procedures and controls to ensure the Federal guidelines are followed. These include (but are not limited to) weekly program updates, monthly reporting of plan metrics, compliance reviews, monthly manpower evaluations of NIFA personnel against invoices to substantiate project management supporting the program and reasonableness of administration fees. In addition, the MOU with NIFA was amended to require monthly manpower evaluations to substantiate the monthly fee for project management and administration of the program beginning with July 2022 invoicing, thus changing from a flat fee to actual costs incurred. APA Response: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200; therefore, the Agency is required to follow 2 CFR part 200. Payments during fiscal year ended June 30, 2022, were made under a fixed amount subaward. Fixed amount subawards are allowable only with prior written approval from the Federal awarding agency. The failure to communicate items required by 2 CFR ? 200.332 (January 1, 2022) illustrates further the inadequacy of Agency procedures.

Program: AL 20.205 ? Highway Planning & Construction ? Subrecipient Monitoring Grant Number & Year: Various Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR ? 1201.1 (January 1, 2022), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR ? 200.332(a) (January 1, 2022) requires all pass-through entities to do the following: Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification . . . . Required information includes: (1) Federal award identification. * * * * (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; * * * * (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; * * * * (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; Good internal control requires procedure to ensure that subrecipients are informed of all required information. Condition: The Agency did not communicate all required information to subrecipients. We noted further that the Agency lacked procedures for ensuring subrecipients have sufficient accounting controls to manage Federal funds properly. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: During the fiscal year, there were 46 subaward projects to a total of eight subrecipients. We tested five subawards and noted the Agency did not properly communicate the subrecipients? unique entity identifier, the Federal Award Identification Number, Federal award date, and amount of Federal funds obligated and committed for all five subrecipient projects tested. Additionally, for one of five projects tested, the Assistance Listing number and title was not communicated. Subrecipient expenditures totaled $29,277,795 during the fiscal year. Cause: The program agreement template used for subrecipient awards does not include all required Federal award identification data elements. For the one project where the Federal Assistance Listings number and title was not communicated, the program agreement was completed in 2006, prior to the program agreement template being changed to include this information. Effect: Noncompliance with Federal regulations could result in sanctions. When subrecipients are not informed of all required information, there is an increased risk for subrecipient noncompliance, including with audit requirements. Recommendation: We recommend the Agency implement procedures to ensure that subrecipient program agreements include all information required to be communicated. Management Response: NDOT concurs with finding and will review all current active agreements to ensure notification of each federal subaward is clearly identified to the subrecipient.

Program: AL 20.509 ? Formula Grants for Rural Areas ? Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-013-00, FFY 2017 Federal Grantor Agency: U.S. Department of Transportation Criteria: Per 2 CFR ? 1201.1 (January 1, 2022), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR ? 200.403 (January 1, 2022) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR ? 200.332(d) (January 1, 2022) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR ? 200.430(i)(1) (January 1, 2022) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] Per 2 CFR ? 200.405(a) (January 1, 2022), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? Condition: The Agency lacked adequate documentation to support that payments were for allowable activities and in accordance with Federal cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2021-065 Questioned Costs: $64,704 known Statistical Sample: No Context: We tested 25 payments to 22 subrecipients and three vendors. The Agency performed financial desk reviews for subrecipients; however, the reviews tested were not adequate. When desk reviews were not adequate, we provided the Agency with the opportunity to obtain additional support from the subrecipient; however, adequate support was not obtained. We noted the following: ? For nine subrecipients tested, documentation was not adequate to support that personnel charges were allowable and in accordance with Federal cost principles. The Agency did not have timesheets, time certifications, or other payroll documentation on file for all reimbursement requests. In some cases, payroll documentation was on file, but there was not adequate support to verify that the correct amount was charged to the program, as timesheets were not sufficient to identify time allocated to the program when the employee did not work entirely on the Federal program. In addition, for some subrecipients there was not sufficient documentation to support the benefits reimbursed. ? For one subrecipient tested, fuel costs and maintenance expenses were not adequately supported. The expenses were not supported by invoices. ? For seven subrecipients tested, capital and nonoperating costs were not adequately supported. The Agency did not obtain documentation to support the percentage of nonoperating expenditures allocated to the program. Subrecipients may share building space with other city or county offices and, therefore, may be charged a portion of the rent and utilities. While this is allowable, the Agency must obtain documentation to support that the percent allocated to the transit program is reasonable; however, such supporting documentation was not available. We also noted that one subrecipient was improperly reimbursed for sales taxes. The sample population totaled $15,537,764, which included $12,810,135 paid to 60 subrecipients and $2,727,629 vendor payments. Federal payment errors noted in the sample totaled $24,600. The total Federal sample tested was $353,695. Based on the sample tested, the dollar error rate was 6.96% ($24,600/$353,695), which estimates the potential dollars at risk for fiscal year 2022 to be $1,081,428 (dollar error rate multiplied by population). North Fork Area Transit During the course of our audit, we became aware of potential fraud related to the North Fork Area Transit (NFAT), a subrecipient of the Agency. On December 15, 2022, the Director of NFAT was suspended. A warrant was issued for his arrest the next day, alleging theft of up to $1 million between April and December 2022. From April 1, 2022, through June 30, 2022, the Program reimbursed NFAT a total of $582,587. As a result, we selected the April 2022 reimbursement paid to NFAT in June 2022, totaling $101,519, for additional testing. During that testing we identified $40,104 in questioned costs due to the following: ? For all four non-operating personnel (director and managers), documentation was inadequate to support that personnel charges were allowable and in accordance with Federal cost principles, as the timesheets identified only times in and out and did not specify what work the nonoperating employee was performing for the Federal grant. Questioned costs due to the lack of support for nonoperating personnel totaled $24,104. ? A $20,000 payment for vehicle insurance was reported; however, there was no documentation to support how the amount was determined or why it was reasonable. Furthermore, the $20,000 paid was inconsistent with past vehicle insurance payments. We observed a check in March 2022 for $600 with the description that it was for March bus insurance, and previous testing identified $600 bus insurance checks in August 2020 and August 2021. As a result, we question the Federal share of $16,000. ? We also noted inconsistencies in supporting documentation for operating personnel (drivers and dispatchers). Variances were noted between timesheet hours and the payroll register. Due to the NFAT concerns, the APA has now commenced a thorough review of this entire matter, which will be reported separately at a later date. Cause: Procedures were not adequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: The NDOT Local Assistance Division has increased transit staff by 1.5 FTEs for a total of 3.5 FTEs dedicated to reviewing monthly invoices. NDOT continues to engage and educate transit recipients. In late 2022, the North Fork Area Transit (NFAT) Board began an internal review process which revealed an inappropriate use of funds and authorities were notified. In December 2022, the NFAT Board engaged NDOT and requested assistance from the Mobility Management Team following the allegation. The Mobility Management Team is assisting the NFAT Board in managing operations, review of existing reporting and financial policies, and review and update of step-by-step checks and balances process. NDOT is financially supporting the Mobility Management Team in an effort to support and resume services at NFAT.

Program: AL 20.933 ? National Infrastructure Investments ? Reporting Grant Number & Year: 693JJ22040000BDG3NE5009003, Period ending September 5, 2023; 693JJ22040000BDG0NE0752128, Period ending February 1, 2024 Federal Grantor Agency: U. S. Department of Transportation Criteria: Per 2 CFR ? 1201.1 (January 1, 2022), the U.S. Department of Transportation adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at Title 2 CFR part 200. 2 CFR ? 200.302(a) (January 1, 2022) states the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR ? 170 (January 1, 2022), Appendix A, Section I, Reporting Subawards and Executive Compensation, states, in relevant part, the following: (a) Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . * * * * (2) Where and when to report. (i) The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. (ii) For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure that Federal reports are complete, accurate, and submitted as required. Condition: Both the quarterly financial reports and the Federal Funding Accountability and Transparency Act (FFATA) report were inaccurate. A similar finding was noted in the prior audit. Repeat Finding: 2021-066 Questioned Costs: N/A Statistical Sample: No Context: The Agency is required to file quarterly SF-425 Financial Reports for each open project. We noted the following: ? The Agency did not complete the cash receipts, cash disbursements, and cash on hand sections for the quarters ended September 30, 2021, and December 31, 2021, for projects 21209 and 22277. In addition, Federal funds authorized and Federal share of expenditures were not completed for project 22277 for these same two quarters. ? We noted the following errors for the 21209 quarterly report ended March 31, 2022. See Schedule of Findings and Questioned Costs for chart/table. ? The June 30, 2022, quarterly report for project 21209 reported $0 cash disbursements and $5,529,176 cash on hand. These line items should have been reversed, with $5,529,176 reported as cash disbursements. The $5,529,176 was correctly reported as the Federal share of expenditures. During the fiscal year, the Agency had one subrecipient that required FFATA reporting. One of seven Key Data Elements tested was not reported accurately. The amount of the subaward was $16,960,000; however, that amount was reported incorrectly as $16,960. Cause: Employee error and inadequate review procedures. Effect: Noncompliance with Federal requirements, which could lead to sanctions. Recommendation: We recommend the Agency improve procedures to ensure expenditures are reported properly and agree to accounting records. We further recommend the Agency improve procedures to ensure FFATA reporting is accurate. Management Response: The FY21 Statewide Single Report was issued on June 23, 2022. Upon receipt of the findings, NDOT took action to implement changes to the quarterly SF-425 Report. The Key Data Element noted as being inaccurately reported as $16,960 is a number automatically generated by the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). A federal system, not a state system. The federal funding of $16,960,000 was accurately reflected in other areas of the report. NDOT concurs with the adjustments and will review procedures to ensure accurate FFATA reporting. APA Response: It is the Agency?s responsibility to ensure that all data reported is accurate. While the grant award of $16,960,000 was identified on the report, the subaward of $16,960,000 was incorrectly reported as $16,960. If the Agency is aware that key data elements are incorrect, the Agency should make the necessary changes so the subaward amount is accurate. In response to our testing, Agency staff indicated they went back into the system and were able to adjust the numbers.

Program: AL 21.019 ? COVID-19 Coronavirus Relief Fund; AL 93.323 ? COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases; AL 97.036 ? COVID-19 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) ? Allowability Grant Number & Year: AL 21.019 ? NA; AL 93.323 ? NU50CK000547, project period 8/1/2019-7/31/2024; AL 97.036 ? 4521-DR-NE, 4/4/2020 Federal Grantor Agency: U.S. Department of Treasury, U.S. Department of Health and Human Services, U.S. Department of Homeland Security Repeat Finding: No Questioned Costs: $10,224,700 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Summary: Audit finding 2021-005 (NOMI Contract Matters), included in Part II of this report, relates to both the financial statements and Federal awards. The State of Nebraska did not have adequate documentation to support the receipt of testing kits. The State entered into a contract with Nomi Health, Inc., on April 21, 2020, to provide 1,200,000 test kits. However, based on the documentation available, we were able to obtain support for the receipt of only 803,240 test kits. The State paid between $25 and $32.50 per test kit. The Agency was unable to provide support that 396,760 test kits, for a cost of $10,224,700, were received. Recommendation: We recommend the Agency establish procedures for documenting that all contract deliverables have been received before payment is made. Management Response: The Department of Administrative Services provided the auditor with Nomi Health, Inc. records to support that all test kits required under the contract were shipped. DAS? own records indicate that there was a lack of packing slip documentation maintained during the pandemic, particularly in the early months of June, July, and August 2020, however, such test kits were received. Records of the Department of Health and Human Services (DHHS) show that tests were administered at TestNebraska sites in these months. DAS disagrees with the entirety of the questioned costs, as this was a performance issue. According to DHHS electronic lab records, a minimum of 789,400 tests were performed. A count of warehouse inventory accounts for an additional 206,500 test kits, providing support for receipt of at least 995,900 test kits. Nomi Health, Inc. provided documentation supporting over 1.2 million test kits, and the contract was fulfilled. APA Response: Per Uniform Guidance, questioned costs include costs that are not supported by adequate documentation at the time of the audit. On December 3, 2021, the Agency communicated to the APA, ?The record of shipments of the tests and delivery receipts DAS provided you constitutes all of the documentation DAS has regarding test kit deliveries.? As documentation was not on file to support the receipt of all test kits paid for, these are considered questioned costs.

Program: Various, including AL 93.778 ? Medical Assistance Program (Medicaid) ? Allowable Costs/Cost Principles Grant Number & Year: Various, including #2005NE5ADM, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR ? 200.403 (January 1, 2021) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. * * * * (g) Be adequately documented. 2 CFR ? 200.405(b) (January 1, 2021) states, in relevant part, the following: All activities which benefit from the non-Federal entity?s indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. 2 CFR ? 200.444(a) (January 1, 2021) states, in relevant part, the following: For states, local governments, and Indian Tribes, the general costs of government are unallowable (except as provided in ? 200.475). Unallowable costs include: (1) Salaries and expenses of the Office of the Governor of a state . . . . (2) Salaries and other expenses of a state legislature . . . . 2 CFR ? 200, Appendix V, subsection (G)(2), (January 1, 2021) states the following: Internal service funds are dependent upon a reasonable level of working capital reserve to operate from one billing cycle to the next. Charges by an internal service activity to provide for the establishment and maintenance of a reasonable level of working capital reserve, in addition to the full recovery of costs, are allowable. A working capital reserve as part of retained earnings of up to 60 calendar days cash expenses for normal operating purposes is considered reasonable. A working capital reserve exceeding 60 calendar days may be approved by the cognizant agency for indirect costs in exceptional cases. 2 CFR ? 200, Appendix V, subsection (G)(4), (January 1, 2021) states, in relevant part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenues generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually and an adjustment will be made for the difference between the revenue and the allowable costs. These adjustments will be made through one of the following adjustment methods: (a) a cash refund including earned or imputed interest from the date of transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations to the Federal Government for the Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c) adjustments to future billing rates, (d) adjustments to allocated central service costs. A good internal control plan requires: ? Procedures to ensure rate charges are equitable, reflective of actual costs incurred, and reviewed periodically to confirm that charges are appropriate for the services provided. ? Adequate documentation to support both rates charged and the approval of those rates. ? Periodic review of internal service fund balances to ensure revenues are not in excess of expenses. ? Internal service rates are published and available for State agency review and applied consistently for all State agencies. Condition: The Agency did not have adequate documentation to support the allocation of security costs in developing building rental rates. Additionally, the Agency?s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. A similar finding was noted in prior audits since 2015. Lastly, the Accounting Internal Service Fund balance was greater than 60 calendar days for cash expense for normal operations incurred. Repeat Finding: 2020-022 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Building Division The rental rate charged to agencies for building space includes an allocation for indirect costs for administration, groundskeeping, security, and energy management. We noted that the Capitol and the Governor?s residence were not allocated any costs for security, even though there is security at these locations. As these locations were not allocated any security costs, Federal programs could be over-charged. Additionally, security costs to the Capitol and the Governor?s residence are general costs of government and, therefore, unallowable. For the fiscal year ended June 30, 2021, the allocations for security costs were $809,495. Materiel Division We tested five Print Shop billings and noted the following: ? In prior audits, we noted that 24 Print Shop rates were based on calculations from fiscal year 2008, and three other Print Shop rates were based on calculations from fiscal year 2011. The Print Shop increased all the rates by 10% in fiscal year 2019 and increased the rates by 5% in fiscal year 2020. No changes to the rates were made in fiscal year 2021. No support was provided to determine that the current rates were reasonable. ? The Agency?s published markup price for special purchases, paper costs, plate material, special order supplies, and colored ink was 41%. However, the Agency was charging a markup of only 35%. Regardless, the Agency did not have adequate documentation to support the reasonableness of either markup percentage rate. ? One billing tested included 20 hours per month for bookwork and accounting services. However, there was not adequate documentation to support the number of hours billed as reasonable. ? For two billings tested, the Agency charged for the cost of plates used during printing. Per the published Print Shop rate schedule, the Agency charges $57.89 per metal plate and $14.96 per plastic plate; however, the Agency was charging $25.75 per plate used, regardless of plate type. As previously stated, the Agency did not have support that the current rates were reasonable. ? For one billing tested, we noted that the Agency was not using the current Print Shop rates in order to calculate the bill. The Agency charged $10,097; however, using the current Print Shop rates, we calculated the bill to be $10,679, a variance of $582. Receipts from sales of print shop services during the fiscal year ended June 30, 2021, totaled $3,132,067. Accounting Division Per the Agency?s calculation, as of June 30, 2020, the Accounting Services Internal Service Fund Balance was $4.307 million; however, the allowable reserve was only $0.914 million, a difference of $3.393 million. The Agency had not completed its internal service fund balance calculations for the fiscal year ended June 30, 2021, at the time of the audit. We estimated that the fund balance increased to $4.527 million as of June 30, 2021, and the allowable reserve was $1.007 million, a difference of $3.520 million. Additionally, the Accounting Services Internal Service Fund Balance has been increasing since 2016; therefore, the Agency appears to be charging too much for services. Cause: Inadequate procedures. Effect: When security costs are not allocated to all buildings in an equitable manner, Federal programs will not be charged in accordance with Federal cost principles. Additionally, without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs will be overcharged for services, and the Agency?s internal service funds will be above Federal regulations. Recommendation: We recommend the Agency review its allocation of security costs to ensure that the costs are allocated in an equitable manner to all activities that benefit from the services. Additionally, we recommend the Agency maintain adequate documentation to support charges and ensure rates are equitable and reflect the actual costs incurred for services. We also recommend the Agency develop procedures to monitor its internal service funds to ensure that its fund balances do not exceed the allowable threshold. Management Response: The Building and Grounds Maintenance allocation is based on a management business decision. A prior year finding regarding the Lincoln grounds and security indirect cost allocation was corrected, and additional corrective action is planned for the Print Shop. The error of $582 out of $3,132,067 billed was corrected. State Accounting formally reviews its fund balance monthly. The increased cash balance is a result of planned increased costs for a new accounting system. The implementation of the system did not occur, and State Accounting was diligent in keeping spending consistent with prior levels. Rates were reduced by $450,000 in fiscal year 2021, and from that level reduced another $132,000 in each of the next two years (current biennium). Further offsets to rates are planned for the coming biennium to bring the cash balance to within a 60-day operating level.

Program: Various, including AL 93.767 ? Children?s Health Insurance Program, AL 93.778 ? Medical Assistance Program ? Reporting Grant Number & Year: Various, including #2005NE5021, FFY 2020; #2105NE5ADM, FFY 2021 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented. A good internal control plan also requires the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 2 CFR ? 200.510(b) (January 1, 2021) states, in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available. For a cluster of programs also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. ? 81-1111(1) (Reissue 2014) states, in part: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state?s central system. EnterpriseOne is the official accounting system of the State. Condition: Several programs did not have either expenditures or the amount provided to subrecipients reported accurately on the SEFA. We notified the Agency of the errors, and the SEFA was subsequently adjusted. Also, as noted in Finding 2021-006, the Agency did not perform a reconciliation of the SEFA to the financial statements. A similar finding was noted in the prior audit. Repeat Finding: 2020-023 Questioned Costs: None Statistical Sample: No Context: The Agency is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. The Agency compiles the SEFA from information by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services (DHHS) did not accurately report expenditures for several programs, including over-reporting AL 93.767 by $1,052,592 and under-reporting AL 93.778 by $10,286,807. DHHS also reported $63,137,044 under AL 10.551 that should have been under AL 10.542. Several agencies did not properly identify COVID-19 expenditures. There were 38 programs for various State agencies that needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency lacked adequate procedures for ensuring the accuracy of amounts not directly from the accounting system. The Agency established a specific account code for aid to subrecipients, but not all agencies utilized this code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or failure to audit programs that should be audited. Recommendation: We recommend the Agency implement procedures to ensure the SEFA is complete and accurate. Management Response: State Accounting has complied with Title 2 CFR ?200.510(b) and Neb. Rev. Stat. ? 81-1111(1), and presented the total SEFA amount with 99.5% accuracy. APA Response: State Accounting procedures failed to detect that a $63 million dollar program was not accurately reported. This was a Type A program and was required to be audited as a major program.

Program: AL 84.287 ? Twenty-First Century Community Learning Centers ? Allowability & Subrecipient Monitoring Grant Number & Year: S287C180027, FFY 2019; S287C190027, FFY 2020 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.403 (January 1, 2021), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2021) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . . ; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity . . . . ; and * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR ? 200.332 (January 1, 2021) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal pass-through funds for authorized purposes and in compliance with applicable regulations. Condition: The Agency lacked adequate procedures to ensure that subrecipients: 1) used Federal awards for authorized purposes; 2) complied with laws, regulations, and the provisions of contracts and agreements; and 3) achieved performance goals. Repeat Finding: 2020-030 Questioned Costs: $50,722 known (S287C180027, $35,819; S287C190027, $14,903) Statistical Sample: No Context: We randomly selected 19 subrecipient payments and also chose the largest subrecipient payment for testing. We noted the following: ? The Agency did not perform adequate subrecipient monitoring during the fiscal year for seven subrecipients tested, as the Agency did not review salaries and benefits claimed by the subrecipients. The Agency obtained general ledger summary information from the subrecipient but did not obtain and review payroll records such as timesheets, paystubs, or salary and fringe benefit support. ? Of the 19 randomly selected payments, we noted that $50,722 did not have adequate documentation to support that those expenditures were allowable and in accordance with Federal cost principles. Several employees? salaries and benefits were included in the reimbursement requests; however, the Agency did not require the subrecipients to submit documentation for these expenditures, other than reports from its accounting systems. We provided the Agency with an opportunity to request documentation from its subrecipients to support that its salaries and benefits expenses were allowable and in accordance with Federal cost principles; however, three of the subrecipients did not provide adequate support to show that its salaries and benefits were allocable to the grant. Subrecipient aid payments for the fiscal year ended June 30, 2021, totaled $7,140,154. The sample population was $5,356,233 (total population $7,140,154 less $1,783,921 to largest subrecipient that was separately determined to be allowable). The random sample tested totaled $857,155. Based on the sample tested, the case error rate was 15.79% (3/19). The dollar error rate for the sample was 5.92% ($50,722/$857,155), which estimated potential dollars at risk for fiscal year 2021 to be $317,089. Cause: Inadequate procedures Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to monitor subrecipients, including reviewing both detailed supporting documentation for expenditures and payroll documentation for each subrecipient. We further recommend adequate documentation be maintained to support expenditures are allowable and in accordance with Federal cost principles. Management Response: The Budget Management Specialist under the Office of Budget & Grants Management and the 21st CCLC Director under the Office of ESEA Programs conduct a desk review of each reimbursement request, which includes the grantee general ledger, to assure expenditures are allowable, reasonable and within the budget and performance period. If there are any unusual or questionable expenditures, sub-grantees are contacted to provide additional documentation or justification. Virtual visits and programmatic desk monitoring under the Office of ESEA Programs are additional strategies utilized to mitigate risk. All programs receive a programmatic monitoring visit in year 3 of the 5-year grant where the 21st CCLC director reviews selected financial documentation and employee time and effort information. The Nebraska 21st CCLC program utilizes a risk-assessment instrument to identify programs that may require interim programmatic monitoring or additional technical assistance. On behalf the Nebraska?s FFY 2018 and FFY2019 Single State Audit Resolution?s the Nebraska Department of Education engaged in Federal corrective action plans commencing in April 2019 through December 2020. Per the USDE, a reasonableness check of reimbursement requests (or primary documentation) did not identify questioned costs or meet the Standards for Internal Control in the Federal Government (Green Book) or under the 2 CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The Nebraska Department of Education diligently over this timeframe and under the guidance of USDE Federal Compliance Specialists and to recognize Federally approved practices worked with other State Department of Education SEAs to establish the Grant Compliance Section under the Office of Budget & Grants Management. This section is a dedicated unit to Federal internal controls and Federal award fiscal activities. On July 1, 2020, the Department deployed a standardized practice of sub-recipient internal controls: fiscal monitoring policy and procedures for LEAs subrecipients under 2 CFR ? 200.332, control environment, risk assessment, technical assistance through the lifecycle of a grant, non-compliance measures, single audit practices, and sub-recipient fiscal monitoring. Fiscal monitoring reviews financial primary documentation (including 2 CFR ? 200.430(1)(i) noted) and establishes that a sub-recipient has internal controls in place for these Federal awards supported by policies, procedures, and engages in established practices. Fiscal monitoring also provides one-on-one technical assistance where and when it is needed as well as through scheduled events through the year. Sequential sampling monitoring ensures that the NDE monitors all subrecipients effort at any given point in time on a 1-to-3-year cycle based on level of risk (23 data-driven evidenced based indicators), level of award and if under a corrective action from prior monitoring cycles. The Nebraska FFY20 Single State Audit encompassed review of reimbursement request primary documentation and programmatic monitoring outside of the Grant Compliance Section?s internal control standards for sub-recipient fiscal monitoring, questioned costs, and non-compliance systematic activities performed each year.

Program: AL 84.367 ? Supporting Effective Instruction State Grant ? Special Tests Grant Number & Year: S367A200026, FFY 2021 Federal Grantor Agency: U.S. Department of Education Criteria: 34 CFR ? 299.7(a)(1) (July 1, 2020) states the following: Expenditures of funds made by an agency, consortium, or entity under a program listed in ?299.6 (b) for services for eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the amount of funds expended for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of those children and their teachers and other educational personnel. Good internal control requires procedures to ensure that non-public schools receive an equitable proportion of funds. 2 CFR ? 200.511(b) (January 1, 2021) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: One of four public school districts tested with non-public schools had an incorrect calculation of the per-pupil rate. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2020-032 Questioned Costs: None Statistical Sample: No Context: For one public school district tested, $735 of administrative costs were included in the Agency?s per pupil rate calculation; however, this amount was not included in the Agency?s approved budget, which lowered the per-pupil rate to $40.85 instead of $41.98. The result is that the amount available to the public school and the non-public school was incorrect. The amount available to the public school was overcalculated by $111. Cause: Inadequate review by the Agency. Effect: Without an adequate review of the per-pupil rate calculations, there is an increased risk that public schools and non-public schools will be paid incorrectly. Recommendation: We recommend the Agency implement procedures to ensure the per-pupil rate calculations are adequately reviewed for accuracy. Management Response: NDE agrees with finding. NDE worked with the public school to get the $111 added to the non-public budget to correct the issue. NDE reviewed the rest of the districts and found no other issues.

Program: AL 84.425C ? COVID-19 Education Stabilization Fund ? Governors Emergency Education Relief Fund (GEER) ? Allowability & Cash Management Grant Number & Year: S425C200038, grant period ending 9/30/2021 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR ? 200.403 (January 1, 2021) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. * * * * (g) Be adequately documented. The Department of Administrative Services (DAS) State Accounting Manual, Policies ? Section AM-005-4, Prepayments (3/2021), states, in relevant part, the following: Occasionally, there are situations that arise when prepayment is necessitated due to federal requirements, State Statutes, contracts or, normal business practices. Though prepayments are not illegal, per se, they are in conflict with the normal claims process since the State will give an asset in anticipation of goods or services being rendered at a later date. (There is not an enforceable claim against the State until goods or services are received.) Since the potential for loss to the State is greater under prepayment situations, extreme care should be exercised and a conscious effort should be undertaken to minimize prepayments. State Accounting reserves the right to review all prepayment requests. Per 2 CFR ? 200.53 (January 1, 2021), the definition of an improper payment includes ?any payment for a good or service not received (except for such payments authorized by law).? Per 2 CFR ? 200.84 (January 1, 2021), the definition of a questioned cost includes the following: Questioned cost means a cost that is questioned by the auditor because of an audit finding: (a) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds; (b) Where the costs, at the time of the audit, are not supported by adequate documentation[.] 31 CFR ? 205.11(a) (July 1, 2020) provides the following: A State and a Federal Program Agency must minimize the time elapsing between the transfer of funds from the United States Treasury and the State?s payout of funds for Federal assistance program purposes, whether the transfer occurs before or after the payout of funds. A good internal control plan requires procedures to ensure that goods or services are provided to the State prior to payment or as close as administratively possible to the payment. Condition: The Agency did not have adequate procedures to ensure that its contractor was utilizing Federal funds for allowable costs. In addition, the State advanced millions of dollars in Federal funds to the contractor without procedures to minimize the time elapsing between the receipt of funds from the Agency and the subsequent contractor disbursement to its vendors/schools. Repeat Finding: No Questioned Costs: $633,780 known Statistical Sample: No Context: The Agency contracted with another entity to provide student devices for schools. For one payment tested, the Agency paid the contractor to purchase student devices for schools in the amount of $8,000,440 on November 30, 2020. Per the contractor?s records, the contractor received the payment on December 4, 2020. However, the first disbursement by the contractor for student devices was not made until January 21, 2021, 48 days after the receipt. The full $8,000,440 was not spent by the contractor until April 8, 2021, 125 days after the receipt. Additionally, the contractor received a second receipt from the Agency in the amount of $1,654,617 on February 10, 2021, when the contractor still had a balance of $4,768,413 from the first receipt. As of June 30, 2021, the contractor had a balance of $1,030,284 to be used to purchase student devices. As of January 25, 2022, the Agency had paid the contractor $11,606,653 for the purchase of student devices, and the contractor still had a balance of $633,780. As these funds have not been spent by the contractor for student devices, it is unknown if they were used for an allowable purpose, so these are considered questioned costs. Cause: Inadequate procedures. Effect: When goods or services are not provided prior to payment by the State, there is an increased risk of the loss of Federal funds and noncompliance with the DAS State Accounting Manual and Federal regulations. Recommendation: We recommend the Agency implement procedures to minimize or eliminate advance payments to contractors. We further recommend the Agency implement procedures to ensure compliance with Federal regulations. Management Response: For risk management and internal controls in avoidance of questioned costs per 2 CFR ? 200.84 (January 1, 2021): ? Which results from a violation or possible violation of statute, regulation, or the terms and conditions of a federal award: o The NDE applied guidance per 2 CFR ? 200.53 (January 1, 2021), whereas the law providing exception for allowability being under Part B: Programmatic, Fiscal, and Reporting Assurances of the GEER Fund Certification and Agreement (C&A), whereas the Governor assured and that the NDE to the greatest extent practicable, continue to pay its contractors during the period of any disruptions related to COVID-19 in compliance with Section 18006 of Division B of the CARES Act., and ?Where the costs, at the time of the audit, are not supported by adequate documentation[.] o The contractor maintains a shared electronic records, cost documentation, and administration environment for the NDE to review as required by 2 CFR ? 200.302 (financial management), 2 CFR ? 200.430(i) (standards for documenting personnel expenses), and 2 CFR ? 200.333 (retention requirements for records) and for the NDE to substantiate the charging of any reasonable and necessary costs related to the administration and financial performance of the program. The Nebraska Department of Education is prudent in its stewardship of financial resources and relied upon the DAS State Accounting Manual, Policies ? Section AM-005-4. Prepayments (3/2021) states, in relevant part, as stated in the Criteria section of this finding. ? Whereas the COVID-19 pandemic being the unexpected and unprecedented qualifying emergency that arose and necessitated prepayment due to the federal requirement under Part B: Programmatic, Fiscal, and Reporting Assurances of the GEER Fund Certification and Agreement (C&A), whereas the Governor assured and that the NDE to the greatest extent practicable, continue to pay its contractors during the period of any disruptions related to COVID-19 in compliance with Section 18006 of Division B of the CARES Act and that the GEER fund was an emergency appropriation to address the harm to students and the ongoing functionality of education and for States to deploy GEER funds quickly to prevent, prepare for, or respond to COVID-19 under the same section of the CARES Act. The NDE exercised extreme care and a conscious effort to minimize payments and the time elapsing looking to 2 CFR 200.305(b) Federal Payment, in support for advance payment as reimbursement was not feasible due to the educational contracting entity?s lack of sufficient working capital and demonstrated the willingness to maintain processes that minimize the time elapsing between transfer of funds and disbursements, and maintains financial managements systems that provide for fund control and accountability to meet timely cash disbursements. All parties involved acted in good faith, however, operational impacts unknown at that time included but were not limited to the contractor?s operational capacity, increased and changing costs due to the COVID-19 crisis, lack of device supply to meet national education demands, priority of the schools to support the process, and schools change in requests. APA Response: Paying millions of dollars in advance is not sound business practice and is not in compliance with Federal requirements. The Agency could have reimbursed the contractor after the devices were received, as the contractor would not be paying the vendors in advance.

Program: AL 84.425D ? COVID-19 Education Stabilization Fund ? Elementary and Secondary School Emergency Relief Fund (ESSER) ? Reporting Grant Number & Year: S425D200048, grant period ending 9/30/2021 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.302(a) (January 1, 2021): [T]he state?s and other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. A good internal control plan requires procedures to ensure reported data elements are complete and accurate. Condition: While testing the ESSER Annual Report for the reporting period, March 13, 2020, to September 30, 2020, we noted the following: ? Reported data did not agree to the supporting records. ? Data elements were not included on the report. ? Data was not accumulated and summarized in accordance with the stated criteria and methodology. ? Fifty-nine out of 132 Local Educational Agencies (LEA) did not respond to the Agency?s questionnaire used to accumulate the reporting data. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The ESSER Annual Report was submitted to report data for the reporting period, March 13, 2020, to September 30, 2020. Four LEAs that were awarded a subgrant prior to September 30, 2020, were not included on the ESSER Annual Report. The award information is summarized in the table below. See Schedule of Findings and Questioned Costs for chart/table. The report included 132 LEAs. We selected 15 of the schools to trace the reported data to support and noted the following: ? Each LEA was to complete a questionnaire used to accumulate the data required to be reported. Nine of the 15 LEAs did not respond to the questionnaire issued by the Agency. Upon further review, 59 out of 132 LEAs did not complete the questionnaire, which is over 44% of the LEAs. The Agency did not perform adequate follow-up to ensure that all LEAs completed the questionnaire, resulting in unreported data. ? On the questionnaire, the question ?Among students enrolled September 30, 2020, what proportion of students had a dedicated LEA-provided device for the following grade bands?? was only asked if the LEA answered ?Yes? to the question ?Did the LEA use ESSER funds to provide home internet access for any students.? Per the Data Collection Form Instructions, these two questions are independent of each other and, therefore, both questions should be asked regardless of the answer to the other question. As a result, 4 of the 15 LEAs tested did not have the option to answer the question. ? For Section 4 ? Student Participation and Engagement, the Data Collection Form Instructions asks the following question, ?If the LEA used ESSER Act funds to develop, initiate and/or implement remote learning, please mark all methods used to document student participation and engagement during remote learning; (mark yes for methods used for 50% of more of the students within the grade level in the LEA).? On the questionnaire, the Agency worded the question as follows, ?Did the LEA use 50% or more of the ESSER funds to develop, initiate and/or implement remote learning?? If the LEA marked ?Yes,? then the LEA would then mark the methods that applied. The way the question was written on the questionnaire could result in the LEA reporting different data than what the Data Collection Form was asking for. ? For Section 4 ? one of the methods an LEA can choose per the Data Collection Form Instructions is ?Participation in help lines or hot lines for help with remote learning.? However, this method was not included on the questionnaire sent by the Agency to the LEAs. Even though this method was not included on the questionnaire, the report still noted that 4 of the 15 LEAs tested used this method to document student participation and engagement during remote learning. ? For one of the 15 LEAs, the ESSER Annual Report stated that the LEA paid for the cost of home internet subscriptions for students. However, the LEA did not state this on its questionnaire. Cause: The Agency did not adequately set up its questionnaire for LEAs to ensure that the data provided to the Agency was complete and accurate. Additionally, the Agency did not have adequate procedures to ensure all LEAs responded to the questionnaire and were included on the report. Effect: Without adequate reporting procedures, there is an increased risk for errors in reporting and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure that all LEAs provide the required data for the report. Management Response: The following identifies the process the Department engaged for the CARES ESSER and GEER Year 1 Annual Performance Report (APR) and changes to the process which occurred during the data submission timeframe. The U.S. Department of Education provided a reporting window from January 5, 2021 ? February 1, 2021. ? The initial reporting tool provided on January 5, 2021, allowed for the State Educational Agencies to enter in information for each subrecipient awarded funds manually. ? On Jan 15, 2021, the NDE received notification of the cumbersome and administrative process for States to manually enter such substantial amounts of data and provided a template to populate and upload. States transitioned to this process and all data previously enter was wiped out by the upload ability. ? On January 25, the NDE received notification that previous templates provided for upload would be replace with template populated with basic awarding information to utilize for upload. Again, deleting any prior information entered into the reporting system and not containing recipient awards below $25,000. ? A second collection period was provided from March 1, 2021, through March 12, 2021. Being the inaugural launch for all federal financial assistance program reporting, the NDE is aware is issues and barriers incurred during the first attempt at this new process and the Department waited for the window for final data corrections to address aspects needing correction.

Program: AL 93.575 ? Child Care and Development Block Grant; AL 93.778 Medical Assistance Program - Allowable Costs/Cost Principles & Cash Management Grant Number & Year: 0G1901NECCDD, FFY 2019; 2105NE5ADM, FFY 2021 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: 45 CFR ? 75.403 (October 1, 2020) provides the following, in relevant part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. See also ?? 75.300 through 75.309. 45 CFR ? 75.303 (October 1, 2020) provides, as is relevant, the following: 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. . . . Title 45 CFR ? 75.302 (October 1, 2020) requires financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Title 42 CFR ? 433.10 (October 1, 2020) provides for payments to states, based on a Federal Medical Assistance Percentage (FMAP). EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. A good internal control plan also requires that Federal reports be reconciled to accounting records, and adjustments and reconciling items be resolved in a timely manner. Per 45 CFR ? 75.305(a)(1) (October 1, 2020), ?For States, payments are governed by Treasury-State CMIA agreements and default procedures codified at 31 CFR part 205 . . . .? Per 31 CFR ? 205.11(a) (July 1, 2020), ?A State and a Federal Program Agency must minimize the time elapsing between the transfer of funds from the United States Treasury and the State's payout of funds for Federal assistance program purposes, whether the transfer occurs before or after the payout of funds.? The CMIA agreement requires a three-day average clearance for Medicaid. Condition: The Agency lacked adequate procedures to ensure that administrative costs charged through the Cost Allocation Plan (CAP) were properly and timely reconciled. The Agency charged an excess $283,855 to the Federal Childcare program that should have been paid using State funds. We also noted that $1,603,602 charged to the Federal Medicaid program should have been charged to State funds. Repeat Finding: No Questioned Costs: $1,887,457 known (0G1901NECCDD $283,855; 2105NE5ADM $1,603,602) Statistical Sample: No Context: At the end of each quarter, the Agency performs an adjustment between State and Federal funds based upon expenditures recorded on the accounting system and how costs should be recorded according to the Agency?s cost allocation plan. We tested four journal entries to reconcile expenditures to the CAP and noted the following: ? For one Child Care and Development Block Grant adjustment tested, a clerical error resulted in the Agency improperly charging $283,855 in expenditures to Federal funds when State funds should have been used. ? For one Medicaid adjustment tested, the Agency did not reconcile all cost centers. For the quarter ended March 31, 2021, CAP Cost Center 25C23835 APD MMIS Data Management & Analytics had $5,780,392 in costs assigned to it with a 90% FMAP. However, the amount reported on the CMS 64 was reduced by $3,536,047, as the expenses were over the amount approved by the Federal grantor. Therefore, the total reported was $2,244,345 (Federal share $2,019,911); however, Federal expenditures of $3,623,513 had already been drawn and spent. Despite performing a journal entry to reconcile Medicaid administrative expenses on May 28, 2021, the Agency did not reconcile 25C23835. As a result, $1,603,602 was paid with Federal funds that should have been paid with State General Fund monies. Cause: For Childcare, an error in the Agency?s spreadsheet used to determine the adjustment between Federal and State funds resulted in a miscalculation. For Medicaid, per the Agency, cost center 25C23835 did not have available budget in MBES (grantor CMS64 reporting system) to report the amount as of the March 31, 2021, quarter. The Agency made the reporting adjustment but did not move the amount in the general ledger because of its previous understanding from CMS for treatment of line 7 adjustments. The Agency could not afford to float the funds while CMS was in the approval process. That approval eventually came with a CMS letter on August 26, 2021. However, as of March 1, 2022, the Agency had not yet reconciled general ledger expenditures. Effect: Unallowable expenditures were charged to Federal funds. When costs are not reconciled in a timely manner, there is an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure reconciling entries are complete, accurate and performed timely. We further recommend the Agency strengthen review procedures to ensure compliance with Federal regulations. Management Response: Agree

Program: AL 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.575 Child Care and Development Block Grant; AL 93.767 Children?s Health Insurance Program; AL 93.778 Medical Assistance Program ? Allowable Cost/Cost Principles Grant Number & Year: 202020S251443, FFY 2020; 0G2001NECCDD, FFY 2020; 2005NE5021, FFY 2020; 2105NE5ADM, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: 45 CFR ? 75.303 (October 1, 2020) says, in relevant part, the following: 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. 45 CFR ? 75.403 (October 1, 2020) requires costs to be necessary, reasonable, and adequately documented. 45 CFR ? 75.405(a) (October 1, 2020) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per the Cost Allocation Plan, the cost center 25C21940 Field Office Resource Development is ?allocated to the benefiting programs based on Time and Effort Reports prepared by the DHHS Resource Developers in the cost center.? Good internal control and sound accounting practices require policies and procedures to ensure that all payroll costs are properly recorded within the State Accounting System (E1) and allocated to the proper funding source for activities performed. Condition: The Agency did not have adequate procedures to ensure payroll charges were proper. Repeat Finding: 2020-033 and 2020-034 See Schedule of Findings and Questioned Costs for chart/table. Questioned Costs: $2,659 known Statistical Sample: No Context: We noted the following payroll issues: ? We randomly selected 25 employee paychecks paid with Federal funds. One employee was an accountant whose payroll expense was charged to Child Support Enforcement, Child Care and Development Block Grant, Medical Assistance Program (Medicaid), Children?s Health Insurance Program (CHIP), and the Supplemental Nutrition Assistance Program (SNAP). The employee?s payroll costs were allocated to cost center 25C20944 and 25C20945 but should have only been allocated to cost center 25C20945, which only records costs to Medicaid and Child Support Enforcement. As a result, for the pay period tested, Child Care, CHIP, and SNAP were overcharged by $57, $54, and $57, respectively. During the fiscal year, this employee had $1,897 recorded incorrectly to cost center 25C20944. We tested $30,547 Federal payroll charges related to eight major programs and noted $168 in questioned costs. Federal payroll charges for those eight programs totaled $56,219,753. A similar finding was noted in the prior audit. ? A Staff Assistant and Office Specialist were recorded to the Resource Development cost center during the quarter March 31, 2021; however, the supervisor they worked with was not charged to this cost center, and the employees were not employed as Resource Developers, which was the job title of most of the employees included in this cost center. As a result of these two employees being charged to the Resource Development cost center instead of the cost center to which their supervisor was charged, Medicaid was charged an excess $2,491 for the quarter ended March 31, 2021. The Resource Development cost center allocated $1,473,197 for the quarter ended March 31, 2021. A similar finding was noted in the prior audit. Cause: Inadequate policies and procedures for review and documentation of payroll expenses. Additionally, the Agency did not change the cost centers for two employees who changed positions. Effect: Without adequate documentation to support the allocation of costs, there is increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure that employee pay is recorded correctly in E1, and those costs are properly allocated and charged. Management Response: Agrees

Program: Various, including AL 10.561 ? State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.323 ? COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); AL 93.575 ? Child Care and Development Block Grant; AL 93.767 ? Children?s Health Insurance Program; AL 93.778 ? Medical Assistance Program ? Allowable Costs/Cost Principles Grant Number & Year: Various, including 202121S251443, FFY 2021; 6 NU50CK000547-01-05, August 1, 2019, to July 31, 2024; 0G1901NECCDD, FFY 2019; 2005NE5021, FFY 2020; 2105NE5ADM, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 45 CFR ? 75.303 (October 1, 2020): 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. 45 CFR ? 75.403 (October 1, 2020) requires costs to be necessary, reasonable, and adequately documented. Per the Cost Allocation Plan (CAP), the cost center Information Services and Technology (IST) Fiscal Projects Billing is as follows: OCIO payments relative to NFOCUS system . . . Costs associated with the IST Application SVCS NFOCUS Application Office will be allocated to the benefiting programs based on the NFOCUS end of quarter count of recipients receiving benefits associated with each program that benefits from the system. 45 CFR ? 75.405(a) (October 1, 2020) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per the CAP, the cost center IST Application Services NFOCUS Applications (25C20990) ?will be allocated to the benefiting programs based on the NFOCUS end of quarter count of recipients receiving benefits associated with each program that benefits from the system.? 2 CFR ? 200.511(b) (January 1, 2021) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Good internal control requires procedures to ensure contract payments are adequately supported, and costs are allocated in accordance with Federal requirements. Condition: Four of 25 operating expenditures were not adequately supported, resulting in questionable costs to Federal programs. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. We also noted that the Agency did not maintain documentation to support that allocations were based upon the accurate count of recipients. Repeat Finding: 2020-035 Questioned Costs: $465,909 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We randomly selected 25 operating expenditures paid with Federal funds and noted the following: ? The Agency did not obtain adequate documentation to support $639 of a $6,519 payment to the University of Nebraska ? Lincoln. The purpose of the payment was to reimburse the University for salaries and benefits for an epidemiologist and additional administrative staff for the purpose of surveillance of preventable diseases; however, there were no timesheets or time records to support administrative staff charges. ? Three expenditures tested were for technology fees paid to the Department of Administrative Services Office of the Chief Information Officer (OCIO). The Agency allocated these costs among different Federal programs, based on point-in-time reports listing the number of registered users on each program. The Agency did not maintain documentation that supported these point-in-time reports; thus, the APA was unable to verify that costs were allocated properly. In addition to the expenditures sampled, we also reviewed the Federal costs charged outside of the sample for the entire three documents paid to the OCIO, totaling $2,014,328. All of these costs were coded to cost center 25C20944 ? IST (Information Services and Technology) Fiscal Project Billing. This cost center is specifically for ?OCIO Payments relative to NFOCUS Systems?; however, charges included were for MMIS, CHARTS, NFOCUS, and Other Fees. As CHARTS and Other Fees were not related to NFOCUS, recording costs to this cost center resulted in an overstatement of costs charged to NFOCUS, and an understatement of costs coded to CHARTS and other programs. For the three payments tested, those charges totaled $933,116 ($40,051 CHARTS / $893,065 Other Fees), resulting in $465,270 in Federal questioned costs. The total Federal sample tested was $324,740, and operating expenditures for the Agency?s major Federal programs during the fiscal year totaled $187,017,424. We noted $639 in questioned costs for the sample tested and $465,270 in questioned costs on charges outside of the sample. In addition, during testing of the IST Application Services NFOCUS Applications cost center allocation for the quarter ended March 31, 2021, the APA was unable to trace the member counts to documentation that supported allocating $2,073,683 to Medicaid and $307,308 to the Children?s Health Insurance Program. The Agency did not maintain the member count reports used at the time of the allocation. The Agency was able to generate a historical report; however, while the report amounts were similar, they did not agree with the counts used in the allocation. When recalculating the allocation using the Medicaid and CHIP member counts provided, Medicaid was overcharged $6,126, and CHIP was undercharged $808 for the quarter ended March 31, 2021. The IST Application Services NFOCUS Applications allocated 4,191,799 for the quarter ended March 31, 2021. Cause: Inadequate policies and procedures for review and documentation of expenses. The Agency did not have procedures to maintain documentation that supported the member counts for Medicaid and CHIP. Effect: Without adequate documentation to support the allocation of costs, there is increased risk that programs are not being charged the proper amount. Payments to contractors without adequate supporting documentation increases the risk of improper use of State and Federal funds. Recommendation: We recommend the Agency improve procedures to ensure that cost allocations are documented properly, and such documentation is retained on file. We further recommend the Agency strengthen procedures to ensure adequate documentation is received and maintained to support Federal expenditures. Lastly, we recommend the Agency maintain documentation to support the Medicaid and CHIP member counts at quarter end. Management Response: Agrees

Program: AL 93.658 Foster Care Title IV-E ? Allowable Cost/Cost Principles Grant Number & Year: 0G2101NEFOST, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2020): 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. 45 CFR ? 75.403 (October 1, 2020) requires costs to be necessary, reasonable, and adequately documented. 45 CFR ? 75.405(a) (October 1, 2020) states, in part, the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per the CAP, ?The RMTS Administrator reviews submitted observations to make certain that each observation was completed appropriately. If any discrepancies exist, the RMTS Administrator will work with the worker and/or supervisor to resolve the problem.? Per the CAP, ?After the observation form has been submitted and validated (if selected for validation), it is reviewed by a member of the CFS and Cost Accounting Office for consistency.? According to RMTS instructions: 1. Case Work ? Select this item if you were working on a specific case at the observation time. If you select this item you will be asked to enter the NFOCUS master case number. If there is not an NFOCUS master case, use any other number or description that can be used to identify the case . . . .. Good internal control and sound accounting practices require procedures be in place to ensure that staff know how to accurately complete random moment time studies, which are used to allocate costs to Federal programs. Condition: The Agency did not have adequate procedures to ensure random moment time studies completed were accurate and all documentation to support the time study response was maintained. Repeat Finding: No Questioned Costs: $6,100 known Statistical Sample: No Context: We tested 40 random moment time study (RMTS) observations of which four were reported as Foster Care IV-E and five reported as Foster Care Non-IVE. We noted that two of four RMTS reported as Foster Care IV-E did not have adequate support. We also noted the following: ? The RMTS form was not available to be observed for one employee. Additionally, the employee reported she was working on Foster Care IV-E, but this was not supported by Agency documentation. Cases assigned to the employee were Foster Care Non IV-E. ? Another employee reported she was working on Foster Care IV-E, but this was not supported by the Agency?s documentation. Per review of case narratives, the case was Foster Care Non IV-E. Federal payment errors noted in the sample were $6,100. The total Federal sample tested related to Foster Care IV-E was $11,866, and the total Federal Foster Care IV-E funds charged via RMTS were $8,340,219. The dollar error rate for the sample was 51.4% ($6,100/$11,866), which estimates the potential dollars at risk for fiscal year 2021 to be $4,286,873 (dollar error rate multiplied by the population). The APA also inquired with Agency staff to determine if they were provided training in how to complete the RMTS. For one individual, the Agency was unable to provide documentation to support that the employee selected had completed RMTS training. Cause: The Agency?s training of staff and supervisory reviews of RMTS observations were insufficient to ensure the observations were completed accurately. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability of a relatively small number of random observations yielding an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS observations are inaccurate, there is an increased risk costs will be allocated incorrectly between programs. Recommendation: We recommend the Agency improve procedures to ensure that random moment observations are accurate and reviewed adequately. Management Response: Agree

Program: AL 10.542 ? COVID-19 Pandemic EBT Food Benefits ? Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Agriculture Criteria: Division A ? Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Title I ? Department of Agriculture, Section 1101(b) of the Families First Coronavirus Response Act, states the following: To carry out this section, the Secretary of Agriculture may approve State agency plans for temporary emergency standards of eligibility and levels of benefits under the Food and Nutrition Act of 2008 (7 U.S.C. 2011 et seq.) for households with eligible children. Plans approved by the Secretary shall provide for supplemental allotments to households receiving benefits under such Act, and issuances to households not already receiving benefits. Such level of benefits shall be determined by the Secretary in an amount not less than the value of meals at the free rate over the course of 5 school days for each eligible child in the household. Division A ? Second Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, Title I ? Department of Agriculture, Section 1101(h)(1) of the Families First Coronavirus Response Act, states the following: The term ?eligible child? means a child (as defined in section 12(d) or served under section 11(a)(1) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1760(d), 1759(a)(1)) who, if not for the closure of the school attended by the child during a public health emergency designation and due to concerns about a COVID-19 outbreak, would receive free or reduced price school meals under the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.) at the school. Per the Nebraska State Plan, the average number of school days was determined based on each school district?s calendar. Good internal control requires procedures to maintain documentation to support benefit amounts set. Condition: The average number of closed/remote school days was used to determine the benefit level amount that was set; however, the Agency did not maintain the documentation used to support its calculation. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: Per the State plan for school year 2019-2020, the Nebraska Department of Education (NDE) determined that schools across the State averaged 49 cancelled school days. The average number of cancelled days was then multiplied by the approved daily rate to calculate the benefit amount of $281 to be paid for each student. Per the State plan for school year 2020-2021, NDE determined that the state?s schools averaged 17 school days per month. The average number of school days was then multiplied by the approved daily rate to calculate the benefit amount of $116 per month for students not attending school (learning remotely). The Department of Health and Human Services (Agency) was then responsible for issuing the benefits to recipients. Neither the Agency nor NDE kept documentation to support that the school districts were closed an average of 49 days in school year 2019-2020, and the schools averaged 17 school days per month in school year 2020-2021. There are 427 schools in the State. We reviewed the calendars for five schools in both school year 2019-2020 and school year 2020-2021. Based on these five schools, an average of 46 school days were cancelled in school year 2019-2020, and schools averaged 18 school days per month in school year 2020-2021. Consequently, according to the data obtained from the five schools reviewed, school year 2019-2020 benefits would have been overpaid, and school year 2020-2021 benefits would have been underpaid. Cause: NDE stated that, due to staff turnover, not all documentation was properly maintained. Effect: When adequate documentation is not maintained, there is an increased risk that Federal awards will not be in compliance with requirements of the program. Recommendation: We recommend the Agency maintain documentation to support benefit amount determinations. Management Response: The Agency does not agree with this finding. Our Federal partners granted approval of the methodology with the same documentation that was provided to the APA. It is our opinion that the Federal partner?s approval is sufficient. APA Response: The USDA approved the methodology the Agency submitted. However, the USDA would not have had the underlying support the Agency used to set the benefit amounts.

Finding 2021-035 Program: AL 93.069 ? Public Health Emergency Preparedness; AL 93.889 ? National Bioterrorism Hospital Preparedness Program ? Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP922039-01, FFY 2020; NU90TP922039-02, FFY 2021; U3REP190555A-01, FFY 2020; U3REP190555B-01, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2020) requires a pass-through entity to: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means. 45 CFR ? 75.302(a) (October 1, 2020) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? Good internal control requires procedures to ensure financial activity is properly recorded in the accounting system. 45 CFR ? 75.403 (October 1, 2020) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR ? 75.430(i)(1) (October 1, 2020) states, in part, ?Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.? A good internal control plan requires procedures to ensure salaries and wages charged to subawards are properly documented, and payments made to subrecipients apply to work performed under the subaward project description. Condition: Subrecipient monitoring procedures were inadequate. A similar finding was noted in the prior audits since 2014. Repeat Finding: 2020-037 Questioned Costs: $654,789 known See Schedule of Findings and Questioned Costs for chart/table. Context: The Agency made 130 payments to 30 subrecipients during the fiscal year ended June 30, 2021. The Agency did not perform subrecipient monitoring. The Agency cited the ongoing COVID-19 pandemic as reason why it was unable to perform subrecipient monitoring procedures. The APA selected a sample of 13 payment documents for testing, totaling $756,954, and offered the Agency the opportunity to gather supporting documentation from subrecipients. Agency administrators declined that option, noting the additional strain it would put on the Local Health Departments (i.e., subrecipients) who were already stretched thin dealing with COVID-19 responses, particularly the recent surge of the Omicron Variant at the time of field work. The Agency did note that it would communicate with the subrecipients going forward the need to include supporting documentation for reimbursement of expenses when they send in their quarterly requests for reimbursement. For all the payments selected for testing, there was no underlying documentation, such as payroll registers, paystubs, employment files, etc., to support the charges to the subaward for salaries, wages, taxes, and benefits, and no underlying documentation, such as invoices, contracts, billing notices, etc., to support other amounts charged to the subaward for other costs such as supplies, rent, and utilities. Therefore, we initially questioned costs for all payments tested. Subsequently, the Agency provided limited documentation, which supported a portion of two payments. Subrecipient payments for the fiscal year ended June 30, 2021, totaled $4,583,102. Federal payment errors noted were $654,789, and the total sample tested was $756,954, meaning the dollar error rate for the sample was 86.5%. This estimates the potential dollars at risk for the fiscal year to be $3,964,383 (dollar error rate multiplied by the population). Cause: The Agency?s procedures for subrecipient monitoring were not followed (due to COVID-19 responses taking its full attention, per the Agency). Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency perform adequate subrecipient monitoring to ensure costs are allowable and Federal regulations are adhered to. Management Response: The Agency partially agrees. Standard subrecipient monitoring procedures within PHEP and HPP were paused during the height of response to the COVID-19 pandemic, as both local health departments and the Public Health Emergency Preparedness and Response unit's staff resources were fully allocated to emergency activities. Subrecipient compliance checks remained in place, with required programmatic reporting.

Program: AL 93.069 ? Public Health Emergency Preparedness; AL 93.889 ? National Bioterrorism Hospital Preparedness Program ? Matching and Reporting Grant Number & Year: NU90TP922039-01, FFY 2020; NU90TP921891-01, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.302(a) (October 1, 2020) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 45 CFR ? 75.306 (October 1, 2020) states in part: (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and third party in-kind contributions, must be accepted as part of the non-Federal entity?s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity?s records; * * * * (c) Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with prior approval of the HHS awarding agency. Unrecovered indirect cost means the difference between the amount charged to the Federal award and the amount which could have been charged to the Federal award under the non-Federal entity's approved negotiated indirect cost rate. A good internal control plan requires procedures to ensure documentation is obtained and retained to support the amount of match funds provided and reported. Condition: The Agency did not have adequate documentation to support the amount of matching funds provided and reported on the annual Federal Financial Report. Repeat Finding: No Questioned Costs: Unknown Context: We tested two of the three Federal Financial Reports that were submitted during the fiscal year ended June 30, 2021. Both Federal grants had a match requirement of 10%. According to the Agency, the match for both grants was met by in-kind contributions, primarily coming from one subrecipient?s unrecovered costs on multiple subawards and contracts that use these grant funds. The following reports tested were submitted on September 28, 2020, for the period ended June 30, 2020. See Schedule of Findings and Questioned Costs for chart/table. The following was noted: ? As permitted by 45 CFR ? 75.306 (c), the Agency could utilize the subrecipient?s unrecovered indirect costs as in-kind match, but only with prior approval from the Federal awarding agency. The Agency was unable to provide documentation of such Federal approval. ? The Agency was unable to provide support for the subrecipient?s Federally approved indirect cost rates used to calculate unrecovered indirect costs. ? The Agency did not have documentation from the subrecipient summarizing the unrecovered indirect costs for each subaward, and certifying the in-kind contribution was not included as contributions for any other Federal award and not paid by the Federal Government under another Federal award. ? The Agency provided a spreadsheet with match amounts for both grants: o For one grant tested, there were dollar amounts listed for various subawards and contracts, as well as indirect costs percentage rates applied; however, no underlying support was provided. o For the other grant, dollar amounts were listed, which the Agency considered to be match amounts, but the Agency was unable to provide any other support for how those amounts were calculated or to which subawards these amounts may pertain. Federal expenditures reported for the two reports tested totaled $16,262,585, meaning that the total match required would be $1,626,259. Cause: Inadequate procedures to ensure documentation was maintained to support in-kind contribution amounts. Effect: Noncompliance with Federal requirements, which could lead to Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure matching amounts are adequately supported and matching requirements are met. Management Response: The Agency agrees.

Program: AL 93.301 ? COVID-19 Small Rural Hospital Improvement Grant Program ? Allowability & Subrecipient Monitoring Grant Number & Year: H3JRH37447; budget period 4/1/2020 to 9/30/2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2020) requires a pass-through entity to: ?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.? 45 CFR ? 75.403 (October 1, 2020) requires costs to be reasonable, necessary, and adequately documented. 45 CFR ? 75.430(i)(1) (October 1, 2020) states, in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. Condition: Documentation was not adequate to ensure costs were allowable and in accordance with Federal requirements for three of seven subrecipients tested. Repeat Finding: No Questioned Costs: $37,125 known Context: The Agency paid 67 subrecipients during the fiscal year. We tested seven subrecipients and noted the following: ? For one subrecipient tested, there was not adequate documentation on file to support that the amounts claimed were allowable. The subrecipient was paid $83,019 for the CARES Act grant. A list of items and amounts charged was provided; however, only $58,146 was supported with underlying receipts or invoices to substantiate what was purchased. Therefore, we question costs of $24,873. ? For two subrecipient tested, there was not adequate documentation on file to support the amounts charged for personnel costs. o One subrecipient had invoices and support for equipment and supplies, but no detailed support was on file for personnel costs. Therefore, we question costs of $12,252 of personnel costs. o For one subrecipient, a listing of employee payroll amounts was provided, totaling $66,695. This listing indicated names, job titles, hours and pay rates; however, the gross pay did not agree to the individual pay rate multiplied by the hours charged. Additionally, there were no time records showing total activity for each employee, and no support to verify the payrates were accurate. The questioned costs are unknown. Subrecipient payments for the fiscal year ended June 30, 2021, totaled $5,643,799. Federal payment errors noted were $37,125. The total sample tested was $601,714. The dollar error rate for the sample was 6.17%. This estimates the potential dollars at risk for the fiscal year to be $348,222 (dollar error rate multiplied by the population). Cause: Program staff stated that their procedure was to receive support for all amounts charged to the subawards to ensure Federal funds were used in an allowable manner. It appears those procedures were not followed fully. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve subrecipient monitoring to ensure costs are allowable, and Federal regulations are adhered to. Management Response: The Agency agrees that documentation on hand did not support the entirety of grant payments for three of the sampled entities. These payments were pursuant to a Covid-19 pandemic CARES Act grant program that has since ended.

Program: AL 93.323 ? COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases ? Allowability Grant Number & Year: NU50CK000547-02, project period ending 7/31/24; NU50CK000547-01, project period ending 7/31/24 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure payments are allowable and in accordance with contract provisions and Federal requirements. Sound accounting practices and a good internal control plan require contracts to be thoroughly reviewed by legal counsel and agencies to hold contractors accountable to the contractual terms. The intent of contracts should be stated clearly, and any changes thereto should be documented through formal contract amendments. Neb. Rev. Stat. ? 84-602.04(4)(a)(i) (Cum. Supp. 2020) requires the State Treasurer to maintain a website containing, among other things, the following: A database that includes a copy of each active contract that is a basis for an expenditure of state funds, including any amendment to such contract and any document incorporated by reference in such contract. 45 CFR ? 75.403 (October 1, 2020) requires costs to be necessary, reasonable, and adequately documented. 45 CFR ? 75.404 (October 1, 2020) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm?s length bargaining Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award?s cost. Contract 90600 O4 with Professional Research Consultants (PRC) contains the following provisions: 2.2. PAYMENT STRUCTURE. Payment shall be structured as follows: 2.2.1. DAS shall pay the Contractor $45.00 (forty-five dollars and no cents) per hour for English language contact tracing services, Spanish-language contact tracing services, and DAS required training. 2.2.2. DAS shall reimburse Contractor for actual expenses of telephonic interpretation services for languages other than English and Spanish. Contractor must provide documentation of said expenses with invoice. 2.2.3. No payments may be made until a written Statement of Work (SOW) has been completed by the parties (see Section 4.1) and an invoice has been provided by Contractor. Per Section 3.1.3 of Addendum D (?Contact Tracing Services?) to the contract with PRC, ?Actual hours will be based on actual utilization.? Additionally, the contracts with PRC, Nelnet Servicing LLC (Nelnet), and North End Teleservices (North End) for contact tracing services required all contract employees providing services to complete approved Health Insurance Portability and Accountability Act of 1996 (HIPAA) and privacy training. Condition: The Agency lacked adequate procedures for ensuring that Epidemiology & Laboratory Capacity for Infectious Diseases (ELC) expenditures were allowable and in accordance with contract provisions. Repeat Finding: No Questioned Costs: $1,337,063 known (NU50CK000547-02-03, $1,139,214; NU50CK000547-01-05, $197,849) Statistical Sample: No Context: ELC expenditures for the fiscal year totaled $69,709,529, of which $53,330,632 of those payments were greater than $50,000. We randomly selected 10 payments over $50,000 for testing and noted that seven payments tested were not adequately supported. Six of the 10 payments were to three contractors that provided contact tracing services during the COVID-19 pandemic. The contracts were not competitively bid. An emergency deviation was approved for each contract in accordance with State statute; however, there was not adequate support on file to allow for a determination regarding the reasonableness of the contracted amounts. The table below details the total amount paid by ELC for each contract during fiscal year ended June 30, 2021: See Schedule of Findings and Questioned Costs for chart/table. PRC ? There was a lack of overall transparency in the implementation of the contract entered into with PRC. According to the terms of the written agreement, the Agency would pay the contractor for hours worked. Contrary to this clear contractual language, the Agency exchanged emails with PRC agreeing that payments would be based instead on guaranteed hours because PRC would still have to pay the wages of its workers, whether they were utilized or not. This understanding was not reflected in either the contract or any amendments thereto, resulting in a lack of transparency regarding the actual intent of the parties. ? We tested two payments to PRC. One payment was for services between July 27, 2020, and August 9, 2020, totaling $508,500, of which $497,250 was for 11,050 guaranteed hours and $11,250 for training hours. There was not adequate documentation to support the need for 11,050 guaranteed hours. Per the spreadsheet provided, 6,653.35 hours were actually worked. Actual and guaranteed hours were both paid at the rate of $45 per hour. The difference between the guaranteed hours and the hours worked amounts to $197,849. We question that amount because: 1) guaranteed hours were not in accordance with the terms of the written agreement; 2) there was not adequate documentation to support the number of guaranteed hours needed; and 3) the reasonableness of a rate of $45 per guaranteed hour was similarly unsupported. ? The second payment tested was $1,656,000 for 36,800 guaranteed hours scheduled between February 22, 2021, and March 7, 2021. There were no timesheets to differentiate between the hours worked and the guaranteed hours. On April 15, 2022, nine weeks after the initial support request was sent, the Agency provided timesheets to support 14,620.25 hours worked. The difference between the guaranteed hours and the hours worked amounts to $998,089. We question that amount because: 1) guaranteed hours were not in accordance with the terms of the written agreement; 2) there was not adequate documentation to support the number of guaranteed hours needed; and 3) the reasonableness of a rate of $45 per guaranteed hour was similarly unsupported. ? We reviewed the invoices on file and noted that, starting with the August 25, 2020, payment, PRC invoiced the Agency for guaranteed hours and did not provide any information to support how many hours were worked. From August 25, 2020, to April 15, 2021, PRC was paid $26,041,050 for 578,690 guaranteed hours with no documentation of hours worked. Nelnet ? We tested two payments to Nelnet. The first payment tested was for October 2020 services and totaled $581,245, of which $291,472 was for actual hours worked, and $289,773 was for back-up capacity. The rates for back-up capacity were tiered and were less than the $45 rate for actual hours provided. We noted $1,475,431 paid to Nelnet during the fiscal year for agents on standby. There was not adequate documentation to support the back-up capacity needed. Also, we tested three Nelnet employees to determine if required HIPAA training was completed, and one of three employees tested was not listed as having completed the training. ? The second payment tested was for April 2021 services and totaled $782,400. That amount was broken down as follows: $391,275 was for hours worked; $125,570 was for data entry agents; $15,555 was for a vaccine hotline; and $250,000 was for 350 agents on standby. Data entry agents and vaccine hotline services were not included in the written contract, nor was the contract amended to include these services. The Agency was unable to provide documentation to support that contract provisions were expanded to include this work; therefore, we question $141,125 paid for those services. Also, three of four Nelnet employees tested did not have adequate documentation to support that HIPAA training was completed. North End ? We tested two payments to North End. Because no names were provided for the contact tracers, it was impossible to determine if those workers had completed required HIPAA training. Questioned costs noted amounted to $1,337,063, and the total sample tested was $4,574,348. The dollar error rate for the sample was 29.23%, which estimates the potential dollars at risk for the fiscal year to be $15,588,544 (dollar error rate multiplied by sample population). Cause: Per Agency staff: [D]ue to the timing delay of increases in staffing due to onboarding and training, seeing other state and global trends, and the urgent need to have staff available for the possible projected increase in cases, the Division was working with the best-known information to meet the need to respond immediately to the crisis situation. Effect: Without adequate controls, there is an increased risk for misuse of funds and abuse or fraud to occur. Recommendation: We recommend the Agency implement procedures to ensure that costs are necessary, reasonable, and in accordance with Federal requirements and contract provisions. Management Response: The Agency does not agree with this finding. PRC Bullet 1: Emails provided to APA made clear the interpretation that both DHHS and PRC shared regarding billable hours. The intent was to maintain sufficient contact tracing capacity for surges in case counts, which were subject to rapid rises during this period. Later contract language further clarified this. Reference Amendment 1, which states billing will be based on ?actual utilization of hours scheduled,? which is distinct from ?actual utilization of hours worked.? This corresponds to the guaranteed hours described in correspondence between PRC and DHHS. Bullet 2 &3: Per #1: Guaranteed hours were in accordance with the mutual understanding of DHHS and PRC, which was memorialized later under amendment one. Per #2: DHHS maintained a weekly cadence where leadership reviewed contact tracing and pandemic projection reports to determine the levels of contact tracing services needed. There were certainly periods where guaranteed hours exceeded hours worked. This was by design, as new contact tracing staff could not be on boarded without significant lead time, which would create substantial risk to the timeliness and public health value of contact tracing operations. The following was provided during the FY21 ACFR audit, which also included PRC contact tracing contractual costs in APA?s sample. The following explanation resolved APA?s concerns at that time: DHHS employed CDC guidance, which emphasized the use of mathematical modeling to inform case investigation/contact tracing (CI/CT) activities (https://www.cdc.gov/coronavirus/2019-ncov/php/contact-tracing/contact-tracing-plan/prioritization/mathematicalmodeling.html). Per this guidance, the speed with which contacts can be traced is an important factor in determining the effectiveness of contact tracing in reducing the spread of disease (CDC emphasis). DHHS used numerous national and regional models during that time to show a vast array of projections for potential surge in case counts. DHHS reviewed international impacts of COVID-19 waves. Contact tracing/case investigation is a disease mitigation strategy, and our goal was to protect vital health infrastructure, preventing the system-wide collapse seen in jurisdictions with uncontrolled disease spread. This required DHHS to retain a high level of CI/CT capacity even during a period of falling case counts to protect against a rapid surge in cases. Had such a surge occurred and the guaranteed capacity been insufficient, the effectiveness of all CI/CT operations would have been reduced (see figures 1 and 2 in CDC guidance). For example, figure 3 illustrates that contact tracing that occurs in five days or less after contact exposure can yield a 60% or greater potential reduction in disease transmission, but delay of just an additional 1.5 days eliminates virtually all potential usefulness in preventing onward transmission of disease. Though PRC would have been able to reduce guaranteed hours at the Department?s request, there would have been a significant threat to the public health had DHHS been forced to rely on the vendor?s ability to rapidly re-onboard laid off staff during a surge. Maintaining a high capacity of guaranteed hours protected the public health against this risk. CI/CT activities were included in the authorized grant workplan and budget and were consistent with grant guidance and the CDC technical guidance linked above. The Department considers these costs to be consistent with the parameters for reasonable costs provided in 45 CFR 75.404. Should this explanation not resolve this draft finding, we request that we be able to walk your team through the decision points guiding the management of this contract. Per #3: The rates paid to vendors in this sample were the result of negotiations during a public health emergency, during which lengthy request for proposal processes were not realistic. In 2021, DHHS did review cost proposals as part of an RFP process for contact tracing. Bids were largely in line with existing vendors and in some cases higher than existing vendors. PRC itself submitted a bid with a cost proposal of $42.50 per hour. These cost proposals are publicly available under the DAS Purchasing code 6499 ? Z1. Nelnet Nelnet bullet 1: Please see response to #2 in bullets two and three of PRC finding above. APA Response: ACFR testing of PRC did not include compliance with Federal regulations; that was reviewed during Single audit testing of the major program. The Agency paid PRC nearly $28 million during the fiscal year for a guaranteed number of hours scheduled, as opposed to the far fewer hours actually worked. No documentation was provided to support that those payments were reasonable and necessary, as required by Federal regulations. Moreover, the contract language ? whether in its original form or as amended ? does not support the Agency?s claim that payment should clearly have been for guaranteed hours scheduled instead of hours worked. The phrases ?actual utilization of hours worked,? as found in the original agreement, and ?actual utilization of hours scheduled,? per the amendment thereto, both require the ?actual utilization,? of those hours ? which indicates a need for those hours to be worked. If the intent was otherwise, less equivocal contractual language should have been used.

Program: AL 93.323 ? Epidemiology & Laboratory Capacity for Infectious Diseases ? Allowability and Subrecipient Monitoring Grant Number & Year: NU50CK000547-01, project period ending 7/31/24 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Good internal control requires procedures to ensure costs are allowable and in accordance with Federal requirements. 45 CFR ? 75.302(a) (October 1, 2020) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? 45 CFR ? 75.352(d) (October 1, 2020) requires a pass-through entity to: ?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.? 45 CFR ? 75.403 (October 1, 2020) requires costs to be necessary, reasonable, and adequately documented. 45 CFR ? 75.430(i)(1) (October 1, 2020) states, in part, ?Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.? Condition: The Agency lacked adequate documentation to support that expenditures were allowable and in accordance with Federal requirements. Repeat Finding: No Questioned Costs: $631,401 known Statistical Sample: No Context: Auditing standards require discussions with the Agency regarding the risks of fraud and noncompliance with State and Federal requirements. Those discussions noted a concern with a lack of oversight by the former epidemiologist. As a result, we reviewed a subaward payment for $752,128 for the Nebraska Antimicrobial Stewardship Assessment Program (ASAP) and Infection Control Assessment Program (ICAP) subaward. We observed four quarterly invoices that included amounts for Salaries, Benefits, Travel, and Supplies, plus indirect costs at 10% of the total direct costs. The amounts from these quarterly invoices did not agree to the final invoice submitted for payment. The invoices by quarter totaled only $433,838, but the cumulative invoice for the year was $752,128. It is unclear how the amounts charged on the final invoice were calculated. Additionally, there was no detailed documentation, such as payroll records and invoices, to support the amounts charged. Furthermore, the activity summary provided noted that most activities were put on hold in the third and fourth quarter due to COVID-19; however, amounts were still being charged to the subaward, similar to the first two quarters. We noted that the Agency performed its own internal audit of the subaward, and the resulting draft report also questioned $752,128. The internal audit is not yet complete, so there has been no final decision or resolution by the Agency. The Agency subsequently provided support for $120,727, with $631,401 remaining as questioned costs. Cause: Inadequate review prior to payment. Effect: Without adequate documentation to support amounts paid, there is an increased risk for loss or misuse of Federal funds. Recommendation: We recommend the Agency improve procedures for ensuring adequate documentation is obtained to support that subrecipient expenditures are allowable and in accordance with Federal requirements. Management Response: The Agency partially agrees with the finding. We agree that all of the supporting documents were not immediately available upon request, however, we disagree with the questioned costs being unallowable. If there was more time to request the documentation from UNMC we believe we could have obtained support to show allowability of the costs. Standard subrecipient monitoring procedures within ELC were paused during the height of response to the COVID-19 pandemic, as both ELC sub-recipients and ELC staff resources were fully allocated to emergency activities. Subrecipient monitoring is the time that these types of documents would have traditionally been requested by the Division during standard procedures. Subrecipient compliance checks remained in place, with required programmatic reporting. APA Response: According to 45 CFR 75.2, the definition of ?questioned costs? includes the following: ?Where the costs, at the time of the audit, are not supported by adequate documentation[.]? The payment to UNMC was made October 8, 2020, and the Agency did not have supporting documentation on file as of April 5, 2022, almost 18 months after the payment. When we initially communicated this finding to the Agency, no attempt was made to dispute any of the information contained herein. On April 19, 2022, however, the Agency claimed to have support for the payment but, on April 22, 2022, provided documentation from UNMC, dated April 19, 2022, that supported only $120,727 of the entire $752,128 subaward. Failure to secure the required supporting documentation within 18 months of payment demonstrates the inadequacy of the subrecipient monitoring.

Program: AL 93.323 ? Epidemiology & Laboratory Capacity for Infectious Diseases, COVID-19 Epidemiology & Laboratory Capacity for Infectious Diseases ? Reporting Grant Number & Year: All open, including NU50CK000547-01, project period ending 7/31/24 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.508(d) (October 1, 2020) requires the Agency to: ?Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part.? Neb. Rev. Stat. ? 84-305(1) (Cum. Supp. 2020) says the following: The Auditor of Public Accounts shall have access to any and all information and records, confidential or otherwise, of any public entity, in whatever form or mode the records may be, unless the auditor is denied such access by federal law or explicitly named and denied such access by state law. If such a law exists, the public entity shall provide the auditor with a written explanation of its inability to produce such information and records and, after reasonable accommodations are made, shall grant the auditor access to all information and records or portions thereof that can legally be reviewed. Subsection (2) of that same statute adds the following: Upon receipt of a written request by the Auditor of Public Accounts for access to any information or records, the public entity shall provide to the auditor as soon as is practicable and without delay, but not more than three business days after actual receipt of the request, either (a) the requested materials or (b)(i) if there is a legal basis for refusal to comply with the request, a written denial of the request together with the information specified in subsection (1) of this section or (ii) if the entire request cannot with reasonable good faith efforts be fulfilled within three business days after actual receipt of the request due to the significant difficulty or the extensiveness of the request, a written explanation, including the earliest practicable date for fulfilling the request, and an opportunity for the auditor to modify or prioritize the items within the request. No delay due to the significant difficulty or the extensiveness of any request for access to information or records shall exceed three calendar weeks after actual receipt of such request by any public entity. The three business days shall be computed by excluding the day the request is received, after which the designated period of time begins to run. Business day does not include a Saturday, a Sunday, or a day during which the offices of the custodian of the public records are closed. (Emphasis added.) Neb. Rev. Stat. ? 84-305.02 (Supp. 2021) provides a criminal penalty for failure to comply with the above statutory requirements, as follows: Any person who willfully fails to comply with section 84-305 or 84-305.01, who otherwise willfully obstructs or hinders the conduct of an audit, examination, or related activity by the Auditor of Public Accounts, or who willfully misleads or attempts to mislead any person charged with the duty of conducting such audit, examination, or related activity shall be guilty of a Class II misdemeanor. Condition: The Agency did not respond to auditor requests within the required three business days and/or did not provide the information requested within the required three weeks after the initial request. Repeat Finding: No Questioned Costs: NA Statistical Sample: No Context: There were several instances of failure to comply with ? 84-305(2), which requires responses to requests by the auditor to be made within three business days and the information sought to be provided within three weeks after the initial request. ? On December 7, 2021, we requested that questionnaires be completed with comments describing control procedures, including the who/what/when/how and names and titles of individuals. We requested that the questionnaires be returned by January 5, 2022. (The APA allowed additional time due to the holidays.) The Agency returned the questionnaires on the designated date, but one questionnaire did not include any comments describing what the control procedures were and who performed them. On January 6, 2022, the APA again requested comments describing the procedures and a copy of the written policies and procedures. The auditor also questioned what ?PI? referred to in another of the questionnaires and who was the financial lead. On January 14, 2022, Agency staff emailed that a response would be received by January 21, 2022. On January 25, 2022, the APA asked about the status of the request, and the Agency replied on January 28, 2022, with the information. Having been requested on December 7, 2021, the comments sought should have been received by no later than January 5, 2022. Also, the written policies and question regarding the meaning of ?PI? and the identity of the financial lead should have been readily available and answered immediately, as those requests were not extensive; however, the Agency took three weeks to respond. For one questionnaire requested on December 7, 2021, comments were not provided for over seven weeks. ? On January 7, 2022, the APA requested monthly reports for June 2021. The reports were received on January 31, 2022, which is a delay of over three weeks. These reports would have been submitted to the Federal grantor months earlier and should have been readily available. ? On January 5, 2022, the APA sent six questions regarding a journal entry for COVID-19 test kits. On January 14, 2022, Agency staff emailed that they would respond by January 21, 2022. On February 2, 2022, the APA sent an email pointing out that four weeks had passed without a response, which is noncompliant with ? 84-305. On February 4, 2022, the Agency sent responses for five of the six questions but did not include any supporting documentation. One response indicated that the Agency did not have the needed support but might be able to gather it. A response to the sixth question was finally received on February 14, 2022. ? On February 10, 2022, the APA sent questions about eight payment documents. Before the day was over, Agency staff had responded by saying that the needed answers would be provided on or before March 4, 2022. On that promised date, the auditor received four emails with information. It seems unlikely, however, that none of the requested information could have been provided earlier. In addition, the timesheet detail provided for one of the items was for the wrong time frame, and no names of contact tracers were given for two payments. The correct timesheet was received on April 15, 2022. Cause: Failure by management to stress the importance of audit cooperation and to require personnel to adhere to State statute. Effect: The Agency?s failure to respond promptly to information requests not only constitutes a violation of ? 84-305 but also interferes with the APA?s testing and timely completion of the audit. Recommendation: We recommend the Agency implement procedures to ensure compliance with ? 84-305 by responding timely to auditor requests for information. We further recommend the Agency take disciplinary action against staff who violate statute. Management Response: The Agency agrees with the condition of the finding. It should be noted that through this audit the Division continued to respond to an active public health emergency which had to take priority. The Epidemiology team members working directly with this grant and the leadership team were actively involved in various response operations and had greatly limited capacity for other priorities.

Program: AL 93.568 ? Low-Income Home Energy Assistance (LIHEAP) ? Eligibility Grant Number & Year: 2001NELIEA, FFY2020; 2101NELIEA, FFY2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 96.30(a) (October 1, 2020): Fiscal control and accounting procedures. Except where otherwise required by Federal law or regulation, a State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditure of its own funds. Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant and (b) permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. 476 NAC 2-002, Eligibility, states the following: To qualify for the Low Income Home Energy Assistance Program, a household must: (A) Be considered an economically-vulnerable household; (B) Meet income guidelines according to household size; (C) Meet citizenship and residency requirements; and (D) Not otherwise be disqualified or ineligible. 476 NAC 2-002.01, Income Guidelines, states the following: For purposes of calculating and treating income for Low Income Home Energy Assistance Program eligibility, the Department applies the rules and regulations from the Supplemental Nutrition Assistance Program, Title 475 Nebraska Administrative Code (NAC). 475 NAC 3-002.03(D), Verification of Income, states the following: Before initial certification, the Department will verify gross non-excluded income. At the time of recertification, earned income will be verified again. Additionally, unearned income will be verified if the amount or the source has changed. However, under certain conditions, the Department determines an income amount based on the best available information. These conditions are as follows: (i) All attempts to verify the income have failed because the source has failed to cooperate with the household and the Department; and (ii) No other source of verification is available. 475 NAC 3-002.03(C)(i), Income Received in Less Than One Year, states the following, in relevant part: Some households receive their annual income in a period of less than one year by contract or through self-employment. The income for these households is averaged over a 12-month period. 475 NAC 3-001.02, Residency, states the following, in relevant part: Only Nebraska residents are eligible. 476 NAC 3-002.01(A), Refund, states the following, in relevant part: If a household disconnects service from a provider that has received payment from the Department on the household?s behalf, and at the time of the disconnect the household has a credit balance with the provider, the provider will refund the full credit balance to the Department. 476 NAC 1-004.09, Household, defines Household as follows: A person or group of people living together as one economic unit for whom residential energy is customarily purchased in common or paid through rent. 476 NAC 3-003.01, Heating and Cooling Payments, states the following: The Department makes heating and cooling payments according to the tables published at 476-000-200 and 476-000-201 which are based upon the federal poverty level and the following factors: (1) Fuel type; (2) Household income; (3) Household size; and (4) Whether the household resides in a single-family arrangement or a multi-family arrangement. Per Publication 476-000-200 (Rev. September 19, 2020), heating payments are determined using the table below: See Schedule of Findings and Questioned Costs for chart/table. Good internal control and sound business practices require staff to verify household eligibility properly prior to payment and to ensure that the amount of aid paid complies with applicable rules and regulations. Condition: The Agency lacked adequate procedures to ensure that LIHEAP applicants met eligibility requirements prior to issuing aid payments. The Agency also lacked adequate procedures to ensure the amount of aid provided was accurate and complied with rules and regulations. Repeat Finding: No Questioned Costs: $1,948 known Statistical Sample: No Context: We tested 25 payments and noted the following: ? For 1 of 25 payments tested, the Agency did not consider all sources of income when determining eligibility of the household. The payment of $478 was made to a public power district. The recipient originally applied for the program on February 5, 2021, and listed only one member of the household. On March 11, 2021, the recipient informed DHHS staff of an additional member of the household, which was added to the household in the Agency?s NFOCUS system. However, when the Agency determined income eligibility on June 25, 2021, a statement of income for the new household member was not obtained. Since the income information for the additional household member was not obtained, there is a risk that not all sources of income were used to determine eligibility and the payment amount. Due to the lack of income documentation, we were unable to determine if the household was eligible and if the amount paid was correct, resulting in questioned costs of $478. ? For 1 of 25 payments tested, the Agency issued a payment on behalf of an applicant who was no longer a current resident of Nebraska. The individual?s program eligibility was determined on September 19, 2020. On October 8, 2020, Agency staff entered documentation into the NFOCUS system stating that the individual had moved to Ohio. Even so, the Agency issued a $300 payment on behalf of the individual to the utility provider on November 16, 2020. No documentation was provided to indicate whether a refund of the benefits was required, resulting in questioned costs of $300. ? For 2 of 25 payments tested, the Agency overpaid eligible benefits by $620, as follows: One recipient?s income eligibility for the 2020-2021 heating season was determined using the SNAP income calculations performed on July 16, 2020. That calculation found the individual?s annual earnings to be $3,153 from child support. Using this income calculation, the Agency issued a $700 benefit on behalf of the client in November 2020. However, the income calculations did not include the applicant?s earnings from employment at a public school. The income at the time of the application was only temporarily halted because the school was closed for the summer. The SNAP income regulations include multiple methods to calculate earnings, including the use of past earnings or verification of future estimated earnings from the employer. The client?s past partial year of earnings was approximately $16,784, making her annual earnings $19,937. With this level of income, the individual would be entitled to only a $400 benefit, resulting in questions costs of $300. For the other payment, the applicant resided at an apartment complex, which is considered a multifamily dwelling. However, the Agency incorrectly identified the household as a single-family dwelling and erroneously issued a $700 payment on behalf of the individual in December 2020. For the 2020-2021 heating season, the maximum aid payment for a multifamily dwelling was only $380. As such, the Agency overpaid the benefit by $320, which is a questioned cost. ? For 2 of 25 payments tested, the Agency failed to verify properly the household composition, as follows: In one instance, the application included three household members. According to the Agency?s NFOCUS system, an additional adult, who was not listed on the application, was reported as having the same address as the applicant. On September 19, 2020, when performing the eligibility review for the household, the Agency failed to review the additional adult as part of the applicant?s household. Therefore, the household composition was not properly reviewed prior to the $550 payment on behalf of the individual, resulting in questioned costs of $550. In the other instance, on June 25, 2021, the Agency performed the eligibility review for an applicant with two household members. According to the Agency?s NFOCUS system, an additional family of four reported the same address as the recipient. The second family had submitted signed documents reporting that they lived at the same address as the recipient as early as January 7, 2020, and as late as August 29, 2021. Therefore, the Agency failed to review the household composition properly prior to the $478 payment. This cost was questioned previously in the first bullet above. Because of the Agency?s failure to review the household composition, the APA could not determine whether the additional individuals were properly included or excluded from the household to determine the income eligibility and benefit tier. Payment errors noted for the sample tested were $1,948. The total sample tested was $14,138, and total LIHEAP assistance payments for the fiscal year were $37,127,588. Based on the sample tested, the case error rate was 20% (5/25). The dollar rate for the sample was 13.78% ($1,948/$14,138), which estimates the potential dollar risk for fiscal year 2021 to be $5,116,182 (dollar rate multiplied by the population). Cause: Inadequate review procedures. The Agency believes that, because the LIHEAP regulation (476 NAC) references the SNAP regulation (475 NAC) for income calculations and verification procedures, it can use the SNAP calculations to support the LIHEAP eligibility without additional review. The Agency has recorded this policy in written form within their ?LIHEAP Desk Aid? document given to LIHEAP staff, which states: ?If a household is active SNAP when heating eligibility is being determined, staff must use the copy SNAP income option to determine the income amount utilized in the heating budget.? (Emphasis added). The APA feels that the present method of determining LIHEAP eligibility for those already participating in SNAP inhibits effective compliance with Title 45 CFR 96.84(c) (October 1, 2020), which states the following: Grantees must establish appropriate systems and procedures to prevent, detect, and correct waste, fraud, and abuse in activities funded under the low-income home energy assistance program. The systems and procedures are to address possible waste, fraud, and abuse by clients, vendors, and administering agencies. The APA found no guidance explicitly stating that eligibility for one form of assistance automatically qualified an applicant for participation in LIHEAP. Effect: When Agency staff fail to verify or enter household information properly into NFOCUS, there is an increased risk of fraud, loss of Federal funds, and noncompliance with Federal and State law. Recommendation: We recommend the Agency strengthen its policies and procedures to ensure compliance with State and Federal LIHEAP requirements, which include procedures to ensure that all income, household composition, and residency information is verified prior to benefit payment. We also recommend the Agency review its reliance on the SNAP income for LIHEAP applicants to ascertain whether the present method of determining eligibility for those applicants complies with the Federal regulations. Management Response: Agency partially agrees with the finding. Federal regulation at 42 U.S.C. 8624(b)(2)(A)(ii) allows grantees to make payments to households in which one or more individuals are receiving benefits from the Supplemental Nutrition Assistance Program (SNAP). Thus, a household that would significantly exceed the LIHEAP income guidelines but includes one person that is eligible for SNAP could be eligible for LIHEAP. This is because SNAP and LIHEAP have differing definitions of who must be included in the household. This categorical eligibility is not required (as this is a block grant) but is an option for grantees to utilize. Nebraska does not fully implement categorical eligibility, at this time, as it would require every household that has any SNAP eligible individual to be eligible for LIHEAP. However, Nebraska does utilize the information that was verified/utilized by SNAP when determining eligibility as it is already on hand. This is a significant outreach measure (which is required per 42 U.S.C. 8624(b)(3)) that Nebraska utilizes to ensure that eligibility can be automatically determined for households that have already been determined eligible for SNAP when household sizes are the same, etc. This helps to reduce the burden for households and helps to ensure that those in need of assistance are served. The LIHEAP State Plan (approved by Federal partners) states the following: 8.2 How do you provide alternate outreach and intake for HEATING ASSISTANCE? DHHS administers low-income programs. Individuals can apply for all economic assistance programs on one application. If an application is on file and is current (pending or active economic assistance program case), a new application is not required for LIHEAP. Either prior to or during the heating season, the eligibility system (NFOCUS) conducts a ?mass run? to determine eligibility for heating assistance for households the system identifies as having met the pre-determined eligibility factors. The first bullet identifies questioned costs of $478, as it states there is not a statement of income. DHHS does not require a written statement of each household member?s income. The individual?s unearned income was utilized in the budget. The staff that determined eligibility did not narrate that the household member in question had no other income. The second bullet identifies questioned costs of $300. Eligibility was determined for the household on 9/19/20, and a notice was sent to the household on that date informing of the LIHEAP benefit amount the household would receive. The payment was not released from the system until November. The change did not occur until after eligibility had been determined. Additionally, DHHS has a vendor agreement in place with all providers that receive LIHEAP payments on behalf of a client. The vendor agreement requires funds to be returned to DHHS. Below is the information from the vendor agreement. E. Refunds: 1. If the household, during the course of this program, moves locally and will then use a new fuel type and go off services of the Provider, any credit balance shall be refunded to DHHS. 2. If the head of the household dies and there are no surviving members in the household, any credit balance on the account shall be returned to DHHS. 3. If DHHS has paid a deposit on behalf of the household, that deposit shall be refunded to DHHS. 4. Provider must include the account name, client ID number, payment number and the reason money could not be applied to the household?s energy account with all refunded payments. 5. Refunds of LIHEAP payments should be processed and refunded within ten (10) business days of receiving notice that the LIHEAP client is no longer Provider?s energy customer. 6. Refunded LIHEAP payments should be returned to: DHHS PO Box 94906 Lincoln NE 68509-9947 APA Response: The APA reiterates its recommendation for the Agency to strengthen procedures to ensure all income information is properly verified prior to payment. This would include proper documentation in the case file or narrative of any income verification. Additionally, the APA does not consider its recommendation to be unreasonable. The Agency should review additional income or household information that has become available prior to payment to determine if the additional information affects the benefit payment to the applicant. Finally, the APA did not state that using the SNAP budget is not allowable. Rather, the APA?s concern relates to whether the Agency has a responsibility to consider new information ? pertaining to income or household size changes ? that becomes available subsequent to approval of the SNAP application.

Program: AL 93.568 ? Low-Income Home Energy Assistance (LIHEAP) ? Reporting Grant Number & Year: 2001NELIEA, FFY2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2020) says, in relevant part, that ?fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .? 2 CFR ? 170, Appendix A, Section I, Reporting Subawards and Executive Compensation (January 1, 2021), states, in relevant part, the following: (a) Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . * * * * (2)(ii) For subaward information, report no later than the end of the month following the month in which the obligation was made. 45 CFR ? 96.82(a) (October 1, 2020) states the following: Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97?35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1?September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. 42 U.S.C. 8624(c)(1)(G) requires a plan that does the following: [S]tates, with respect to the 12-month period specified by the Secretary, the number and income levels of households which apply and the number which are assisted with funds provided under this subchapter, and the number of households so assisted with- (i) one or more members who had attained 60 years of age; (ii) one or more members who were disabled; and (iii) one or more young children; . . . . Good internal control and sound business practices require procedures to ensure that adequate reports are submitted, and the information therein is correct and complete. Condition: The Agency lacked adequate procedures to ensure that required Federal Funding Accountability and Transparency Act (FFATA) reports were submitted, and program information reported was complete and accurate. Repeat Finding: No Questioned Costs: N/A Statistical Sample: No Context: During review of federally required LIHEAP reports, we noted the following: Federal Funding Accountability and Transparency Act (FFATA) Reporting Neither the Agency nor the Nebraska Department of Environment and Energy (NDEE), which distributes weatherization subawards, filed the required FFATA reports. Each thought that the other entity was responsible for this reporting. NDEE has issued multiple subawards to community action partnerships, including Habitat for Humanity of Omaha, that exceed the $30,000 reporting requirement. NDEE had subrecipient expenditures of $1,967,001 during fiscal year 2021, as shown below: See Schedule of Findings and Questioned Costs for chart/table. The Agency reported that the last time FFATA information was submitted was in 2018. Households Report In its LIHEAP Household Report for FFY2020, the Agency reported 543 applicant households for the weatherization program. This information for the weatherization applicant households was reported by NDEE, which obtained the figures from its subrecipients. No documentation was provided to support the number or type of weatherization applicant households. The 543 applicants were also reported by poverty level of the household, as shown in the table below. See Schedule of Findings and Questioned Costs for chart/table. Due to the lack of data provided for the weatherization applicant households, we were unable to verify whether the applicants reported were accurate. We selected a sample of 20 households included on the FFY2020 Household Report as LIHEAP assisted households, LIHEAP applicant households, or weatherization assisted households and noted that 4 of the 20 households tested were not properly reported or classified, as follows: ? One LIHEAP applicant household was reported at the ?Under 75% Poverty? income level. However, based on the Agency?s February 2020 calculation of the annual income of $62,556 for a household size of two, the income appears to have been 370% of the 2019 Federal poverty level for a household of two, which was $16,910. ? One LIHEAP applicant household was reported at the ?Under 75% Poverty? income level. However, based on the Agency?s December 2019 calculation of annual income of $41,009 for a household size of five, the income appears to have been 136% of the Federal poverty level for a household of five, which was $30,170. ? One weatherization-assisted household was listed in the Household Report covering the period of October 1, 2019, through September 30, 2020. However, the weatherization services were reimbursed in September 2019. Therefore, the household should not have been included in the report tested. ? One weatherization-assisted household was not properly reported as a ?Disabled? household. The household?s application materials identified one member of the household as disabled, and one of the sources of income was disability income. Cause: Inadequate review and reporting procedures. Effect: Without adequate knowledge of required reporting, or proper procedures to ensure reports contain accurate information, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen its procedures to ensure all participants of the LIHEAP program are properly reflected in the Household Report. We also recommend the Agency work with NDEE and its Federal partners to obtain sufficient knowledge of FFATA reporting requirements and to ensure all required FFATA reports are properly submitted. Management Response: The Agency disagrees that FFATA is required to be reported by DHHS. Per the FFATA Sub-award Reporting System (FSRS), FSRS collects data from Federal prime awardees on sub-awards they make. The prime awardee is required to file a FFATA sub-award report by the end of the month following the month in which the prime awardee awards any sub-grant greater than or equal to $30,000. As DHHS is not awarding any sub-awards, DHHS is not required to report FFATA. In addition, the most recent guidance provided by ACF agrees that DHHS is not the entity responsible for reporting FFATA information. DHHS has not received anything from ACF that contradicts their original determination. APA Response: The APA believes its recommendation is valid and that the Agency, whose staff is listed as the contact on the Federal award, should work with NDEE and its Federal partners to determine the responsibility for the FFATA reporting.

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Allowability & Eligibility Grant Number & Year: #G2001NECCDM, FFY 2020; #G2001NETANF, FFY 2020; #G2101NECCDF, FFY 2021; #G2101NETANF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 42 USC ? 9858K(b) states, in relevant part, ?With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for? (1) any services provided to such students during the regular school day . . . .? 45 CFR ? 98.67(a) (October 1, 2020) states, ?Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.? To be eligible for services, 45 CFR ? 98.20 (October 1, 2020) requires a child to be under 13 years of age, a citizen, and reside with a family whose income does not exceed 85% of the State?s median income. Title 392 NAC 3-004.01(A) states, ?The Department pays by attendance, not enrollment.? Title 392 NAC 3-004.01(A)(i) states, ?The provider may bill the full authorized amount for times that the child is absent on a scheduled day, up to five times per month.? Title 392 NAC 3-001.02 states, ?The recipient and child care provider must ensure that the services are delivered as authorized.? Title 392 NAC 4-002 states, in relevant part, ?Before furnishing any service, each provider must sign an enrollment form agreeing . . . (G) To retain authorizations, billing documents, and attendance records for four years to support and document all claims . . . .? Per 45 CFR ? 98.45k (October 1, 2020): Lead Agencies shall establish, and periodically revise, by rule, a sliding fee scale(s) for families that receive CCDF child care services that: (1) Helps families afford child care and enables choice of a range of child care options; (2) Is based on income and the size of the family and may be based on other factors as appropriate, but may not be based on the cost of care or amount of subsidy payment; Title 392 NAC 3-002 states the following: A child care recipient must contact the Department within 10 days when: (A) Total assets exceed $1,000,000.00; (B) Changes in household composition; (C)There is a non-temporary change in the recipient?s work, job training, or educational status that will exceed three months; (D) The family?s income exceeds 85 percent of the State Medium Income; or (E) The family changes residence. Title 392 NAC 2-013 states that childcare services for eligible individuals are approved only if each parent: (A) Is employed; (B) Is actively seeking employment. Each time the recipient loses employment, the recipient is entitled to three months of child care to seek employment. . . . (C) Is participating in an Employment First activity; * * * * (E) Is enrolled in and regularly attending vocational or educational training to attain a high school or equivalent diploma, an undergraduate degree or certificate, or English as second language classes . . . . The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, ?You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour . . . .? Additionally, the Handbook states, ?You and the client/parent/caretaker must sign the calendar at the end of the billing period.? Section IV (K)(1) of the Handbook states, ?Hourly or daily units listed on the Authorization are for the total time frame of the Authorization period - less than 6 hours are hourly units - 6 hours or more are daily units.? Good internal control requires procedures to ensure that payments are made in accordance with Federal and State requirements. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2020-042 Questioned Costs: $4,725 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 40 child care claims and noted 14 with errors. Some payments had more than one type of error. ? For one claim tested, the child had no birth record on file and no social security number verification to support the age or citizenship of the child. ? For one claim tested, the family income was not verified properly. The Agency listed no earned or unearned income because the parents were self-employed and stated that their business was not receiving income due to COVID-19. The Agency should have obtained self-employment ledgers from the parents to verify income but did not do so for over four months. ? For two claims tested, the worker authorized the incorrect service type based on the age of the child. In both cases, a preschooler was charged at a toddler rate on multiple claims during the fiscal year. ? For four claims tested, the required parent signature was not on file or appeared forged. For three claims, it appears the provider may have forged the parent?s signature, and for one claim, no attendance sheet was ever obtained. ? For four claims tested, the number of hours or days billed on the claim line did not agree to the attendance sheet. ? For six claims tested, the number of hours or days billed did not agree with the service hours authorized: o One claim was authorized for 32 hours per week, but child care was provided at 55 hours per week. o One claim was authorized for 25 hours per week, but 35.5 hours of child care were provided one week, and 66 hours were provided for another week. o For one claim, child care was authorized up to 20 hours per week while the parent was attending classes; however, the hours billed did not agree to the class schedule. In addition, 24 hours of child care were provided. o For one claim tested, child care was authorized for before and after school and days when school was out for the time the client was working. The client lost her job and could have been allowed job search for up to three months. However, the provider billed overnight hours from 10:30 pm to 4:30 am or 6:30 am for five or six days per week. Job searching overnight does not appear reasonable. o For one claim, child care was authorized while the parent was completing Employment First Activities; however, days claimed did not agree to the activity log. o For one claim, no attendance sheet was obtained by the Agency; therefore, there was no way to verify if the claim was charged in accordance with the authorization. ? For three claims tested, the claims included hours for a school age child during regular school days. For one claim, the provider began billing at 2:30 pm, but school was not dismissed until 3:05 pm. For another claim, two full days were billed when school was in attendance. For the third claim, no attendance sheet was obtained by the Agency; therefore, there was no way to verify if times claimed were appropriate for a school-age child. ? For two claims tested, the payment was not properly reduced by the required copay (i.e., family fee). One claim was due to an override error by staff, and for one claim the family only paid half their co-pay for the month. Federal payment errors noted for the sample tested were $1,741. The total Federal sample tested was $9,929, and total child care Federal assistance claims for the fiscal year were $40,582,077. Based on the sample tested, the case error rate was 35% (14/40). The dollar rate for the sample was 17.53% ($1,741/9,929), which estimates the potential dollar risk for fiscal year 2021 to be $7,114,038 (dollar rate multiplied by the population). In addition to the $1,741 Federal questioned costs noted on the sample items tested, we also noted $2,984 of Federal questioned costs on other line items of the claims reviewed or other claims for the same child we reviewed, which resulted from questionable signatures, service authorizations exceeded, incorrect rate charges, incorrect co-pay calculations, and failure to provide attendance calendars. Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for errors and misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency take the necessary action to recover the overpayments. Management Response: Agrees

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: Various, including #G2101NECCDF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 4-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection, unless the center is located in a health care facility or school that receives more frequent sanitation inspections[.] A good internal control plan requires that adequate documentation be maintained to support compliance with health and safety requirements. According to 45 CFR ? 75.511(a) (October 1, 2020), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2020-043 Questioned Costs: None Statistical Sample: No Context: We tested 31 child care centers subject to fire and sanitation inspections. We noted the following: The Agency received a waiver for inspections for the period March 12, 2020, to September 30, 2021; however, for two child care centers tested, a required inspection was overdue on March 12, 2020, and had not been performed or received as of June 30, 2021: See Schedule of Findings and Questioned Costs for chart/table. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care centers. These procedures should include regular follow-up with the Fire Marshal or local fire departments and local health departments or the Environmental Health Agency to ensure the inspections are completed timely. Management Response: The Agency partially agrees with the finding. It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children's Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure changes in 2020 and 2021; however, DHHS has no authority to require these entities to complete the inspections more promptly or release completed inspections when the licensee has not paid for the fire or sanitation inspection. DHHS will continue to implement policies and procedures: File Review by Child Care Licensing Supervisors and Fire and Sanitation Inspection Referrals. It is accurate that ?per 45 CFR ? 98.41 (October 1, 2020), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training.? DHHS disagrees that: ?The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers.? Regulations 391 NAC 1-5 include robust requirements to address a healthy and safe environment that includes: environmental services and safety, physical plant standards, communicable diseases, children excluded due to illness, medications, food safety, emergency preparedness, safety training and nutrition and food service training. Child Care Inspection Specialists conduct inspections pursuant to these regulations, checking on compliance in the areas listed above, and these inspections are conducted once or twice annually as required by statute. APA Response: The Agency is the recipient of the Federal funds and, therefore, is ultimately responsible for ensuring that fire and sanitation inspections are performed. Without such inspections, there is an increased risk of children being cared for in unsafe facilities.

Program: AL 93.575 ? Child Care and Development Block Grant ? Period of Performance Grant Number & Year: #G1901NECCDF, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(d) (October 1, 2020): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (5) Obligations may include subgrants or contracts that require the payment of funds to a third party (e.g., subgrantee or contractor). However, the following are not considered third party subgrantees or contractors: (i) A local office of the Lead Agency; (ii) Another entity at the same level of government as the Lead Agency; or (iii) A local office of another entity at the same level of government as the Lead Agency. According to 45 CFR ? 75.511(a) (October 1, 2020), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2019 grant after the period of performance. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2020-045 Questioned Costs: $109,747 known Statistical Sample: No Context: The FFY2019 Child Care Discretionary grant must be obligated by September 30, 2020. The Agency charged $3,202,956 to the FFY19 grant after September 30, 2020. Of that total, $2,188,474 was paid to other agencies of the State. We tested four payments to State agencies and noted the following: ? We tested two payments to the Nebraska Department of Education (Department) paid in May and June 2021. The payments tested totaled $683,570 and included $11,283 for administrative costs of the Department after September 30, 2020. ? We tested two payments to the Nebraska State Patrol paid in May and June 2021. The payments tested totaled $98,464 for background checks in March and April 2021. As other State agencies are not considered a third party, these costs were not obligated by September 30, 2020, and are considered questioned costs of $109,747. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: Agrees

Program: AL 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: All open, including #G2101NECCDF, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(i) (October 1, 2020), ?Lead Agencies shall recover child care payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud.? Per 45 CFR ? 98.68(b) (October 1,2020), ?Lead Agencies are required to . . . (1) Identify fraud or other program violations . . . . (2) Investigate and recover fraudulent payments and to impose sanctions on clients or providers in response to fraud.? A good internal control plan requires procedures to ensure cases are reviewed, and appropriate dispositions are made in a timely manner. Condition: Three of nine Child Care Special Investigation Unit (SIU) cases tested were not investigated in a timely manner. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: Three SIU Child Care cases were not worked timely, as follows: ? One case was not worked between May 2020 through January 2021, or nine months. ? A second was referred on December 26, 2019, and no work was completed on the case until October 2020, nine months later. ? A third case was not worked between April 2021 through February 2022. Cause: The Agency did not devote adequate resources to ensuring child care fraud cases were worked in a timely manner. Effect: When cases are not completed timely, there is an increased risk of fraud or misuse of Federal funds. When potential fraud cases are not adequately pursued, this results in noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure cases referred to the SIU are reviewed timely and appropriate dispositions are made. Management Response: The Agency partially agrees. DHHS disagrees with the finding that the cases in question were not completed timely; 45 CFR ? 98.68 does not define timeliness for these reviews and we feel that the expectations of timeliness applied have been arbitrary. DHHS acknowledges that the Agency was not able to provide a written policy or process that defines the internal definition of timeliness with relation to these cases. The Agency is responsible for creating a process that includes timeliness expectations. APA Response: The Agency is required to investigate program violations and fraud. The cases noted above were not investigated for nine months. During that time, claims continued to be paid, increasing the risk for fraud or violations to continue.

Program: AL 93.674 ? John H. Chafee Foster Care Program for Successful Transition to Adulthood ? Allowability & Subrecipient Monitoring Grant Number & Year: G-1901NECILP, FFY 2019; G-2001NECILP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Repeat Finding: 2020-036 Questioned Costs: Unknown Statistical Sample: No Summary: Audit finding 2021-013 (Lack of Adequate Subrecipient Monitoring), included in Part II of this report, relates to both the financial statements and Federal awards. During our testing of reimbursements made to subrecipients, we noted that the Agency lacked adequate procedures to ensure amounts reimbursed to the Nebraska Children and Families Foundation (NCFF) were reasonable and allowable. Although documentation was on file for two payments, totaling $8,575, it was not adequate to support the expenses. Subrecipient payments during the fiscal year to NCFF for the Program totaled $828,788. A similar finding was noted in the previous audit. Recommendation: We recommend the Agency improve procedures for monitoring subrecipients. Such monitoring should ensure monthly reports are accurate and agree to support, and expenditures are in accordance with State and Federal requirements. Management Response: See Finding 2021-013

Program: AL 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2105NE5MAP, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.302(a) (October 1, 2020), each state must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State?s own funds. Per 45 CFR ? 75.403 (October 1, 2020), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(1) states that personal assistance services not documented in the service plan are non-allowable services. Title 471 NAC 15-006.01A(1)(a) requires an approved provider to bill only for services that are authorized and actually provided. Additionally, Title 471 NAC 15-006.05 requires a provider to perform the personal assistance services described on the service plan and document accurately on Form MC-37 (?Service Provider Time Sheet?) all services provided. Title 471 NAC 15-006.06C requires that, after receiving a provider?s timesheet and billing document, the beneficiary?s social service worker or designee must verify that ?the hours worked and services provided fall within the parameters of those authorized? by the service needs assessment. The Provider?s Guide for Billing PAS Recap states, ?Gather participant?s signature at each visit in EVV APP.? A good internal control plan requires procedures to ensure that services provided agree to the service needs assessment. Section 1903(1)(5)(A) of the Social Security Act states the following: The term ?electronic visit verification system? means, with respect to personal care services or home health care services, a system under which visits conducted as part of such services are electronically verified with respect to ? (i) the type of service performed; (ii) the individual receiving the service; (iii) the date of the service; (iv) the location of service delivery; (v) the individual providing the service; and (vi) the time the service begins and ends. Title 45 CFR ? 75.511(a) (October 1, 2020) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: During testing of personal assistance service (PAS) claims, we noted that services provided were not adequately supported. We also noted that services billed exceeded the service needs assessments and the timing when services were provided did not appear reasonable. Additionally, we noted overlapping services and services billed and paid that exceeded 24 hours in one day. A similar finding has been noted in prior audits since 2014. The Summary Schedule of Prior Findings states the status is complete. Repeat Finding: 2020-053 Questioned Costs: $8,387 known (#2105NE5MAP, $7,678 and COVID-19, $709) Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). The Agency implemented an electronic visit verification system for PAS providers on January 3, 2021, as required by Section 12006(a) of the 21st Century CURES Act, passed by Congress in 2016. The Electronic Visit Verification (EVV) system electronically captured and verified provider visit information, and providers were required to submit claims to the Agency electronically through this application. We initially selected five PAS claims for testing submitted through the EVV system. The Agency was unable to provide documentation from the EVV system of client signatures and the specific activities or tasks performed by the provider. The SNA details the tasks to be provided, the frequency allowed for each, and the number of minutes allotted for each task. Claim detail provided included the start and stop times and location of the visit, but there was no record of what tasks were provided on each day and for how long to ensure compliance with the SNA. Therefore, we questioned the entire claim and specific dates selected for testing, resulting in questioned costs of $2,684. The claims submitted through the EVV system do not follow the PAS work week from Sunday through Saturday; therefore, we reviewed additional claims for the initial five providers tested to ensure that the units billed did not exceed the SNA. One unit is 15 minutes. We noted the following issues with four of the five providers: ? Three providers billed hours that exceeded the authorized hours per the SNA. Neither the EVV system nor NFOCUS prevented the provider from billing units that exceeded the weekly authorized hours and from billing for more than 24 hours of service in one day. This resulted in additional questioned costs of $2,925. Provider 1 This provider was authorized for up to 156 quarterly units or 39 hours of service per week. The provider billed for hours that exceeded the SNA for one week in January 2021, and then, beginning in March 2021, billed for hours that exceeded the SNA for every week paid through June 30, 2021. The provider lived with the client so the GPS verification of the visit would show that the provider was at the service location. The provider billed 21.75 hours of service in one day and typically billed over 10 hours of service each day of the week, resulting in billing from .5 to 61 hours of service over the 39 hours that were authorized. Over 445 hours were overbilled for the 11 weeks tested. The Agency conducted a quality assurance review for four weeks of services in March and April of 2021 and established overpayments of $481 on June 26, 2021, and $175 on July 3, 2021, for billing over the authorization. The provider briefly billed within the SNA for one week after receiving notice of the overpayment and then again began to bill excessive hours. The Agency did not review any of the other claims. We identified an additional $2,566 in questioned costs for claims paid during fiscal year 2021. Provider 2 This provider was authorized for up to 157 quarterly units or 39.25 hours of service per week for one client. The provider billed for hours that exceeded the SNA for service provided beginning with the week of April 18, 2021, through the week ending May 22, 2021. The provider billed between 2.75 and 14.75 hours over the 39.25 hours that were authorized. We identified an additional $256 in questioned costs for these claims. The provider also exceeded the SNA during the week of April 11, 2021, through April 17, 2021. The provider billed for two clients during this week. Due to deficiencies between the EVV system and NFOCUS, the provider was able to make multiple entries for services with overlapping times on April 12, 2021, and all of these hours were paid. These multiple entries on the same day had a ?NON? or ?GPS? verified location method. When a provider uses a mobile device, the location is verified through GPS tracking. However, the provider is also able to ?deny? or not verify the location when manually logging visits in the provider portal through a computer. This provider billed for 34.25 hours on this one day. See the table below. There were no additional questioned costs for this overlapping of services and exceeding the SNA, as the entire claim was already questioned as noted above. See Schedule of Findings and Questioned Costs for chart/table. Provider 3 This provider was authorized for up to 114 quarterly hour units or 28.5 hours of service per week. This provider also lived with the client and began to bill for hours that exceeded the SNA in April 2021. The provider billed between .25 and 5.25 hours of service over the 28.5 hours that were authorized. We identified an additional $103 in questioned costs for claims paid from April 2021 through June 30, 2021. ? Provider 4 was authorized to provide services for three different clients. The provider billed the maximum number of units authorized for each of these clients for the week tested. Not only was it unreasonable to authorize one provider to provide 85.25 hours of services in one week, but some services were also not reasonable based on the times the provider was at each client?s home. Care for one client was provided from 8:00 am to 12:00 pm, seven days a week. The activity of assisting with eating was authorized three times per day; however, the provider was there for only two mealtimes. Care for another client was provided from 12:30 pm to 4:30 pm, seven days a week. The activity of assisting with the administration of medication was authorized three times per day. It is not reasonable medications would have been administered three times during the four-hour period the provider was at the client?s home. Care for the third client was provided from 5:00 pm to 9:00 pm, seven days a week. Assisting with mobility was authorized 20 times per day and assisting with going to the bathroom was authorized 10 times per day. It does not seem reasonable the client would only need this assistance in the evening during a four-hour period. Due to the numerous issues noted with the initial claims tested that were submitted through the EVV system, we reviewed additional claims submitted by six additional providers. We did not request the start and stop time and location information from the EVV system and based the review on the claim information in NFOCUS that identified the total number of quarterly units billed each day. We noted the following issues: ? Five providers billed hours that exceeded the authorized hours per the SNA, resulting in questioned costs of $2,778. Provider 5 This provider was authorized for up to 154 quarterly units (38.5 hours) for one client and 125 quarterly units (31.25 hours) for a second client. The first client was authorized for services from both this provider and from Provider 2 noted above. Both Provider 2 and Provider 5 billed for services for this client during the week of March 7, 2021, through March 13, 2021, as follows. Provider 2 also billed 14 quarterly units over the SNA authorized hours for the previous week for this client. See Schedule of Findings and Questioned Costs for chart/table. Provider 5 continued to bill excessive hours for the first and second client through May 2021 service dates. During the week of April 18, 2021, through April 24, 2021, this provider billed 499 quarterly units or 124.75 hours of service. This included 28.75 hours of service between the two clients on one day. The provider exceeded the weekly authorized hours for 10 weeks reviewed and billed 5.5 to 33 hours over the SNA each week for the first client and .75 to 14.75 hours over the SNA each week for the second client. There were questioned costs of $1,652. Provider 6 This provider was authorized for up to 149 quarterly units or 37.25 hours of service per week. This provider billed for more than 24 hours in one day and exceeded the SNA for three weeks reviewed. The Agency created overpayments for two of these weeks; however, even with the reduction of hours paid, the provider still exceeded the SNA. For the third week, the provider billed 312 quarterly hour units, including 100 quarterly units (25 hours) on one day and 120 quarterly units (30 hours) on a second day. There were questioned costs of $323. Provider 7 This provider was authorized for up to 158 quarterly units (39.5 hours) for one client and 93 quarterly units (23.25 hours) for a second client. The provider obtained another job with a staffing company in February 2021 and began billing only for the client authorized up to 39.5 hours of service each week. The Agency created an overpayment for one week from February 14, 2021, through February 20, 2021, as the provider was billing for services completed on five days and many of the tasks were authorized to be completed seven days a week. After the audit period, the Agency created another overpayment for service dates from March 21, 2021, through March 27, 2021, for exceeding the authorized hours per the SNA. The Agency also identified overlapping services on February 12, 2021. Although these reviews identified the provider was billing incorrectly, the Agency did not review any other claims. We noted that the provider exceeded the weekly authorized hours for seven weeks from January 2021 through May 2021 and billed between .5 to 16.5 hours over the SNA, resulting in questioned costs of $288. We did not look at the specific activities noted on the SNA; therefore, there could be additional questioned costs for activities not performed according to the SNA. Provider 8 This provider was authorized for up to 90 quarterly units or 22.5 hours of service per week. The Agency performed quality assurance reviews on services for two weeks in April 2021 and created overpayments for billing units that exceeded the SNA. Although these reviews identified the provider was billing incorrectly, the Agency did not review any other claims. We noted that the provider exceeded the weekly authorized hours for two additional weeks from March 28, 2021, through April 3, 2021, and from May 2, 2021, through May 8, 2021. The provider billed between 2 and 9.5 hours over the SNA, resulting in questioned costs of $68. The provider normally billed services on only two to four days per week, and tasks were authorized for seven days a week; therefore, there could be additional questioned costs for activities not performed according to the SNA. Provider 9 This provider was authorized for up to 160 quarterly units or 40 hours of service per week. The provider exceeded the weekly authorized hours for 10 weeks reviewed and billed between 2 and 7.25 hours over the SNA each week, resulting in questioned costs of $447. Provider 10 This provider was authorized to provide services for three clients for a weekly total of 452 quarterly units or 113 hours. To provide the services authorized, the provider would have to average over 16 hours of care per day for seven days a week. Due to the unreasonableness of the hours authorized for one provider to perform, two of the three clients did not receive all the services they needed. The third client lived with the provider along with their two children. Title 472 NAC 15-003.02 states that services provided by a legally responsible relative, such as a spouse, are not allowed. The provider may provide services for the partner, however, because they are not legally married. The following chart details the quarterly units billed for each client for the two weeks reviewed. See Schedule of Findings and Questioned Costs for chart/table. Federal payment errors noted totaled $8,387. The Federal payments tested totaled $34,165, and the total Federal share of PAS claims for the fiscal year was $6,908,588. Cause: Procedures were not adequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient?s needs, as well as a risk of services being billed but not provided. Recommendation: We recommend the Agency implement procedures to ensure that payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: The Agency partially agrees. DHHS disagrees with some characterizations that the program and EVV solution do not have controls in place to limit billing and payment within allowed authorized units.

Program: AL 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability and Eligibility Grant Number & Year: #2105NE5MAP, FFY 2021; #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2020): 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. Per 45 CFR ? 75.302(a) (October 1, 2020), ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds.? 45 CFR ? 75.403 requires costs to be reasonable, necessary, and adequately documented. Per 477 NAC 23-003.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. Per 477 NAC 23-003.05(A)(iii), ?A specified maximum may be disregarded if it is set aside for the purpose of paying burial expenses.? Further, 477 NAC 23-003.05(A)(iii)(1)(b) states that for burial insurance policies, ?If the client has irrevocably assigned more than the specified maximum in burial insurance, the excess is not an available resource but may be a deprivation of resources.? According to NAC Medicaid Eligibility Appendix 477-000-012, the maximum for a burial trust was $5,303 effective January 1, 2020. Per 477 NAC 23-003.05(B)(v)(1)(a): The disregard of any motor vehicle is not allowed when it has been determined a client residing in a nursing home or an assisted living facility and receiving services through Home and Community Based Services or Programs or All-Inclusive Care for the Elderly does not intend, or will not be able to return home if medical transportation is included in the payment to the facility[.] Per 477 NAC 23-003.05(B)(vi): The owner of a life estate in real property is generally unable to sell the property. The net income from the life estate must be included in the budget rather than considering the life estate as an available resource. Per 477 NAC 23-003.10, the established maximum for available resources which a client may own and still be eligible is $4,000 for a one-member unit. 477 NAC 23-003.05(B)(vi) states, in relevant part: The net income from the life estate must be included in the budget rather than considering the life estate as an available resource. 477 NAC 23-003.04(A) defines a deprivation of resources as: Any action taken by the applicant or client, or any other person or entity, which reduces or eliminates the applicant?s, client?s, or spouse?s recorded ownership or control of the asset for less than fair market value is a deprivation of resources. The fair market value of a resource at the time the resource was disposed of must be verified and the equity value of the resource must be determined by taking into consideration any encumbrances against the resource . . . . Title 471 NAC 12-009.07 (effective December 19, 2018, through June 25, 2021) states, in relevant part: 1. A ?held? bed must be vacant and counted in the census. The census must not exceed licensed capacity; 2. Hospital bed-holding is limited to reimbursement for 15 days per hospitalization. Hospital bed-holding does not apply if the transfer is to the following: NF, hospital NF, swing-bed, a Medicare-covered SNF stay, or to hospitalization following a Medicare-covered (SNF) stay . . . . Title 477 NAC 26-002.03 defines excess shelter costs as, ?The amount by which the combined rent or mortgage; property taxes; homeowner?s insurance; and condominium or cooperative fees, if applicable, exceed 30% of the minimum maintenance needs amount.? Title 45 CFR ? 75.511(a) (October 1, 2020) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure that income and resources are updated for changes timely, adequately documented, and verified. Condition: The Agency did not adequately verify the income and resources of individuals residing in long- term care facilities to ensure that limits were not exceeded, and the individuals were eligible. Additionally, the Summary Schedule of Prior Audit Findings states the corrective action is complete. Repeat Finding: 2020-054 Questioned Costs: $4,482 known (#2105NE5MAP, $4,039; COVID-19, $443) Statistical Sample: No Context: We tested 25 long-term care facility payments and noted the following issues: ? Seven recipients had title to 20 vehicles that were not currently registered, and one recipient had a title to a vehicle that was currently registered; however, none of these vehicles were included as resources. If the vehicles were still in the recipients? possession, the value should have been included as an available resource, which may have affected Medicaid eligibility. The Agency failed to inquire with the recipients to determine if the vehicles were still in their possession. ? One recipient became eligible for Medicaid in February 2020 and reported at that time that she had a preplanned guaranteed funeral agreement for $11,688. However, the Agency failed to obtain a copy of the agreement to determine if the included items in the agreement exceeded the maximum burial trust limitation. Instead, the entire agreement amount was included in the recipient?s budget as a non-countable resource. However, the Agency obtained a copy of the agreement after our inquiry, which listed only $3,419 of non-countable items, such as a casket and sales tax. Based on the maximum burial trust limitation in 2020, totaling $5,303, the remaining amount of the funeral agreement, totaling $2,966, should have been included as an available resource. If the amount was included as an available resource, the recipient would have exceeded the $4,000 resource limitation, as she also had a checking account with a balance of $3,123. Therefore, the entire claim tested is questioned, resulting in Federal share sample questioned costs of $2,514. ? One recipient purchased a life insurance policy and irrevocably assigned the policy to a funeral home for $11,645. Based on the Preneed Funeral Agreement and Assignment, only $5,263 of the agreement was for excludable items, such as a casket, marker, and grave opening/closing fees. Therefore, $1,010 should have been considered a deprivation of resources, as the maximum excludable amount for a burial trust was $5,372. Further, the recipient was admitted to a nursing facility in October 2020. During that same month, one of the recipient?s two bank account balances was reduced from $21,205 to $3,057. Part of this reduction was due to the purchase of burial insurance, Medicare premium payments, and rent. However, two checks, totaling $5,239, cleared the bank on October 2, 2020, and October 19, 2020, but no images of the checks were provided, and the Agency did not inquire with the recipient about what was purchased to ensure that there was no other deprivation of resources. Lastly, the recipient transferred her home to Greater Beth-El Temple for $31,300 prior to June 30, 2020. The Agency was aware that the recipient was living in a home, as the recipient reported paying homeowner?s insurance and property taxes in 2014. However, no inquiry was made by the Agency to determine where the proceeds from the sale of the home were deposited and how the funds were spent to ensure that there was no deprivation of resources. ? One recipient purchased a life insurance policy and irrevocably assigned the policy to a funeral home for $12,635. A copy of this policy was provided to the Agency in April 2011. However, the Agency failed to obtain a copy of the Preneed Funeral Agreement and Assignment with the funeral home to determine if or by what amount the policy exceeded the maximum excludable amount for a burial trust and if a deprivation of resources should have been considered. ? Two providers billed hospital bed-hold days during the same time frame for one recipient. The recipient resided in an assisted living facility and was admitted to the hospital in late October 2020. The assisted living facility billed 3 bed-hold days in October 2020 and 17 bed-hold days from November 1, 2020, through November 17, 2020, when the recipient died. For the claim tested, the nursing home provider billed nine bed-hold days from November 8, 2020, through November 17, 2020. These billed bed-hold days overlap with the assisted living facility?s bed-hold days, and the recipient never resided in this nursing home. The entire claim tested is questioned as a duplicate claim, resulting in Federal share sample questioned costs of $1,181. Additionally, the assisted living facility billed a total of 20 bed-hold days from October 29, 2020, through November 17, 2020; however, only 15 hospital bed-hold days are allowed per hospitalization. The facility overbilled five hospital bed-hold days, resulting in non-sample Federal share questioned costs of $246. ? One recipient was admitted to a nursing facility in May 2020, but his spouse was still living in the community at the time. The couple had $279 in shelter expenses, which were reported to the Agency in May 2020 and/or included on the recipient?s Medicaid application. This included $55 per month for homeowner?s insurance, $200 per month for their mobile home lot, and $24 of property taxes per month. However, only the $55 in homeowner?s insurance was included in the recipient?s budget. Had the additional $224 in shelter expenses been included correctly in the recipient?s budget, the recipient?s share of cost would have been reduced by $122, which is the excess shelter allowance after adding a $490 utility allowance to the $279 in shelter expenses and subtracting the shelter limit of $647. ? One recipient was a joint owner of three life estate properties. The recipient received income of $665 per month for two of the three properties. Income for the third property was received twice a year in May and December and, therefore, was excluded from the recipient?s March 2021 budget that was tested. The Agency included the $665 income from the two life estate properties as earned income in the recipient?s budget and calculated only $300 as countable income after subtracting earned income disregards. However, income from life estates should be included in the budget as unearned income with no disregarded amount. This resulted in an overpayment of $365, with a Federal share of $229. ? One recipient sold real estate property in October 2018 for $20,000. This sale was reported on the recipient?s Medicaid renewal application form received in October 2019. Additionally, a representative for the recipient reported to the Agency in October 2018 that the recipient was receiving $300 to $350 per month for the sale of the property. Further, a $350 deposit from the purchaser of the property was included on a bank statement received by the Agency in November 2019. However, this $350 per month income was not included in the recipient?s budget. This resulted in an overpayment of $350, with a Federal share of $219. ? One recipient?s budget was reduced by $148 for a Medicare B premium payment. However, no such premium was paid by the recipient or deducted from the recipient?s social security benefit amount. This resulted in an overpayment of $148, with a Federal share of $93. Federal payment errors noted in the sample totaled $4,236. The total Federal sample tested was $76,470, and the Federal long term care facility expenditures during the fiscal year totaled $249,754,891. Based on the sample tested, the case error rate was 56% (14/25). The dollar error rate was 5.54% ($4,236/$76,470), which projects the potential dollars at risk for fiscal year 2021 to be $13,836,421 (dollar error rate multiplied by population). Cause: Worker error and inadequate review Effect: If income and resources are not adequately verified, there is an increased risk recipients will be determined eligible for Medicaid inappropriately or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure that Medicaid recipients? income and resources are properly identified, verified, and documented. We also recommend the Agency implement procedures to ensure that bed-hold days comply with regulations. Management Response: Agrees

Program: AL 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #2105NE5MAP, FFY 2021 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 447.253(b)(1)(i) (October 1, 2020) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR ? 447.253(g) (October 1, 2020), ?The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.? The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.10 (Reporting Requirements and Record Retention), requires facilities to submit cost reports and says the following: Each facility must complete the required schedules and submit the original, signed Report to the Department within 90 days of the close of the reporting period, when a change in ownership or management occurs, or when terminated from participation in NMAP. Under extenuating circumstances, an extension not to exceed 45 days may be permitted. Requests for extensions must be made in writing before the date the cost report is due. When a provider fails to file a cost report as due, the Department will suspend payment. AICPA Professional Standards AU-C Section 500B.A32 states in part: Audit evidence obtained directly by the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the application of a control) . . . . Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies, facsimiles, or documents that have been filmed, digitized, or otherwise transformed into electronic form, the reliability of which may depend on the controls over their preparation and maintenance. A good internal control plan requires procedures to ensure that a risk assessment is performed on long-term care facilities, and those considered high risk are field audited to maintain the integrity of the Medical Assistance Program. Good internal control also requires desk audits to be performed in a timely manner and adequate audit evidence be obtained for significant costs. High-risk providers should be audited as soon as possible to ensure that issues are resolved timely and to reduce the risk for errors or abuse. Condition: We noted that the Agency did not perform field audits on any long-term care facilities during the fiscal year ended June 30, 2021. A similar finding was noted in prior audits. We also noted that desk audits were not completed in a timely manner, and procedures for desk audits did not obtain adequate evidence to ensure costs reported were accurate and proper. Repeat Finding: 2020-055 Questioned Costs: Unknown Statistical Sample: No Context: Agency procedures require a desk audit on each annual cost report provided by long-term care (LTC) facilities that receive Medicaid funding and a field audit on facilities identified by the Agency as high risk. Cost reports for fiscal year 2020 were due from facilities by September 30, 2020, or November 16, 2020, if an extension was approved. We noted the following: ? The Agency received cost reports from 208 facilities but completed desk reviews for only 69 facilities prior to June 30, 2021. In June 2021, the Agency contracted with a private accounting firm to perform desk and field audits; however, no additional desk reviews were completed prior to November 16, 2021. Therefore, two-thirds of the facilities did not have a review completed within one year. ? We reviewed 22 desk audits and noted that limited procedures were performed. Costs were traced to each facility?s trial balance, but no underlying supporting documentation was obtained for salaries, food, or supplies, which are significant costs. In the following response, the Agency acknowledged having not sampled any expenses on the cost reports: DHHS has not performed extensive audits on the facilities, we are completing a desk review. In our analysis we look at costs and if they look to be in line with previous years we do not ask for additional information. For the year 2020, the facilities had an increase in costs due to Covid and that was anticipated in our analysis so we didn?t ask for documentation of the variance on things like increased nursing costs. ? The Agency performs risk assessments of the facilities each year and identifies which facilities are high-risk. Risk assessments were not completed for all facilities for 2020 cost reports. ? No field audits were performed for any facilities identified as high-risk in prior years. o During fiscal year 2016, the Agency identified nine high-risk facilities for the period ended June 30, 2015; only three had field audits performed. The Agency did not document why field audits were unnecessary for the others. The Agency identified one high-risk facility for the period ended June 30, 2016, but no field audit was performed. Per the State Plan attachment 4.19D, 12-011.1, the Agency cannot initiate an audit more than five years from the end of the cost report period; therefore, the Agency can no longer conduct audits for these cost reports. o The Agency identified 23 high-risk facilities for the period ended June 30, 2017. For one of these, no field audit has been completed. In 2019, the Agency indicated that 22 of the facilities were under investigation by Federal authorities and would not be audited further by the Agency without specific direction. These facilities were all owned by the same company, and its owners were recently accused by the Nebraska Attorney General?s Office of $59.6 million in Medicaid fraud. The accusation alleges that cost reports used false numbers that led to the overpayment of Medicaid funds. o The independent contractor performed risk assessments for the 2018 and 2019 cost reports and identified five facilities as high-risk for 2018 and 16 facilities for 2019. No field audits have yet been performed. The Agency has not completed desk reviews or risk assessments for the fiscal year 2020 cost reports. The Federal share of nursing facility expenditures during fiscal year 2021 totaled approximately $250 million. Cause: The Agency did not dedicate adequate resources to the task of nursing facility audits. The Agency hired an independent contractor, but the contract was not signed until July 2021. Effect: When facilities do not have timely desk audits or periodic field audits, there is an increased risk for submitted cost reports to contain errors or fraud. The Nebraska Attorney General?s Office has accused a New York couple of carrying out a $59.6 million Medicaid fraud involving a chain of nursing homes in Nebraska. The company is accused of preparing false records, failing to maintain documentation, and making fraudulent misrepresentation, which resulted in payments to which it was not entitled. This highlights the critical need for strong controls and audit procedures to ensure that cost reports are accurate and to minimize the potential for fraud. Recommendation: We recommend the Agency devote adequate resources to audits of long-term care facilities. We further recommend the Agency improve procedures to ensure that cost reports are accurate. Management Response: Agrees

Program: AL 93.778 ? Medical Assistance Program; AL 93.767 ? Children?s Health Insurance Program (CHIP) ? Special Tests and Provisions Grant Number & Year: All open, including #2105NE5MAP, FFY 2021; #2005NE5021, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR ? 455.104(b) (October 1, 2020), the State Medicaid Agency must obtain the following disclosures from the disclosing entity: (1)(i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. * * * * (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). A person with an ownership or control interest is defined, in part, by 42 CFR ? 455.101 (October 1, 2020) as a person or corporation that: (a) Has an ownership interest totaling 5 percent or more in a disclosing entity; (b) Has an indirect ownership interest equal to 5 percent or more in a disclosing entity; Additionally, under 42 CFR ? 455.101, a ?person with an ownership or control interest? includes ?an officer or director of a disclosing entity that is organized as a corporation,? and a ?managing employee? includes ?a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency.? Per 42 CFR ? 455.436 (October 1, 2020), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment[.] Per 42 CFR ? 455.412 (October 1, 2020), the State Medicaid Agency must also: (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. 45 CFR ? 75.303(a) (October 1, 2020) requires the Agency to ?[e]stablish 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.? 45 CFR ? 75.511(b) (October 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Good internal control requires procedures to ensure that all required disclosures are provided. Condition: Medicaid/CHIP providers were not properly screened, or disclosures were not obtained for managing employees or persons with ownership or controlling interest. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2020-057 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid/CHIP providers. We noted the following: ? Four providers did not have adequate ownership screening or disclosures. Three of the providers failed to disclose any managing employees or persons with ownership or controlling interest during the enrollment or revalidation process. As a result, only the organization was screened and disclosed. One of these three providers was owned by the State of Nebraska. The fourth provider disclosed a managing employee; however, the provider was not screened. ? Two providers did not have license verification performed. Both providers were located outside of the State of Nebraska and were new providers. One provider registered in February 2020, and the other registered in January 2019. Per the Agency, ?A system rules issue was identified impacting a small group of specialty hospital providers and resolved 3/30/20. All providers in this group will be screened at their next update or revalidation.? Cause: The Agency relies on the provider?s disclosure to be complete, true, and accurate. The provider is allowed to complete the enrollment process even if an owner or managing employee is not disclosed. Effect: Without adequate procedures to ensure that providers are screened, and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. We also recommend the Agency implement procedures to ensure that license verifications are performed. Management Response: The Agency partially agrees with the finding. DHHS is in compliance with Title 42 CFR, Sections 455.100 through 455.106, 42 CFR 455.436, 42 CFR 455.412, 45 CFR 75.303 and 2 CFR 200.511. DHHS screens and enrolls Nebraska Medicaid providers against all applicable regulations. When providers submit their Service Provider Agreement, the provider application presents the CFR definitions for owners and managing employees. The provider is expected to review the definitions and be familiar with the rules/regulations that govern their services when they sign the Service Provider Agreement. If a provider omits disclosing owners or managing employees (beginning November 2019), they must check a box in the Maximus provider portal attesting they are intentionally leaving the disclosure information empty. DHHS completes all required screenings for owners and managing employees who are disclosed by the provider. When a provider signs their Service Provider Agreement, they attest that they are in compliance and will follow all applicable rules and regulations. The provider is required to disclose and DHHS is required to screen what is disclosed. DHHS cannot advise the provider on the disclosures. DHHS can only supply the regulations and direct the provider to comply. When found on any post enrollment review, the provider is directed to correct any missing or erroneous disclosures else face disenrollment or other sanction.

Program: AL 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2105NE5MAP, FFY 2021; #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303(a) (October 1, 2020) requires the Agency to ?[e]stablish 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.? Title 45 CFR ? 75.302 (October 1, 2020) requires each state to expend and account for Federal awards in accordance with state laws and procedures. 42 CFR ? 441.302(d)(2) (October 1, 2020) requires the Agency to inform the participant or the legal representative of the ?choice of either institutional or home and community-based services.? The ? 1915(c) Home and Community-Based Services Waiver, effective October 1, 2019, through September 30, 2020, and effective October 1, 2020, through September 30, 2021, states that Habilitative Community Inclusion and Supported Family Living services may not be provided by a legal guardian or a legally responsible person. The DHHS Division of Developmental Disabilities Policy Manual states that a legally responsible person, including a Power of Attorney, cannot provide direct services. Good internal control requires procedures to ensure that costs are in accordance with State and Federal requirements. Condition: We tested 25 claims paid from the Comprehensive Developmental Disability (CDD) waiver and noted that two payments did not comply with State and Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2020-058 Questioned Costs: $35,994 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We noted the following: ? For one claim tested, we noted that the provider was also performing Chore services for another client during the same time frame. There was overlapping time on July 28, 2020, for four hours, resulting in sample Federal share questioned costs of $37. See Schedule of Findings and Questioned Costs for chart/table. ? For a second claim tested, we noted that the participant was receiving Supported Family Living and Habilitative Community Inclusion services from several providers, including the participant?s mother and father who were also the participant?s Power of Attorneys (POA). The CDD waivers and the Developmental Disability Policy Manual state that a legally responsible person of a participant, including a POA, cannot perform these services. Therefore, all payments made to the participant?s parents during fiscal year 2021 are questioned costs. Outside sample Federal share questioned costs totaled $35,957. On January 21, 2022, we questioned why this participant?s parents were authorized for services, and the Agency responded, ?This was done in error. There has been confusion if POA?s are legally responsible or not.? Service authorizations for the participant?s mother ended on January 23, 2022, and the father was removed as a POA on January 28, 2022, in order to continue providing services. Federal payment errors for the sample tested were $37. The total Federal sample tested was $46,051, and total CDD payments for the fiscal year was $199,690,276. The dollar error rate for the sample was 0.08% ($37/$46,051), which estimates potential dollars at risk for fiscal year 2021 to be $159,752 (dollar error rate multiplied by population). Cause: Procedures were not adequate to prevent and/or detect errors. Effect: Increased risk for unallowable charges and noncompliance with regulations. Recommendation: We recommend the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: Agrees

Program: AL 93.778 ? Medical Assistance Program; AL 93.767 ? Children?s Health Insurance Program (CHIP) ? Special Tests and Provisions Grant Number & Year: All open, including #2105NE5MAP, FFY 2021; #2005NE5021, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR ? 438.3(m) (October 1, 2020), ?The contract must require MCOs [managed care organizations], PIHPs [prepaid inpatient health plans], and PAHPs [prepaid ambulatory health plans] to submit audited financial reports specific to the Medicaid contract on an annual basis. The audit must be conducted in accordance with generally accepted accounting principles and generally accepted auditing standards.? 42 CFR ? 438.602(e) states, ?The State must periodically, but no less frequently than once every 3 years, conduct, or contract for the conduct of, an independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by, or on behalf of, each MCO, PIHP or PAHP.? 42 CFR ? 438.602(g) directs this audit to be posted on the State?s website. A good internal control plan requires policies and procedures to ensure that mandatory financial audits are completed timely and in accordance with Federal regulations. Condition: The Agency does not have adequate procedures to ensure that required managed care financial audits are completed timely and in accordance with Federal regulations. The MCO-audited financial reports for the year ended December 31, 2020, were not conducted in accordance with generally accepted accounting principles (GAAP). The required periodic audit of the MCOs have not been conducted and posted on the Agency?s website. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: UnitedHealthcare of the Midlands, Inc., (UHC) did not have audited financial reports on file. UHC submitted financial statements based on the ?basis of accounting practices prescribed or permitted by the Department.? This is not in accordance with GAAP, and there was no independent auditor?s report opining on the fair presentation of the financials. Nebraska Total Care, Inc., and Community Care Health Plan of Nebraska, Inc., have audits performed in accordance with generally accepted auditing standards; however, the financial statements were not in accordance with GAAP. The financial statements were prepared using ?accounting practices prescribed or permitted by the Nebraska Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles.? The Department of Insurance has adopted the Statement of Statutory Accounting Principles (SSAP) found in the National Association of Insurance Commissioners? (NAIC) manual. The required periodic independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by or on behalf of each MCO, PIHP, or PAHP has not been conducted. As of October 6, 2021, the Agency was still in the procurement phase for an outside audit vendor. Payments to MCOs during the fiscal year ended June 30, 2021, totaled over $1.7 billion in Federal and State funds. Cause: The Agency has been unable to procure an outside vendor to complete the audit. The MCO-audited financial reports are completed for the Nebraska Department of Insurance, which does not require the audit to be conducted in accordance with GAAP. Effect: When the financial audits completed by the MCOs are not conducted according to GAAP, and the independent audit of the MCOs is not completed, the Agency is not in compliance with Federal regulations, and there is an increased risk for fraud or errors. Recommendation: We recommend the Agency require the MCO financial audits to be conducted in accordance with GAAP. We further recommend the Agency complete the procurement process for the outside audit vendor and ensure the required audit of the accuracy, truthfulness, and completeness of the encounter and financial data of the MCOs is completed timely. Management Response: Agrees

Program: AL 17.225 ? Unemployment Insurance (UI) ? Federal; AL 17.225 ? COVID19 ? Unemployment Insurance ? Federal; AL 17.225 ? Unemployment Insurance ? State; AL 97.050 ? Presidential Declared Disaster Assistance to Individuals and Households ? Other Needs ? Allowability & Eligibility Grant Number & Year: FFY 2020 and FFY 2021 Federal Grantor Agency: U.S. Department of Labor; U.S. Department of Homeland Security Repeat Finding: 2020-060, 2020-061 Questioned Costs: $794,065 known (17.225 ? COVID19 ? UI ? PEUC Federal, $68,287; 17.225 ? COVID19 ? UI ? PUA Federal, $113,489; 17.225 ? COVID ? UI ? FPUC Federal, $337,043; 17.225 ? UI ? State, $205,046; 97.050, $70,200) Statistical Sample: No Summary: Audit Finding 2021-016, included in Part II of this report, relates to both the financial statements and Federal awards. The APA performed a random sample of benefit payments and tested payments to State employees, inmates, deceased claimants, individuals with high wages, individuals under 16 years of age, and other payments. Our procedures revealed adjudication issues, PUA issues, and improper payments to claimants, among other items. The APA randomly selected 60 claimant benefit payments. The total sample tested was $32,321, and questioned costs for payments tested were $17,412. Total benefit payments for the fiscal year ended June 30, 2021, were $633,184,621. Based on the sample tested, the dollar error rate for the sample was 53.87% ($17,412/$32,321), which estimates the potential dollars at risk for fiscal year 2021 to be $341,096,555 (dollar error rate multiplied by population). We also noted $776,653 of questioned costs for fiscal year 2021 during other testing procedures. We noted numerous issues related to: ? Ineligible payments to inmates. ? Payments to deceased claimants. ? Improper unemployment benefits paid to State employees. ? Improper payments to individuals under the age of 16. ? Adjudications and investigations not completed in a timely manner. ? Pandemic Unemployment Assistance (PUA) self-employment verifications and identity verifications not complete. ? Unreasonable Short-Time Compensation payments and claimants with excessive wages. ? Untimely resolution to bank account fraud investigations. ? Duplicate benefit payments. ? Inaccurate Social Security numbers. ? Improper employer charges. Recommendation: We recommend the Agency implement procedures to prevent the payment of improper unemployment compensation benefits. Those same procedures should also ensure compliance with State and Federal requirements, ensuring the following: 1) procedures are improved for identifying incarcerated individuals, claimants who are deceased, and identifying and assessing whether State employees are eligible for UI benefits; 2) employer responses to requests for separation information are adjudicated properly and followed up on; 3) investigations are created properly and completed timely; 4) claimants are eligible and paid from the correct program; 5) benefit overpayments are established and recouped timely; and 6) verification of claimants? identity and employment or self-employment is performed properly and in a timely manner. We also recommend reviewing STC agreements to ensure that program objectives are met, and the employer is compliant with the agreement. Lastly, we recommend the Department implement procedures to ensure that system records, including claimant SSNs, are accurate, and employers are charged or not charged properly. Management Response: See Audit Finding 2021-016

Program: AL 17.225 ? Unemployment Insurance ? Admin; AL 17.225 ? COVID19 ? Unemployment Insurance ? Admin ? Allowability Grant Number & Year: UI-35660-21-55-A-31, FFY2021; EUISSA, grant period 3/18/2020 to 6/30/2022; and UI-34727-20-55-A-31, grant period 4/20/2020 to 6/30/2022. Federal Grantor Agency: U.S. Department of Labor Criteria: 2 CFR ? 200.403 (January 1, 2021) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.403(d) also requires that costs: Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. 2 CFR ? 200.413(a) (January 1, 2021) states, in part, the following: Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs. Good internal controls require adequate supporting documentation be maintained on file, and contract monitoring procedures be in place to ensure Federal funds spent are reasonable and proper. Condition: Due to the COVID pandemic, the Agency entered into several contracts for administrative assistance to handle the influx of UI claims. We noted that the Agency did not obtain or review adequate supporting documentation to ensure the propriety of the payments for those services. Repeat Finding: No Questioned Costs: $13,857 known (UI-35660-21-55-A-31, $13,370; EUISSA, $120; UI-34727-20-55-A-31, $367) Statistical Sample: No Context: Nelnet, Inc. The Agency contracted with Nelnet, Inc. (Nelnet) to provide staffing services to assist in processing the increased number of UI claims. Payments to Nelnet totaled $10,924,480 for the fiscal year ended June 30, 2021. The contract required each invoice to represent actual hours of services provided by Nelnet. After an inquiry with Nelnet, however, we learned that billings were based upon the number of associates, rather than the actual hours worked. Also, per discussion with staff, the Agency did not request, receive, or review supporting documentation, such as timesheets, to verify that the amount paid to Nelnet was accurate. The agreement between the Agency and Nelnet states the following, in relevant part: Each bi-weekly invoice will represent actual hours of services provided to NDOL by NELNET during the two-week time period covered by the invoice . . . . NDOL will be billed for the actual number of hours, up to forty (40) hours per week per individual, for the actual number of individuals, up to two hundred (200) individuals per week. We reviewed two payments to Nelnet and noted the following: ? The first payment tested was for work performed from January 1, 2021, through January 15, 2021, totaling $556,640. We requested five timesheets for workers, representing $7,000 of the payment. One timesheet reviewed contained leave hours, which were included in the invoice. This resulted in a $280 overpayment. ? The second payment tested was for work performed from January 18, 2021, through January 29, 2021, totaling $504,000. We requested five timesheets for workers, representing $6,160 of the payment. Two of the five timesheets contained leave hours, which were included in the invoice. This resulted in a $435 overpayment. We reviewed timesheets, totaling $13,160, and noted overpayments of $715, a 5.4% error rate. As the Agency was not reviewing timesheets, it is likely that additional significant errors could have occurred. North End Teleservices, LLC The Agency contracted with North End Teleservices, LLC (NET) to provide data entry services and to answer UI questions from employers and applicants. Payments to NET totaled $6,153,167 for the fiscal year ended June 30, 2021. The contract rate was $30 per hour. The contract between the Agency and NET states the following, in relevant part: Since invoices may be submitted by NET at the start of a Service Period, following the first Invoice Date, NET must submit supporting documentation of actual hours of service performed during the previous Service Period. In the event of a discrepancy between the hours of services and the invoiced amount, NDOL may adjust subsequent payments accordingly, and may withhold and/or adjust the final payment under this Agreement until all hours of services are reconciled (subject to the maximum invoice amount and maximum expenditures under this Agreement). Supporting documentation must include, but is not limited to, the position titles and reference number (which are specific to individuals and traceab1e) that performed services during the applicable Service Period, and actual hours worked by such individuals. The invoices included full-time equivalent (FTE) identification (ID) reference numbers, number of hours by FTE ID, and hourly rate; however, timesheets to support the number of hours were not provided. The Agency did not request, receive, or review supporting documentation, such as timesheets, to verify the accuracy of the hours billed. We requested five timesheets for workers that were included in the payment for services provided from March 16, 2021, through March 31, 2021, for $175,975. The five timesheets represented 413 hours of the invoice. We noted that one timesheet was underbilled by 7 hours and another timesheet was overbilled by 11 hours, resulting in 4 hours, or $120, overbilled. As the Agency was not reviewing timesheets, it is likely that additional errors could have occurred. Protiviti Government Services, Inc. The Benefit Payment Control (BPC) unit is responsible for the detection, investigation, recovery, and prosecution relating to UI overpayments. The Agency contracted with Protiviti Government Services, Inc. (Protiviti) to provide additional staffing for the BPC unit. Payments to Protiviti totaled $1,653,126 for the fiscal year ended June 30, 2021. The agreement between the Agency and Protiviti states the following, in relevant part: D. Each monthly invoice must include actual hours of services provided to NDOL by Contractor and actual numbers of Support Staff during the month covered by the invoice. * * * * 3. NDOL is not responsible for payment of any holiday hours/holiday pay. As stated in the SOW, any overtime (hours in excess of forty (40) hours per week for an individual, must be requested by NDOL, in writing, and/or approved by NDOL, in writing (e-mail request or approval from NDOL?s designated POC is acceptable). 4. Contractor uses a timekeeping system (TCast), and this will be system of record for tracking hours for the purposes of billing and invoices. Contractor will provide NDOL with a weekly report of number of Support Staff that provided services, and number of hours per Support Staff. NDOL agrees to notify Contractor of any concern/perceived discrepancy in time reported as soon as reasonably possible. The invoices included staff names, number of hours by each, and hourly rate; however, timesheets to support the number of hours were not provided. The Agency did not request, receive, or review supporting documentation, such as timesheets, to verify that the hours billed were accurate, and no holiday or unapproved overtime hours were paid. We requested five timesheets for workers included in the payment for February 2021 services provided. The payment tested totaled $364,755, and the timesheets tested represented $74,282 of that payment. The APA noted that one individual was overpaid $367. As the Agency was not reviewing timesheets, it is likely that additional errors could have occurred. OCIO The Department of Administrative Services Office of the Chief Information Officer (OCIO) provides technology services to State agencies. We selected five work orders from the May 2021 payment to the OCIO. One of these work orders was related to running the data warehouse and was charged to various business units based on communications between the Agency and OCIO staff; however, there was no supporting documentation to ensure that the percentages were accurate or in accordance with Federal cost principles. Payment for the work order was for $15,819, of which $12,655, or 80%, was charged to the UI Administration grant, and $3,164, or 20%, was charged to other programs. Cause: The Agency had an increased amount of UI claims due to the pandemic, so the Agency prioritized processing claims. Effect: Without adequate contract monitoring, there is an increased risk for errors and overpayments to occur. Without adequate documentation to support the allocation of costs, there is an increased risk for misuse of funds. Recommendation: We recommend the Agency implement procedures to ensure adequate supporting documentation is maintained, contract payments are proper, and Federal requirements are followed. Management Response: The data warehouse monthly billing with the OCIO is split across a predefined list of applicable cost centers and business units each month. Charged amounts by the contractor are split based on project assignment and additional ad-hoc requests that are reported by the contractor. The Department was in the midst of a pandemic with record breaking unemployment numbers and staff was not available to conduct an audit of the number of hours billed. The Department relied upon information provided and the fact that all requested work was completed to determine hours were reasonable.

Program: AL 17.225 ? Unemployment Insurance ? Admin ? Special Tests & Provisions Grant Number & Year: UI-32853-19-60-A-31, grant period 1/1/2019 to 6/30/2021; UI-34507-20-60-A-31, grant period 1/1/2020 to 9/30/2021; UI-36202-21-60-A-31, grant period 1/1/2021 to 9/30/2022 Federal Grantor Agency: U.S. Department of Labor Criteria: Unemployment Insurance Program Letter (UIPL) 8-20 (January 30, 2020), Section 7(b), from the U.S. Department of Labor (USDOL) states the following, in relevant part: Required Engagement of UI Staff ? UI staff must be engaged in RESEA planning, administration, and oversight, as well as providing all appropriate staff training on UC eligibility requirements. UI staff must be available and involved in the RESEA functions, including reporting, although it may not require a full-time position. Program staff delivering RESEAs must be qualified and have sufficient training from UI staff to conduct a thorough eligibility review and detect eligibility issues requiring referral to the UI agency for adjudication. Further, states must have UI staff participation to ensure accurate data are provided in the RESEA-required reports. Each calendar quarter, prior to submission, the reports must be reviewed for accuracy by a UI staff member, in addition to being reviewed by the RESEA program lead (if a different staff member). Additional information about required RESEA reports is provided in Section 7(f) of this UIPL. Unemployment Insurance Program Letter (UIPL) 13-21 (January 19, 2021), Section 8, from the USDOL also states the following, in relevant part: b. Required Engagement of UI Staff ? UI staff must be engaged in the administration of the RESEA program. This includes, but is not limited to: 1 Participating in the RESEA planning, administration, and oversight; . . . 3. Ensuring accurate data are provided in the RESEA-required reports (refer to Section 8.f. of this UIPL)[.] UIPL 13-21 also goes on to state, under section 8.f., the following: Each calendar quarter, prior to submission, the reports must be reviewed for accuracy by a UI staff member, in addition to being reviewed by the RESEA program lead (if a different staff member). The various grant award agreements to which the State agreed state the following: In performing its responsibilities under this grant agreement, the awardee hereby certifies and assures that it will fully comply with all applicable Statute(s), and the following regulations and cost principles, including any subsequent amendments: Uniform Administrative Requirements, Cost Principles, and Audit Requirements: 2 CFR Part 200; Uniform Administrative Requirements, Cost Principles, and Audit Requirements[.] Per 2 CFR ? 200.303(a) (January 1, 2021), the non-Federal entity must do the following: 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 ? 200.508(d) (January 1, 2021) requires the auditee to do the following: Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. Per 2 CFR ? 200.514(c)(3) (January 1, 2021), we, as the auditors, must test controls. AICPA auditing standards require that, in designing and performing tests of controls, the auditor should obtain more persuasive audit evidence the greater the reliance the auditor places on the effectiveness of a control, and inquiry alone is not sufficient to test the operating effectiveness of controls. Condition: Documentation was not maintained to verify that Unemployment Insurance staff were reviewing the quarterly Reemployment Services and Eligibility Assessments (RESEA) performance reports prior to submission for all quarters of the fiscal year. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency had a process for the UI Director, Director of Reemployment Services, UI Benefits Administrator, and the Reemployment Services Administrator to review quarterly RESEA performance reports prior to submission; however, UI staff did not document or provide support of that review for all reports. The Agency provided the APA with its internal review process, which consisted of a screen shot of an email showing the review of such reports for the quarter ended December 31, 2020. This process, by the Agency?s own admission, was not implemented until January 2021, and no documentation was provided to show that the March 31, 2021, and June 30, 2021, quarter end reports were reviewed. As noted above, Federal regulations clearly require a review of reports before submission, but the Agency disagreed that documentation of such review was required. Without such documentation, there was no evidence that such review occurred, and the APA could not determine that the Agency was in compliance with Federal requirements. Cause: The Agency?s procedures did not include documenting the review of the RESEA performance reports. Additionally, the Agency disagreed that formal documentation was needed. Per the Agency?s Director of Reemployment Services: NDOL respectfully disagrees with the APA?s position that the 2021 Compliance Supplement, Special Test #5, authorizes the APA to request formal documentation of an internal review process as part of the control test related to UI Reemployment Programs: Worker Profiling and Reemployment Services (WPRS) and Reemployment Services and Eligibility Assessments (RESEA). The Department believes it is appropriate for the APA to review NDOL?s procedures to ensure UI engagement during the reporting process is compliant with Section 7(b) of UIPL 8-20. NDOL has provided the APA with its internal review process which is compliant with the provisions of UIPL 8-20. This process was implemented by the Department in January 2021 upon receipt of the APA?s 2020 audit findings. At a fundamental level, the Department maintains that there is no requirement to formally document UI engagement throughout the review process of RESEA performance reporting . . . . Effect: When there is no documentation to support that RESEA reports are reviewed, there is an increased risk that inaccurate reports will be submitted. Additionally, there is no evidence the Agency complied with Federal requirements to review the reports prior to submission. Recommendation: We recommend the Agency implement a documented review of the RESEA performance reports by UI Staff to demonstrate such review was completed prior to the submission of the reports. Management Response: The data for the report is prepared by RESEA staff and submitted to UI staff. UI staff then reviews and submits the data. This process complies with UIPL 13-21. Formal documentation of this process is not required by USDOL. Nonetheless, the Department has implemented processes to formally document UI engagement into its RESEA reporting procedures. APA Response: When documentation is not maintained to support that Unemployment Insurance staff reviewed the quarterly RESEA performance reports prior to submission, the APA cannot verify that the Agency complied with Federal regulations.

Program: AL 17.225 ? COVID19 ? Unemployment Insurance ? Federal; AL 17.225 ? Unemployment Insurance ? State ? Special Tests & Provisions Grant Number & Year: FFY 2020 and FFY 2021 Federal Grantor Agency: U.S. Department of Labor Criteria: Per Unemployment Insurance Program Letter (UIPL) 17-20 (April 10, 2020), PEUC is a temporary program that provides up to 13 weeks of 100% Federally-funded benefits to individuals who: ? have exhausted all rights to regular compensation under state law or Federal law with respect to a benefit year that ended on or after July 1, 2019; ? have no rights to regular compensation with respect to a week under any other state UC law or Federal UC law, or to compensation under any other Federal law; ? are not receiving compensation with respect to a week under the UC law of Canada; and ? are able to work, available to work, and actively seeking work, while recognizing that states must provide flexibility in meeting the ?actively seeking work? requirement if individuals are unable to search for work because of COVID-19, including because of illness, quarantine, or movement restriction. Title 219 NAC 19.007(A)(i) states the following: For each week that an STC employer has an active short-time compensation plan, the STC employer shall submit a certification of hours worked by employees covered by an approved STC plan through the Department of Labor?s website in the form and manner directed by the Commissioner for each employee covered by the employer?s approved STC plan on a weekly basis. A good internal control plan requires procedures to review overpayments to ensure they were established properly, including maintaining documentation of the source of information, such as weekly certifications from employers, used in establishing overpayments. Condition: Two of 25 overpayments tested did not have adequate supporting documentation for the establishment of the overpayment. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: States are required to identify and handle UI overpayments properly, including the assessment of penalties, and not relieve employers of charges when their untimely or inaccurate responses cause improper payments. During the fiscal year, 40,182 overpayment cases were established, totaling $51,204,168. We tested 25 established overpayments, totaling $37,780. For two of the established overpayments, we noted that supporting documentation was not adequate to determine that the overpayment was established properly. ? One overpayment was established in October 2020 for a Pandemic Emergency Unemployment Compensation (PEUC) claim. The Agency had determined that the claimant was ineligible for PEUC because her last employment ended in August 2019. However, the claimant had exhausted all regular unemployment compensation with a benefit year end after July 1, 2019, and the claimant was eligible. After our inquiry, the Director of UI agreed that the overpayment was created in error as the claimant was eligible based on the parent regular UI claim. The total amount of FPUC overpayment tested was $3,600. A related overpayment amount of $5,382 was also established in error for the PEUC amount of the benefits paid to the claimant. ? One overpayment was established in July 2020 for a Short-Time Compensation (STC) regular UI claim. The Agency provided a spreadsheet to support that the claimant worked full-time for the week ending July 18, 2020; therefore, the payment for that week should not have been made. However, the spreadsheet was prepared by a former UI Program Supervisor, and the Agency could not locate any documentation to support that the information was provided by the employer or that the spreadsheet was accurate. The amount of the FPUC overpayment tested was $600. The related overpayment amount for the STC regular UI claim was $352. The total dollar noncompliance noted in the sample tested was $4,200. We also noted $5,734 in related overpayments established in error. Cause: The PEUC program was new in March 2020, and Agency staff were still unfamiliar with the requirements. Additionally, the Agency did not maintain supporting emails or other documentation to support the source of information used in determining an overpayment. Effect: Without adequate procedures and supporting documentation maintained for the establishment of overpayments, there is an increased risk of noncompliance with Federal and State regulation. There is also an increased risk that eligible claimants will be assessed an overpayment, and benefits for which they are eligible will be recouped inappropriately. Recommendation: We recommend the Agency improve procedures for ensuring that overpayments are reviewed prior to establishment to verify that they are both proper and adequately supported. Management Response: The PEUC program was a new program passed in March 2020. The program was temporary in nature and went through multiple revisions. The individual working the PEUC claim made an error. The STC overpayment was correctly determined based upon the best available information.

Program: AL 97.050 ? Presidential Declared Disaster Assistance to Individuals and Households ? Other Needs ? Reporting Grant Number & Year: 4521DRNESPLW, grant period 7/25/2020 to 9/27/2021 Federal Grantor Agency: U.S. Department of Homeland Security Criteria: 2 CFR ? 200.302(a) (January 1, 2021) provides the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. A good internal control plan requires procedures to ensure that data reported on financial reports is accurate, including ensuring all applicable data elements and accounts are included properly. Condition: One SF-425 report tested was not complete and accurate. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the SF-425 reports for quarters ended September 30, 2020, and March 31, 2021. The quarter ended September 30, 2020, report was not complete and accurate, as the Agency included only administrative expenditures in the amounts reported and did not include Lost Wages Assistance (LWA) benefit payments or related receipts. The table below shows the errors noted: See Schedule of Findings and Questioned Costs for chart/table. The quarter ending March 31, 2021, overstated the amount of the recipient share of expenditures that was required and spent. The table below shows the errors noted: See Schedule of Findings and Questioned Costs for chart/table. Cause: The LWA program was a new program, and staff were unfamiliar with reporting requirements. Effect: Increased risk of information being reported incorrectly, which could result in Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure that reports are completed properly and include all applicable payments and accounts. Management Response: LWA was a temporary program that had eligibility for a very short-time frame. This program was created through Executive Order of the President and guidance on operation evolved over time. Weekly eligibility ended with benefit week ending September 6, 2020. The report is a cumulative report and all APA cited errors have been corrected.

Program: AL 12.401 ? National Guard Military Operations and Maintenance (O&M) Projects ? Cash Management Grant Number & Year: Appendices ?W91243-20-2-1001, FFY 2020; W91243-21-2-1024, FFY 2021 Federal Grantor Agency: U.S. Department of Defense Criteria: Title 2 CFR ? 200.305(a) (January 1, 2021) states, in part, ?For states, payments are governed by Treasury-State CMIA agreements and default procedures codified at 31 CFR Part 205 . . . .? Title 31 CFR Part 205 (July 1, 2020) implements the Cash Management Improvement Act (CMIA) and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska and Secretary of the Treasury, U.S. Department of the Treasury, for the period July 1, 2020, through June 30, 2021, requires the program to request Federal funds in accordance with the pre-issuance funding technique by which funds are to be requested and deposited in a State account not more than three business days prior to the disbursement of funds. Master Cooperative Agreement (October 2020), Article V ? Payment, Section 503, Payment by Advance Method, states, ?The advance payment method shall be according to procedures established in current PARC policy, NGR 5-1 Chapter 11 or successor CNGB I & M, and 2 CFR ?200.305.? National Guard Regulation (NGR) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, ?[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).? A good internal control plan would include procedures to ensure that the time between the drawdown of Federal funds and disbursements are minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard Regulations. Title 2 CFR ? 200.511(b) (January 1, 2021) states in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding's recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule must provide an explanation. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings lists the status as complete. Repeat Finding: 2020-062 Questioned Costs: None Statistical Sample: No Context: We noted that the timing of two of five drawdowns tested was not in compliance with NGR 5-1. Funds were expended from 57 and 66 calendar days after the drawdown of Federal funds, which exceeded the 45-day maximum per NGR 5-1. We also noted that three of five drawdowns tested were not in compliance with the applicable funding technique outlined in the CMIA Agreement. Funds were expended from 17 to 47 business days after the drawdown of Federal funds, which exceeded the three business day maximum, as outlined in the CMIA Agreement. A similar finding was noted during the previous audit. In its Corrective Action Plan for the prior-year finding, the Agency stated it would work with the Department of Administrative Services (DAS) to modify the CMIA agreement; however, the Agency noted that, due to other operational priorities, it did not follow-up with DAS to seek the exception. Cause: Funds were drawn down in order to have adequate money available at the end of the State and Federal fiscal years. The Agency?s policy was to follow the NGR requirements of 45 days rather than the CMIA Agreement requirement of three business days. Effect: The Agency is not in compliance with Federal cash management requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard Regulations. Management Response: The Military Department acknowledges the finding. We also note that the requirement per the CMIA Agreement which requires the program to request Federal funds in accordance with the pre-issuance funding technique and that such funds are to be requested and deposited in a State account not more than three business days prior to the disbursement of funds is not a reasonable standard for the National Guard Military Operations and Maintenance Program. The program must forecast expenditures in order to drawdown adequate federal funds and yet in some cases, utility costs and building repair and maintenance costs, for example, exact amounts are not known at the time of request for funding. Thus, monthly Cash Flow documents estimating anticipated expenditures are used in order to have adequate funds available to meet the State Prompt Payment Act standard of 45 days. Using the 45-day standard as outlines in National Guard Regulation 5-1 is a more appropriate standard for the drawdown and disbursement of funds.

Program: AL 21.019 ? COVID-19 Coronavirus Relief Fund (CRF) ? Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: 42 U.S.C. 801(d)(1) (2020) states, in relevant part, that a State, Tribal government, and unit of local government shall use funds from CRF to cover only costs that are ?necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19).? Coronavirus Relief Fund for States, Tribal Governments, and Certain Eligible Local Governments, 86 FR 4182, 4186 (January 15, 2021) states, ?Recipients may not apply their indirect costs rates to payments received from the Fund.? A good internal control plan requires procedures to ensure costs charged to Federal awards as advances are properly expended in accordance with award requirements. Additionally, a good internal control plan requires that adequate supporting documentation be maintained to support that expenditures are in accordance with Federal regulations. Condition: The Agency did not have adequate supporting documentation on file for 5 of 40 random aid payments tested. Repeat Finding: 2020-063 Questioned Costs: $143,581 known Statistical Sample: No Context: We randomly selected 40 aid payments to test and noted the following: Health Departments One payment selected was an advance to a public health department that received $1,490,561 as of June 30, 2021. Costs were required to be incurred by December 31, 2021. The Agency provided the APA with five expense reports submitted by the public health department; however, we noted that expenses were duplicated on two of the expense reports. The APA brought this to the Agency?s attention on February 24, 2022. On March 17, 2022, the Agency responded that one of the expense reports was duplicative and should be discarded. We informed the Agency that, as of March 22, 2022, the health department had reported only $1,383,374 in allowable CRF expenses (excluding unallowable indirect costs). We consider the $107,187 difference between the amount of funds the health department received through June 30, 2021, and the total reported allowable expenditures to be a finding for the fiscal year ended June 30, 2021. On April 12, 2022, the Agency stated that over the last few weeks it had worked with the public health department, which had agreed to reimburse the CRF for unspent and unsupported CRF funds. Local Governments Seven of the 40 aid payments we selected for testing were payments to local governments. The Agency created the Local Government Coronavirus Relief Program to make payments to local counties, cities, municipalities, villages, and public utility districts for eligible costs related to COVID-19 on a reimbursement basis. The local governments submitted reimbursement requests for presumptive payroll expenses for public safety employees for the period March 1, 2020, to May 31, 2020. Reimbursable wages were determined by taking the number of regular hours worked from March 1, 2020, to May 31, 2020, and multiplying by the employees? hourly rates. Reimbursement requests were not to include costs that were reimbursed by FEMA, which included overtime. For fringe benefits, each local government was to calculate the percentage that the local government contributed to each employee based on the employees? annual salaries. Fringe benefits included holiday leave, vacation leave, sick leave, FICA taxes, unemployment insurance, worker?s compensation, retirement, health benefits, life insurance, dental insurance, and other benefits. The Agency contracted with Deloitte & Touche LLP (Deloitte) to review the reimbursement requests for the program. For the payments we tested, Deloitte reviewed 10% of the employees that were included in the reimbursement request and made adjustments for the 10% reviewed. We reviewed the same employees that Deloitte reviewed and noted variances on five of seven payments tested, ranging from an underpayment of $9,119 to an overpayment of $5,842. We noted the following issues when reviewing these payments: ? The number of regular hours was not correctly determined for all employees. There were instances in which the Agency paid for more hours than the number of regular hours worked. There were also instances in which the Agency paid for fewer regular hours than were eligible. ? The Agency did not make any changes to the fringe benefit percentages submitted by the local governments. However, we noted the following issues with fringe benefits: o The local governments were reimbursed for all sick leave hours that the employees earned, rather than sick leave paid. Per the local governments? employee handbooks, employees were not entitled to 100% sick leave payout at termination. Therefore, it does not appear appropriate that 100% of the sick leave hours earned should have been reimbursed. o For numerous employees, we noted that the fringe benefit percentage was not calculated correctly due to either the benefit amount not being correct or the annual pay not being correct. We calculated both larger and smaller fringe benefit percentages. Payments to local governments totaled $113,878,918. We tested $561,497 and noted questioned costs of $9,181. The dollar error rate for local governments was 1.64% ($9,181/$561,497). Summary of Random Sample Test Results Our random sample testing of 40 aid payments, totaling $12,915,310, noted questioned costs of $9,181. Aid payments during the fiscal year totaled $973,271,483, of which $735,665,047 was included in the random sample population. The dollar error rate for the sample was 0.07% ($9,181/$12,915,310), which estimated potential dollars at risk for fiscal year 2021 to be $514,966 (dollar error rate multiplied by population). Hotel Lodging We also selected a payment to Fairfield Inn ? Fremont in July 2020. The hotel was intended to be utilized as a quarantine site for individuals exposed to COVID-19. The Agency executed a contract with the hotel that allowed it to utilize the entire hotel for purposes of lodging individuals, including members of the public, as determined by the Agency. The contract included a termination clause that allowed the Agency to terminate the agreement with 48 hours? written notice and receive a prorated refund. The payment included $134,400 that was charged at a bulk rate (regardless of occupancy) for rental of the entire hotel (including 64 rooms) for 30 days. Support provided reflects room occupancy ranging from two to seven rooms during this time period. Despite this low utilization, the Agency did not exercise the termination clause in the contract. We consider the $134,400 to be questioned costs. Cause: The Agency did not adequately review payments to ensure that all costs were allowable for the program. The State contracted hotels for use as quarantine/isolation sites. Per the Agency, securing facilities to support sites that were readily available to meet diverse population requirements provided the flexibility to address unknown and not easily predictable capacity requirements associated with a rapid onset of pandemic disease progression. Effect: Without adequate monitoring procedures, there is an increased risk for errors or fraud. Recommendation: We recommend the Agency implement procedures to ensure charges to Federal funds are properly expended. Management Response: Health Departments: The Military Department does not agree with this finding. The Health Department program was structured to provide advance payments with use of those funds for expenses incurred by December 31, 2021. The program does not require subrecipients to have expended received funds by June 30, 2021, the State Fiscal Year under Single Audit. They were allowed to submit their expenditures throughout the period of performance. The Military Department executed its subrecipient monitoring procedures to obtain and review all subrecipient expenditures made through December 31, 2021. Through this process, the State identified $427,215 of unspent and unsupported CRF Funds (of which the $107,187 was a part) and requested reimbursement of all unsupported CRF Funds on 4/6/2022. Reimbursement of the unspent funds was received by the State on 4/18/2022. The returned funds were reallocated to other CRF permissible purposes as allowed per U.S. Treasury regulations. Local Governments: The Military Department does not agree with this finding. At the time of fund distribution, the U.S. Treasury did not publish guidance on which rule sets to follow. To be consistent with other federal program dollars used to cover salary related costs for the federally declared Coronavirus Disaster, the State used the FEMA required methodology to calculate the reasonableness of fringe benefit costs by state agencies and local governments. The FEMA methodology is consistent with 2 CFR requirements; however, it does not get into the specific accounting treatments of the States or Local Governments utilized depending on their individual basis of accounting. Rather, FEMA applies a consistent methodology for its State Grantees to utilize when evaluating the reasonableness of local governments? fringe benefits to expedite federal funding from the States to the Local Governments during federally declared disasters. The difference in methodology may result in a variance in the calculated amount, but given its expeditious nature, efficiency, and cost benefit of the preparer, reviewer, and multiple layers of auditors, is widely accepted by FEMA and other granting agencies. Hotel Lodging: The Nebraska Emergency Management Act, Nebraska State Statute 81-829.40; Section 6, i; authorizes the Governor to make provisions for the availability and use of temporary housing. The Centers for Disease Control (CDC) strongly recommended states take measures to ensure quarantine and isolation facilities were available to public safety personnel, medical practitioners, and other groups deemed essential to protect the integrity of services provided by healthcare, law enforcement, emergency medical services, and fire services. Congress appropriated funds through the Cares Act to address response and recovery measures associated with the pandemic. DHHS was assigned the responsibility by the Governor to identify appropriate facilities needed to address a diverse set of requirements for this purpose. During the early stages of the pandemic the meatpacking industry in Nebraska and other surrounding states experienced significant increases in positivity rates. Communities with meatpacking facilities experienced inordinately high disease outbreak due to the work environment associated with the industry. In addition, a majority of workers in these facilities live in multi-generational housing and become prone to contracting infectious disease due to tight living conditions and susceptible to rapid transmission rates between family members. Smithfield Food operates a meatpacking facility south of Crete, Nebraska. For these reasons, DHHS identified Crete, Nebraska, as one geographical area at high risk for rapid disease outbreak. The decision to secure a motel to accommodate quarantine and isolation requirements was deemed a mission-critical response requirement to prevent rapid and uncontrolled disease outbreak. While use of the facility was limited, the need to retain a facility for this purpose was essential in the event of rapid disease progression. While under-utilized, the necessity to maintain the facility as an option for quarantine and isolation measures was considered essential. Additional facilities were secured by DHHS to address quarantine and isolation requirements in Omaha, Lincoln, and Grand Island. Those facilities were utilized primarily to support the quarantine requirements associated with public safety and healthcare workers. These measures supported efforts to protect the integrity and delivery of public safety services in the three largest communities in Nebraska. In addition, the goal of the pandemic response effort was to minimize disease exposure and transmission rates of healthcare practitioners. This was done to preserve hospital capacity needed for COVID-19 patients in areas of the state that could provide intensive care services and ventilators. These communities possessed hospital infrastructure and services which are limited, or non-existent in other rural areas of the state. Quarantine and isolation services were considered an emergency protective measure necessary to protect workers and maintain hospital capacity. APA Response: As stated in the finding, the APA noted that the health department did not fully expend the CRF funds it received and determined one expenditure report submitted was duplicative. Only after the APA brought these concerns to the Agency?s attention was reimbursement sought from the health department. CRF funds are to be used only to cover costs that are necessary expenditures. Accrued sick leave that has not been paid is not an actual cost and, therefore, cannot be considered a necessary expenditure. Although the employees did earn sick leave, nothing would be paid out on the amounts accrued unless those individuals were to become ill and use the leave. The APA understands the use of hotels as isolation centers for healthcare workers and first responders and has no objection whatsoever to implementation, per CDC guidelines, of an appropriate COVID-19 response. Pursuant to the contract with the hotel, however, the Agency expended $134,400 to rent an entire hotel (including 64 rooms) for 30 days. Support provided reflects utilization ranging from two to seven rooms. Despite this low utilization rate, the Agency failed to exercise its option to terminate the agreement and receive a prorated refund.

Program: AL 21.019 ? COVID-19 Coronavirus Relief Fund (CRF) ? Subrecipient Monitoring Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR ? 200.332 (January 1, 2021) states, in relevant part, the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. * * * * (ii) Subrecipient?s unique entity identifier; * * * * (iv) Federal Award Date (see the definition of Federal award date in ? 200.1 of this part) of award to the recipient by the Federal agency; * * * * (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; . . . . (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient?s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and (6) Appropriate terms and conditions concerning closeout of the subaward. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that sub-award performance goals are achieved. (Emphasis added.) 42 USC 801(d) (2020) states, in relevant part, that a State, Tribal government, and unit of local government shall use funds from the Coronavirus Fund (CRF) to cover only costs that are ?necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19).? Coronavirus Relief Fund for States, Tribal Governments, and Certain Eligible Local Governments, 86 FR 4182, 4186 (January 15, 2021) states, ?Recipients may not apply their indirect costs rates to payments received from the Fund.? A good internal control plan requires procedures to ensure compliance with Federal and State requirements. A good internal control plan also requires procedures to ensure subrecipients use Federal awards in accordance with Federal requirements. Condition: The Agency did not notify its subrecipients of all the information required by 2 CFR ? 200.332(a). The Agency also did not adequately monitor 16 of 25 subrecipients tested to ensure expenditures were in accordance with Federal requirements. Repeat Finding: No Questioned Costs: $185,793 known Statistical Sample: No Context: During the fiscal year, the Agency paid $199,752,040 to 362 CRF subrecipients. The subrecipients received funds under various CRF programs administered by the Nebraska Emergency Management Association (NEMA), the Department of Health and Human Services (DHHS), and the Department of Economic Development (DED). We noted the following deficiencies. Award Notification We tested 25 subrecipients paid during the fiscal year ended June 30, 2021, including 17 subrecipients administered by NEMA, three subrecipients administered by DHHS, and five subrecipients administered by DED. We noted the following. For the 17 NEMA subrecipients tested, we requested the subaward documentation on January 18, 2022. The documentation NEMA provided was dated after we requested the information and was several months after the subrecipient had received CRF funds. The first notification letter was dated February 1, 2022. Additionally, the award documents did not include the following: ? A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient?s records. ? Appropriate terms and conditions concerning the closeout of the subaward. ? For two subrecipients, the award documents did not include the subrecipients? unique entity identifier. ? For one subrecipient, the amount awarded per the award document was $370,375; however, the amount paid to the subrecipient was $374,124, which was $3,749 more than the award document. For the five DED subrecipients tested, we noted the following was not included in the award documents: ? For all five subrecipients, the Federal award date; the name of the Federal awarding agency; and the Assistance Listing number and name. ? For two subrecipients, the subrecipients? unique entity identifier. ? For one subrecipient, the appropriate terms and conditions concerning the closeout of the subaward. ? For one subrecipient, a requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient?s records. Financial Monitoring We tested post-award subrecipient monitoring for 25 subrecipients and noted the following: Response and Recovery (R&R) Program Monitoring was not adequate for six of the seven R&R subrecipients tested. In addition to financial monitoring by DHHS, the State contracted with Deloitte to complete a subsequent review of the payment process completed by DHHS. It does not appear that the Agency completed any follow up with the subrecipients after receiving feedback from Deloitte. We also noted the following issues: ? Personnel Costs: For five of the seven subrecipients tested, adequate documentation was not on file to support personnel costs. For example, we noted that one payment had no payroll support on file, and one payment included only a QuickBooks summary of amounts paid to employees. The summary did not include hours worked or wages paid for the employees. We also noted that, for four of seven subrecipients tested, no support was reviewed to ensure hours charged to the grant were COVID-19 related. Additionally, we noted that, for four of seven subrecipients, no documentation was reviewed to support how much the employer was paying for fringe benefits and employee-related taxes charged to the award. Total Personnel Costs paid to these five subrecipients was $902,301. ? Non-Personnel Costs: The seven R&R subrecipients tested were reimbursed a total of $1,302,712 in non-personnel costs. Included in this total was $135,194 that one subrecipient claimed for costs such as PPE, safety supplies, cleaning supplies, and technology tools for remote work. This was 45% of the $303,595 total paid to the subrecipient. However, no detailed documentation was obtained to support these costs. ? Emergency Financial Assistance (EFA): Three of the seven R&R Program subrecipients tested were paid EFA to help individuals pay for rent or utilities when the individuals were unable to pay due to the COVID-19 pandemic. For all three subrecipients who provided EFA payments, DHHS did not obtain adequate support to provide assurance that the payments were for allowable costs. Only a summary list of individuals and amounts were obtained from the subrecipients at the time of reimbursement. We sampled three EFA payments made by each subrecipient tested, and DHHS obtained the underlying documentation that the individuals submitted to apply for the EFA funds. We noted that a subrecipient was reimbursed $630 for an EFA payment to an individual who noted in her application that she was not affected by COVID-19. We consider the $630 questioned costs. Total EFA payments made by these three subrecipients was $2,808,631. ? Indirect Costs: Four of the seven R&R Program subrecipients tested charged indirect costs to the program. Per CRF Guidance, indirect costs are not eligible CRF expenses. The indirect costs totaled $142,914, all of which we consider questioned costs. The Agency stated the costs would be moved from the grant to another funding source; however, that journal entry had not been made as of April 12, 2022. The total amount of indirect costs paid to 70 R&R subrecipients was $1,020,154. Workforce Retraining Initiative Program (WRI) The WRI Program was administered by the DED. We tested one WRI subrecipient. The subrecipient received grant funds for scholarships and administrative costs. The Agency?s monitoring of the subrecipient was not adequate for the following reasons: ? The subrecipient was provided $194,992 in scholarship funds, but a performance report provided by the subrecipient reflected only $152,743 being disbursed to eligible students. Following our inquiry, DED stated it would require the subrecipient to return $42,249 in grant funds that were disbursed to ineligible students. We consider the $42,249 questioned costs. ? The Agency did not review scholarship applications of any students awarded scholarships. ? The Notice of Award to the subrecipient stated that the subrecipient was required to submit evidence of all administration grant fund expenses. However, the subrecipient did not submit support for $23,870 in staff and personnel costs claimed as administration expenses. Local Government Subrecipients We tested the subrecipient monitoring completed for 10 local government subrecipients, including the 7 local governments included in our random aid sample and 3 additional local governments. Desk reviews were performed by Deloitte. The subrecipient monitoring was inadequate due to reimbursing all sick leave hours earned rather than used, and other fringe benefits not adequately supported, including health insurance, dental insurance, life insurance, retirement contributions, FICA contributions, and workers compensation. We also noted that Deloitte generally reviewed 10% of subrecipient expenditures; however, for one subrecipient tested, we noted that adjustments were made, but no additional procedures were performed to detect similar additional errors. Cause: The Agency did not directly communicate all required information to the subrecipients. Some of the required information was posted online; however, the Agency could not provide documentation to support that the subrecipients were made aware that this information was available. Additionally, the Agency did not properly identify all the entities as subrecipients at the time the awards were made. The Agency had inadequate subrecipient monitoring procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk of noncompliance with Federal regulations and misuse of funds. Recommendation: We recommend that the Agency implement procedures to improve subrecipient monitoring and ensure compliance with Federal requirements. Management Response: Awards Notification ? NEMA: The Military Department partially does not agree with this finding. At the time of award in 2020, the State published detailed State program guidelines and related Frequently Asked Questions for each of the State?s CRF funded programs through the State?s coronavirus.nebraska.gov website. These guidelines provided detailed information for each grant to include the source of the funds as the U.S. Treasury, the awarding entity as the State of Nebraska, the specific agency administering each program, contact information for the awarding official for the agency, application guidance, eligibility requirements, reporting requirements, and other terms and conditions applicants were required to follow if awarded funding through the program. Each administrating agency issued their specific grant award documents to their program participants within the CRF funding period. While final agreements were sent to all subrecipients in February 2022, which is within the State?s performance period that concludes on September 30, 2022, we do agree formal grant agreements could have been issued subsequent to the release of the U.S. Treasury providing additional guidance on requirements for subrecipients vs. beneficiaries. Awards Notification ? DED: The Military Department acknowledges the finding. Financial Monitoring ? DHHS Response and Recovery: The Military Department does not agree with this finding. The Department of Health and Human Services performed an additional review of the subrecipient that received the $630 EFA payment and determined the applicant was affected by COVID-19. The applicant provided a furlough letter and were determined eligible on this basis. Financial Monitoring ? DED Workforce Retraining Initiative Program: The Military Department acknowledges the finding. Department of Economic Development is seeking the return of $42,249 in grant funds as indicated. Financial Monitoring ? Local Government Subrecipients: The Military Department does not agree with this finding. As previously stated in the response for Local Government subrecipients, the State used the FEMA required methodology to calculate the reasonableness of fringe benefit costs by state agencies and local governments which is consistent with 2 CFR requirements. Additionally, the procedures utilized by the State was to collect and review all supporting documentation of each reimbursement request submitted by a subrecipient. A sample was performed on 10% of the dollars and 10% of the line items for each reimbursement request to test the eligibility of the supporting documentation and validity of the calculations. If errors were greater than 5% of the dollars or line items for each request, the sample was expanded. If additional errors were found in the expanded sample, the entire request was sent back to the subrecipient for correction. Technical assistance was provided to the subrecipients as they reworked the request. No funds were disbursed to a subrecipient until the request was resubmitted and approved. APA Response: The Agency posted award information and program guidelines online, but this information was not communicated directly to subrecipients. 2 CFR ? 200.332 requires that award information be communicated to subrecipients ?at the time of the subaward.? Regarding the questioned $630 EFA payment, the application provided stated that the applicant was not eligible for current CARES funds and should be paid with other funds. Nevertheless, the payment was still made with CRF funds. When the APA inquired regarding this applicant, DHHS responded that the case ?was in error where our grants department should have moved the application to the utility?s regular energy assistance program with Dollar Energy Fund and did not.?

Program: AL 21.019 ? COVID-19 Coronavirus Relief Fund (CRF) ? Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: OIG-CA-20-025, Memorandum for Coronavirus Relief Fund Recipients (July 31, 2020), states, in relevant part: Each prime recipient shall also provide detailed obligation and expenditure information for any contracts and grants awarded, loans issued, transfers made to other government entities, and direct payments made by the prime recipient that are greater than or equal to $50,000 . . . . OIG-CA-20-028R, Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised) (March 2, 2021), states, in relevant part: 5. If the prime recipient distributes funds to an agency or department within the prime recipient?s government, is the agency or department considered the prime recipient or a sub-recipient when funds obligated are $50,000 or more? The agency or department is considered part of the prime recipient as they are all part of the same legal entity that received a direct CRF payment from Treasury. Obligations and expenditures that the agency or department incurs with the CRF proceeds must be collected by and reported in the GrantSolutions portal by the prime recipient as if they were obligated or expended by the prime recipient. 6. If the prime recipient obligates funds to an entity that provides a public service on behalf of the prime recipient but the prime recipient is not financially accountable, is the entity considered the prime recipient or a sub-recipient/beneficiary when funds obligated are $50,000 or more (e.g., discreetly presented component unit, quasi agency, etc.)? The entity is considered a sub-recipient/beneficiary of the prime recipient when funds obligated are $50,000 or more. The prime recipient must report funds obligated to a sub-recipient/beneficiary as obligations of the prime recipient. The prime recipient must report the related expenditures of the sub-recipient/beneficiary, including associated projects and expenditure categories, in the GrantSolutions portal. If the prime recipient obligated less than $50,000 to the sub-recipient/beneficiary, the prime recipient must report its obligations and the related expenditures of the sub-recipient/beneficiary in aggregate in the GrantSolutions portal. * * * * 26. What is a transfer to another government entity? A transfer to another government entity is a disbursement or payment to a government entity that is legally distinct from the prime recipient. Per the Coronavirus Relief Funds Recipient Portal Upload Data Dictionary (11/30/2020), the contract amount and the grant amount to report is the total amount of Coronavirus Relief Fund dollars on the contract/award issued by the prime recipient. Good internal control requires procedures to ensure that data reported is complete and accurate. Condition: For the two CRF Financial Progress Reports tested, the Agency did not accurately prepare the reports in accordance with all the required criteria and methodology. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the reports ended September 30, 2020, and March 31, 2021. For the report ended September 30, 2020, we selected 2 of 12 projects, 7 of 66 contracts, 13 of 129 grants, and 3 of 24 transfers reported to trace to support. For the report ended March 31, 2021, we selected 1 of 23 projects, 3 of 107 contracts, 16 of 559 grants, and 5 of 167 transfers to trace to support. We noted the following. ? The Agency reported $248,755,293 of payments to the Nebraska Department of Labor (NDOL) in the Transfers >= $50,000 section. However, since NDOL is not a separate legal entity, these should not have been reported as transfers. As these funds would have been used to pay for unemployment insurance benefits to individuals, it would have been more appropriate to report these payments with ?Aggregate Payments to Individuals.? ? Payments of $367,818 to one vendor were included in the Contracts >= $50,000 section. However, the Agency did not enter into a contract with this vendor. Therefore, this should have been reported in the Direct Payments >= $50,000 section. ? For four grants tested on the report ended September 30, 2020, and for eight grants tested on the report ended March 31, 2021, the award amount reported did not agree to the grant award. For seven of the grants, the Agency reported the cumulative expenditures as of that date instead of reporting the actual amount on the grant award. For five of the grants, the Agency incorrectly reported the grants as two or three different grants, even though there was only one. ? For one contract and four grants, the Agency did not properly report the current quarter expenditures. The Agency did not include payment amounts of less than $50,000 for one contract and three grants, even though the contract or grant was for more than $50,000. Instead, the Agency included these payments with the Aggregate Contracts or Awards of less than $50,000. For the remaining grant, the Agency reported expenditures of $113,109 and $94,804 on two different grants; however, these payments were on the same grant. Cause: The Agency did not have adequate procedures to ensure that the amounts reported were accumulated and reported correctly. Effect: Inaccurate information was reported. Recommendation: We recommend the Agency implement procedures to ensure reports are completed properly in accordance with U.S. Treasury requirements. Management Response: The Military Department acknowledges the finding. On a grant or contract with payments in two or more quarters, where one payment is $50,000 or more, and one is less than $50,000; the U.S. Treasury Grants Solutions Portal will not allow the smaller payment to be included in the =>$50,000 category. As such not all payments relating to the same grant or contract are in the same category.

Program: AL 21.023 ? COVID-19 Emergency Rental Assistance Program ? Allowability & Earmarking Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR ? 200.403 (January 1, 2021) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. 2 CFR ? 200.404 (January 1, 2021) states the following: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm?s-length bargaining Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award?s cost. 2 CFR ? 200.459 (January 1, 2021) states, in relevant part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government . . . . (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. * * * * (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(2)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households . . . . Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(3) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of funds received by an eligible grantee from a payment made under this section may be used to provide eligible households with case management and other services related to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary, intended to help keep households stably housed. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(5)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements. Per the amended Emergency Rental Assistance terms, dated March 26, 2021, ?The total of all administrative costs, whether direct or indirect costs, may not exceed 10 percent of the total amount of the total award.? The Reallocation Guidance from the U.S. Department of the Treasury (Treasury) dated March 30, 2022, states the following: A Grantee may spend up to 10% of its initial ERA1 allocation for administrative expenses only if the Grantee obligates at least 30% of its initial allocation for the provision of financial assistance and housing stability services on behalf of eligible households by September 30, 2022. If a Grantee has obligated less than 30% of its initial allocation providing financial assistance and housing stability services as of September 30, 2022, Treasury will presume that the Grantee?s administrative expenses were not attributable to such services ? and therefore were not permissible uses of ERA1 funds ? to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds, unless the Grantee can demonstrate that those costs are related to the delivery of the program. Condition: The contractual agreement to receive and evaluate applications for Emergency Rental Assistance (ERA) did not have adequate limitations or provisions to ensure costs were reasonable. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The State of Nebraska was awarded $158,572,581 for ERA to assist eligible households that have difficulty making timely payments of rent and utilities due to the COVID-19 pandemic. At least 90% of funds are to be earmarked for financial aid to eligible households. No more than 10% of funds may be used for administrative costs. The Agency contracted with Deloitte to provide program administration and case management. Eligibility determinations were made by Deloitte and then sent to the State for review and to process the aid payments to eligible recipients. The total contract with Deloitte was for $8,976,600, of which $762,680 was paid during the fiscal year ended June 30, 2021. We tested one payment for $449,223, and noted the following: ? The contract was not competitively bid. An emergency deviation was approved in accordance with State statute; however, there was not adequate support on file to determine whether the contracted amount was reasonable. There were no maximums or limitations other than the contract was not to exceed $8,976,600. The contract was paid on an hourly rate and did not have any stipulations regarding the number of hours paid per application or performance measures to be achieved. ? Per guidance from the Treasury, if the State obligates less than 30% of its initial allocation providing financial aid by September 30, 2022, the Treasury will presume that the State?s administrative expenses were not attributable to the program, at least to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds. As of March 17, 2022, the Agency has spent $16,397,939 on financial aid, which is 10.34% of the original award of $158,572,581. As of the same date, the Agency has spent $7,525,594, of which $7,167,427 was paid to Deloitte. This is only 4.75% of the original award; however, it is 31.46% of the total amount paid as of March 17, 2022. Without spending 30% of its initial award on financial aid, the Agency will not meet the earmarking requirements per the guidance released from the Treasury. The total contract with Deloitte might have been reasonable had the entire grant award been spent. However, based on the amount of financial aid spent, the administrative costs appear unreasonable. Moreover, the contract contained no provisions for limiting payments if the entire grant was not spent. Cause: The contract was not competitively bid, and contract provisions were not specific enough to ensure amounts paid were reasonable. Effect: Without adequate procedures, there is an increased risk for the misuse of Federal funds. Recommendation: We recommend the Agency review its contracts to ensure that the amount for services is not excessive. Additionally, we recommend the Agency work with the U.S. Department of the Treasury to ensure that the Agency is meeting earmarking requirements. Management Response: The Military Department does not agree with this finding. Vendor Contract: The State performed procurement procedures soliciting Requests for Information from vendors in 2020 to support COVID-19 related tasks. A contractual agreement was completed with the vendor once the State determined the program costs, estimated level-of-effort, and key assumptions were reasonable based on the scope of services the State requested. In addition, the state complied with the procurement standards set forth in 2 CFR 200.317-200.327, included expected contract provisions, key program assumptions, and not-to-exceed thresholds. The contractual agreement was completed to enable the State to proactively monitor vendor performance and analyze detailed information on associated cost. Vendor performance was monitored through twice-weekly status meetings, bi-weekly executive status briefings with executives across multiple agencies, bi-weekly Executive Steering Committee meetings, and review of detailed invoices. All these procedures led to the first year of the ERAP program coming in $1.6 million under the contractual amount. Administrative Fees: The State may spend up to 10% of its initial ERA1 allocation for administrative expenses if 30% of its initial allocation is obligated by September 30, 2022; according to U.S. Treasury?s Reallocation Guidance dated 10/04/2022. The State is currently looking into additional outreach and communication strategies to identify and bring awareness of the program to those Nebraskans that require rental assistance or other housing stability services. The State as the Grantee will also be able to demonstrate that these costs are related to the delivery of the program to prevent any recapture of funds by the U.S. Treasury, if the State does not achieve a 30% obligation rate. APA Response: As of March 17, 2022, the State has spent $1 in administration costs for every $2 spent for aid. This does not appear reasonable, much less a cost that would be ?incurred by a prudent person? under any circumstances, considering the earmarking requirements.

Program: AL 21.023 ? COVID-19 Emergency Rental Assistance Program ? Allowability & Eligibility Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR ? 200.403 (January 1, 2021) states, in relevant part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(k)(3)(A) of the Consolidated Appropriations Act, 2021, states that an eligible household is a household of one or more individuals that is obligated to pay rent on a residential dwelling. Good internal controls require procedures to verify the validity of applicants prior to payment. Condition: We noted five payments, totaling $64,045, that appear likely to have been fraudulent. Repeat Finding: No Questioned Costs: $64,045 known Statistical Sample: No Context: As of January 31, 2022, the Agency had identified $116,804 and $495,702 of likely fraudulent payments in the fiscal years ended June 30, 2021, and June 30, 2022, respectively. We reviewed five of the fiscal year ended June 30, 2021, payments, totaling $64,045. For all five payments, the owner of the property, per the County Assessor?s website, did not agree to the landlord on the application. We also noted other indications of possible fraud in which information on the application provided was inconsistent with the information from other databases or systems. The Agency stated that these payments have been referred to the State Patrol for further investigation. Cause: The Agency had various procedures for ensuring that application information was accurate; however, verifying the owner to County Assessor information was not required. Effect: There is an increased risk for fraudulent payments. Once fraudulent payments have been made, the likelihood of recouping those payments is low. Recommendation: We recommend the Agency strengthen procedures for verifying the validity of applicants prior to payment. Management Response: The Military Department does not agree with this finding. The State has implemented a strong system of internal controls to determine program eligibility. These controls include detailed pre-payment and post-payment analytics to help identify applications at risk for fraud. As the ERA program progresses in Nebraska and nationally, program procedures continue to be enhanced to monitor for and prevent potentially fraudulent applications. As of the issuance of this report, the program has identified almost 1,000 applications as high risk of potential fraud and prevented ineligible payments of over $15 million. Additionally, the State turns over any paid applications that have been subsequently determined at risk of being fraudulent to the State Patrol for further investigation and potential prosecution. APA Response: The five payments we reviewed noted possible indications of fraud. As previously stated, once fraudulent payments have been made, the likelihood of recouping them is low.

Program: AL 20.509 ? Formula Grants for Rural Areas; AL 20.509 ? COVID-19 Formula Grants for Rural Areas ? Allowability & Subrecipient Monitoring Grant Number & Year: NE-2020-013-00, FFY 2023; NE-2020-023-00, CY 2023; NE-2018-015-00, FFY 2021 Federal Grantor Agency: U.S. Department of Transportation Criteria: Title 2 CFR ? 200.403 (January 1, 2021) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. Title 2 CFR ? 200.332(d) (January 1, 2021) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Title 2 CFR ? 200.430(i)(1) (January 1, 2021) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR ? 200.405(a) (January 1, 2021), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? Condition: The Agency did not have adequate documentation to support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2020-066 Questioned Costs: $67,971 known (NE-2020-013-00, $54,818; NE-2020-023-00, $13,033; NE-2018-015-00, $120) Statistical Sample: No Context: We tested 25 payments to 22 subrecipients and 3 vendors. The Agency performed financial desk reviews for subrecipients; however, the reviews tested were not adequate. When desk reviews were not adequate, we provided the Agency the opportunity to obtain additional support from the subrecipient; however, adequate support was not obtained. We noted the following: ? For 10 subrecipients tested, documentation was not adequate to support that personnel charges were allowable and in accordance with Federal cost principles. The Agency did not have timesheets, time certifications, or other payroll documentation on file. In some cases, payroll documentation was on file, but there was not adequate support to verify that the correct amount was charged to the program, as there was no documentation to support the employees? full salary or the benefits received, such as workers? compensation and health insurance premiums. ? Fuel costs were not adequately supported for two subrecipients. Receipts were not provided supporting the fuel costs. ? Maintenance expenses were not adequately supported for one subrecipient, as there was no support for the allocation of expenses. ? For 10 subrecipients tested, capital costs were not adequately supported. The Agency did not obtain invoices for expenses such as rent, insurance, and transportation costs. Furthermore, allocations used by the subrecipients were not always supported to ensure costs charged to the program were proper. Two subrecipients were improperly reimbursed for sales taxes. ? For two subrecipients tested, there was inadequate support to show fares had been receipted properly. For three subrecipients tested, no desk review was done for the operating revenue even though operating revenue had been collected throughout the fiscal year. Fares reduce the Federal reimbursement; therefore, if not properly reported, Federal reimbursements could be excessive. ? The Agency paid $10 each for 19 vehicle titles; however, the Agency had documentation supporting that only seven of the vehicles had been purchased by the program. The other 12 vehicles were purchased using other Federal programs; therefore, $120 is questioned costs. We also noted that the Agency did not perform any subrecipient monitoring for two subrecipients. During fiscal year 2021, these subrecipients were reimbursed a total of $1,470,407. Questioned costs are unknown for these subrecipients. The sample population totaled $18,166,209, which included $16,506,285 paid to 59 subrecipients and $1,659,924 vendor payments. Federal payment errors noted in the sample were $67,971. The total Federal sample tested was $461,857. Based on the sample tested, the dollar error rate was 14.72% ($67,971/$461,857), which estimates the potential dollars at risk for fiscal year 2021 to be $2,674,066 (dollar error rate multiplied by population). Cause: Procedures were inadequate to ensure that costs were in accordance with Federal requirements. Effect: Increased risk for errors or misuse of funds. Recommendation: We recommend the Agency strengthen subrecipient monitoring procedures. We further recommend the Agency improve procedures to ensure expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT Transit reviews each invoice for allowable costs and contacts transit agencies for additional information as required.

Program: AL 20.933 ? National Infrastructure Investments ? Reporting Grant Number & Year: 693JJ22040000BDG3NE5009003, Period ending September 5, 2023; 693JJ22040000TG00NE0026120, Period ending November 1, 2024 Federal Grantor Agency: U. S. Department of Transportation Criteria: Per 2 CFR ? 200.302(a) (January 1, 2021): Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR ? 170, Appendix A, Section I, ?Reporting Subawards and Executive Compensation,? states, in relevant part, the following: (a) Reporting of first-tier subawards. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds for a subaward to a non-Federal entity or Federal agency . . . . * * * * (2)(ii) For subaward information, report no later than the end of the month following the month in which the obligation was made. Good internal control requires procedures to ensure Federal reports are complete, accurate, and submitted as required. Condition: Quarterly financial reports were not accurate, and required Federal Funding Accountability and Transparency Act (FFATA) reports were not submitted. Repeat Finding: No Questioned Costs: N/A Statistical Sample: No Context: The Agency is required to file quarterly SF-425 Financial Reports for each open project. We tested four SF-425 reports, two quarters each for two projects. For each SF-425 tested, the Agency reported $0 for cash receipts, cash disbursements, Federal funds authorized, and Federal share of expenditures. However, $771,140 to $25,000,000 should have been reported. See additional details below of the amounts that should have been reported: See Schedule of Findings and Questioned Costs for chart/table. We also noted that matching expenditures were not accurately reported for all four reports tested, as follows: See Schedule of Findings and Questioned Costs for chart/table. Additionally, the Agency did not file the required FFATA reports. During the fiscal year, the Agency had one subrecipient with $3,834,733 in Federal expenditures that should have been reported. Cause: Employee error and inadequate review procedures. The Agency was unaware that FFATA requirements were applicable to the program. Effect: Noncompliance with Federal requirements, which could lead to sanctions. Recommendation: We recommend the Agency improve procedures to ensure expenditures are reported properly and agree to accounting records. We further recommend the Agency submit all FFATA reports as required. Management Response: NDOT concurs with the finding and will improve procedures to ensure expenditures are reported properly to DAS. Further, NDOT will implement improved procedures to ensure federal SF-425 and FFATA reports are submitted in accordance with guidance provided by the Federal Highway Administration. Unfortunately, up to this point NDOT personnel have not been granted access in the federal system to submit the FFATA report for the project identified, but personnel are working with FHWA to obtain access.

Program: Various, including CFDA 93.778 ? Medical Assistance Program (Medicaid) ? Allowable Costs/Cost Principles Grant Number & Year: Various, including #1905NE5ADM, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR ? 200.403 (January 1, 2020) states, in part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. 2 CFR ? 200, Appendix V, subsection (G)(4), (January 1, 2020) states, in part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. Per the DAS Facility Use Manual, ?Rental rates are based on Facility historical operation costs and projected market price changes. Each Facility is budgeted to operate on a break even basis.? 2 CFR ? 200.511(b) (January 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. A good internal control plan requires: ? Procedures to ensure rate charges are equitable, reflect actual costs incurred, and are reviewed periodically to ensure charges are appropriate for the services provided. ? Adequate documentation is maintained to support both rates charged and the approval of those rates. ? Internal service rates are published and available for State agency review and applied consistently for all State agencies. Condition: We noted the Agency?s Materiel Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. Additionally, the Agency did not have adequate documentation to support the allocation of Lincoln groundskeeping and security costs in developing the building rental rates. A similar finding was noted in prior audits since 2015. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2019-017 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following: Building Division The rental rate charged to agencies for building space includes an allocation for indirect costs for administration, grounds keeping, security, and energy management. We noted that the Agency did not have adequate support for the allocation of Lincoln grounds and security indirect costs in developing the building rental rates. The groundskeeping allocation was split 45% turf maintenance, 30% snow removal, and 25% parking maintenance and clean up; the Agency did not have support for the split. The fiscal year 2020 indirect allocations for grounds keeping and security were $434,385 and $809,495, respectively. Materiel Division We tested three Print Shop billings and noted the following: ? Our prior audits noted that the Print Shop had not reviewed and updated its rates since the fiscal year ended June 30, 2010. We noted printing rates for 24 cost centers were based on calculations from fiscal year 2008, and those for 3 cost centers were based on calculations from fiscal year 2011 with a 10% rate increase in fiscal year 2019 and a 5% rate increase in fiscal year 2020. No support was provided to determine the rates were reasonable. ? One cost center rate for plate printing was not charged based on actual costs or published rates. The Agency utilizes plates for some printing jobs. A metal plate is typically used to print large batches, and plastic plates are used for smaller batches. The raw material cost is far higher with metal plates. Because of the associated raw material costs, the published rate listing had two separate plate printing rates, as shown in the table below. The Agency in fiscal year 2019 combined the two plate printing rates for metal and plastic based on usage to create an average cost of $24.52; in fiscal year 2020, the price was increased 5%. As a result, agencies printing with plastic plates were overcharged, and agencies printing on metal plates were undercharged. See Schedule of Findings and Questioned Costs for chart/table. ? The Agency charged a 35% markup surcharge rate for special purchases, paper costs, plate material, special order supplies, and colored ink. The published markup price was 41%. However, the Agency did not have adequate documentation to support the reasonableness of the markup percentage rate. This was first noted during our audit of the Materiel Division for the period July 1, 2009, through December 31, 2011. ? One billing tested included 20 hours per month of Bookwork and Accounting at a rate of $49.48 per hour. There was not adequate documentation to support the number of hours billed was reasonable. Additionally, the rate charged was based on calculations performed in fiscal year 2008 with a 10% increase in fiscal year 2019 and an additional 5% increase in fiscal year 2020; the Agency did not provide documentation to show that the current rate is reasonable. The Materiel Division had receipts from sales and services of $11,706,442 during fiscal year 2020. Cause: Lack of supporting documentation and inadequate procedures. Per Agency staff, the current accounting system did not provide the necessary information to develop Print Shop rates by cost center. Effect: Without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs will be overcharged for services. Without adequate procedures to ensure billings are proper and consistently charged, there is an increased risk that agencies and Federal programs will not be treated equitably. Recommendation: We recommend the Agency maintain adequate documentation to support charges. We also recommend that procedures ensure rates are equitable and reflect the actual costs incurred for services provided. Management Response: Building and Grounds Maintenance: Our methodology does not require corrective action. In response to this finding in a prior year, DAS created a reasonable and defensible methodology in which rates are determined. The rates are published here: https://das.nebraska.gov/budget/docs/inst/assets/2021-2023_rates-section.pdf. In January 2018 for the current biennium FY19-21 DAS State Building Division used Google Maps to assist in the allocation of the Grounds costs. This data was used to determine the number of square feet for each surface type, and the allocation used updated percentages to allocate costs using 45% for turf maintenance, 30% for snow removal and 25% for parking lot maintenance and clean up. This weighting process is the most efficient and equitable methodology to distribute grounds maintenance costs across state properties. Security: Our methodology does not require corrective action. In January 2018, DAS State Building Division changed the allocation of the security costs from security check points to facility square feet, with the exception of the 501 Bldg, Governor?s Residence, and State Capitol. This is a more accurate methodology of security costs. Print Shop Rates: The 10% increase was applied across the board to the historical rates in order to cover costs based upon a deeply declining fund balance. Prior to 2019, the rates had not been increased since 2010. Regarding the 5% rate increase in fiscal year 2020, that was never applied or charged to customers. We agree the cost center rates should be individually supported and the teammates from Materiel, Central Finance and the IT Team have identified, and began working through, a methodology as the basis for rate setting at the cost center level. Plate Printing Rates: Corrective action was taken during the biennium, but after rates were published. The blended rate charged is fair and equitable. The published rate of the plates is not based upon the cost of the physical plate. The rate is based upon the processing of the plate to include: labor, equipment, maintenance, and overhead. Additionally, 75% of plate printing is performed by utilizing plastic plates. In order to equitably distribute indirect costs, a blended rate was created. Markup Surcharge Rate: Corrective action was taken during the biennium, but after rates were published. The markup has been 35% for over 40 years and is based on industry standard. This was verified with outreach to other state print shops. This markup is to cover administrative duties and costs associated with the purchase, handling, and storage of paper and supplies. The 2019 published rate was 39%, however, the Print Shop only charged 35% to continue meeting industry standard. Bookwork and Accounting: We agree and billing should be based upon actual hours worked. APA Response: Documentation was not adequate to support allocations and billings were reasonable and equitable.

Program: Various, including CFDA 93.767 ? Children?s Health Insurance Program ? Reporting Grant Number & Year: Various, including #1905NE5021, FFY 2019 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is presented properly. A good internal control plan also requires the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 2 CFR ? 200.510(b) (January 1, 2020) states, in part: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. For a cluster of programs also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. ? 81-1111(1) (Reissue 2014) states, in part: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state's central system. EnterpriseOne is the official accounting system of the State. 2 CFR ? 200.511(b) (January 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified the Agency of the errors, and the SEFA was subsequently adjusted. Also, as noted in Finding 2020-005, Administrative Services did not perform a reconciliation of the SEFA to the financial statements. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2019-018 Questioned Costs: None Statistical Sample: No Context: The Agency is responsible for managing the accounting matters of the State and certifies the data collection form for the Statewide Single Audit. The Agency compiles the SEFA from information by the individual agencies and submits it to the auditor. During our review, we noted the following: The Department of Health and Human Services did not accurately report expenditures for several programs, including underreporting CFDA 93.767 by $14,298,877 and underreporting CFDA 10.551 by $8,218,920. Several agencies did not identify COVID-19 expenditures properly. There were 37 programs for various State agencies that needed correction. The total expenditures and amounts provided to subrecipients reported originally and per the final SEFA were as follows: See Schedule of Findings and Questioned Costs for chart/table. Cause: The Agency did not have adequate procedures to ensure amounts that were not directly from the accounting system were accurate. The Agency established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend the Agency implement procedures to ensure the SEFA is complete and accurate. Management Response: The preponderance of reporting errors were caused by the Department of Health and Human Services not accurately reporting SEFA expenditures. Additionally, Administrative Services has established an account code for agencies to utilize for subrecipient payments that are to be recorded on the SEFA. Whether state agencies reporting data comes from the accounting system or from outside sources, those agencies are directly responsible for adequately reviewing their data and providing DAS accurate information. The original SEFA expenditures were under-reported by 0.56%.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Reporting Grant Number & Year: H126A180040, FFY 2018; H126A190040, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.302(a) (January 1, 2020): [T]he state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. A good internal control plan requires procedures to ensure that expenditures are reported properly and agree to accounting records. Condition: The Agency did not report expenditures accurately and did not include all expenditures on the annual RSA-2 report or on SF-425 reports. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We tested the final SF-425 report for grant H126A180040. The Agency did not report the amount of pre-employment transition services on line 12 of the SF-425 report. The Agency should have reported $482,582. During review of the annual 2019 RSA-2 report, we noted that the Agency did not include all applicable accounts and expenditures and, in some cases, included the same expenditures on multiple lines. As a result, we noted the following errors: See Schedule of Findings and Questioned Costs for chart/table. Cause: Employee Error. Effect: Inaccurate information was reported to the Federal government. Recommendation: We recommend the Agency improve its procedures to ensure expenditures are reported properly and agree to accounting records. Management Response: A second staff person will be trained to review and verify expenditures reported on all Federal Reports.

Program: CFDA 84.027 and 84.173 ? Special Education Cluster (IDEA) ? Allowability & Subrecipient Monitoring Grant Number & Year: H027A170079, FFY 2018; H027A180079, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR ? 200.403 (January 1, 2020) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2020) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award: an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR ? 200.331(d) (January 1, 2020) requires pass-through entities to do the following: Monitor the activities of the subrecipient as necessary to ensure the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal funds passed through for authorized purposes and in compliance with all applicable regulations. Condition: The Agency did not have adequate subrecipient monitoring procedures for 1 of 25 subrecipient aid payments tested. The documentation provided was not adequate to support that the amounts paid were in accordance with Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2019-020 Questioned Costs: $9,882 known (H027A170079 ? $4,782; H027A180079 ? $5,100) Statistical Sample: No Context: We tested 25 subrecipient payments, totaling $6,706,343, and noted that $9,882 did not have adequate documentation to support that expenditures were allowable and in accordance with Federal cost principles. The Agency did not have adequate payroll support for one subrecipient tested, such as time-and-effort logs, time certifications, or other payroll documentation to ascertain the expenditures were in accordance with Federal regulations. Federal payment errors noted within the sample were $9,882. The total Federal sample tested was $6,706,343, and total subrecipient aid expenditures paid with Federal funds during the fiscal year were $74,332,726. The Federal dollar error rate for the sample was 0.147% ($9,882/$6,706,343), which estimates the potential dollars at risk for fiscal year 2020 to be $109,269 (dollar error rate multiplied by population). Cause: Inadequate Procedures. The subrecipient did not have adequate documentation on file to support the payment tested. Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency continue to improve its procedures to monitor subrecipients, including a review of payroll documentation. We further recommend adequate documentation be maintained to support that expenditures are allowable and in accordance with Federal cost principles. Management Response: The scope of the single audit samples and tests sub-recipient aid payments (or reimbursement request primary documentation). Under the Department?s environment, the Budget Management Specialist under the Office of Budget & Grants Management conducts a sampling of each reimbursement request prior to payment, which includes an overview of the grantee general ledger and supporting documentation for a preliminary review of reasonableness and allowability. If there are any unusual assessments within this sample, sub-grantees are contacted to provide additional documentation or clarification. The Department also has the option to cash advance in-lieu of any review, recognizes primary documentation can be altered, and review of reimbursement requests is not an internal control recognized by the CFR, therefore reimbursement requests are sampled, are not performing `fiscal monitoring? activities per the CFR or the source for the Department?s sub-recipient internal control activities. The `condition? of the finding indicates the Agency did not have adequate subrecipient monitoring procedures for 1 of 25 subrecipient aid payments tested. The Grant Compliance Section under the Office of Budget & Grants Management is the dedicated sub-recipient fiscal monitoring and internal control unit which audits a minimum of 80 subrecipients in a given year with a variance of entities visited due to the nature of risk assessment driving the need. The Nebraska Department of Education notes, 25 fiscal monitoring completed audits (which including review results, financial & supporting documentation, questioned costs, non-compliance, and technical assistance) from the 80 sub-recipients fiscally monitored for this fiscal year were not requested by the Nebraska APA during this single audit review as indicated. Also, fiscal monitoring reviews may include a different sampling of aid payments tested for payroll documentation, payroll distribution, Time & Effort Reporting in accordance with Federal requirements other than the one reimbursement request (aid payment) the Nebraska APA is testing. APA Response: The Agency did not have adequate documentation to support payroll charges for the subrecipient tested. We requested support from the Agency for fiscal monitoring documentation and provided the Agency the opportunity to obtain support from the subrecipient for the payment tested. The Agency did not provide adequate documentation to support the charges were in accordance with Federal cost principles.

Program: CFDA 84.027 and 84.173 ? Special Education Cluster (IDEA) ? Earmarking Grant Number & Year: H027A180079, FFY 2019; H173A180077, FFY 2019; H027A190079, FFY 2020; H173A190077, FFY 2020 Federal Grantor Agency: U.S. Department of Education Criteria: 34 CFR ? 300.705 and 300.816 (July 1, 2019) describe how funds are to be allocated to the Local Education Agencies (LEAs) for the IDEA Part B and IDEA Preschool Grant Programs. 34 CFR ? 300.705(b) (July 1, 2019) states, in relevant part, the following: For each fiscal year for which funds are allocated to States under ?300.703, each State shall allocate funds as follows: * * * * (3) After making allocations under paragraph (b)(1) of this section, as adjusted by paragraph (b)(2) of this section, the State must ? (i) Allocate 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary schools and secondary schools within the LEA?s jurisdiction; and (ii) Allocate 15 percent of those remaining funds to those LEAs in accordance with their relative numbers of children living in poverty, as determined by the SEA. 34 CFR ? 300.816(c) (July 1, 2019) states, in relevant part, the following: After making allocations under paragraph (a) of this section, the State must ? (1) Allocate 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary schools and secondary schools within the LEA?s jurisdiction; and (2) Allocate 15 percent of those remaining funds to those LEAs in accordance with their relative numbers of children living in poverty, as determined by the SEA. Good internal controls require procedures to ensure that membership counts are correct for the public school district, which includes ensuring that the non-public school counts are included in the correct public school district. Condition: The Agency did not allocate funds correctly for 5 of 25 allocations tested. A similar finding was noted in the prior audit. Repeat Finding: 2019-021 Questioned Costs: None Statistical Sample: No Context: Allocations are made to the LEAs based on the total membership counts of the public school districts and the number of children living in poverty in the public school district. The membership counts must also include the number of children who attend non-public schools within the public school district. We tested 25 allocations that were paid to school districts during the fiscal year ended June 30, 2020. We tested the 2018-2019 school year allocation for 16 school districts and noted errors for 3 of 16. For those three school districts and six additional school districts, we tested the 2019-2020 allocation and noted errors for two of the nine school districts. The Agency did not include the non-public school membership counts within the correct public school districts. As a result of including the non-public schools membership counts in the incorrect public school districts, the allocations to the public school districts were incorrect. Variances noted for school year 2018-2019 were $28,700 and $91,134 over-allocated and $13,045 under-allocated. Variances for school year 2019-2020 were $9,750 and $11,073 over-allocated. Allocations tested for 2018-2019 totaled $16,728,486. Allocations tested for 2019-2020 totaled $21,300,970. Total allocations were $46,607,225 and $46,931,706 for school years 2018-2019 and 2019-2020, respectively. Cause: Employee error. Effect: Without adequate procedures to ensure the allocation to school districts is correct, there is an increased risk the LEAs will not be allocated the correct amount. Recommendation: We recommend the Agency implement procedures to ensure that the allocation of funds to the LEAs is correct. Management Response: Modified procedures to address this issue were implemented with the FFY2020 IDEA grant LEA allocation calculations in May 2020 for the 2020-21 school year. Modified procedures were implemented with the incorporation of non-public student data with public school district student data in determining allocations based on membership and poverty. The modification consists of the student data calculation conducted separately by two individuals. The individual results are compared and any differences are reconciled if needed.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Allowability Grant Number & Year: H126A190039, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per Title 92 NAC 72-005.01, ?The program shall retain a vested interest in any items of equipment in which its share of the current market value is $5,000 or more.? 2 CFR ? 200.511(b) (January 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: The Agency did not have documentation showing that the program retained a vested interest in equipment in which its share of the current market value is at least $5,000. A similar finding was noted in the prior audit. Repeat Finding: 2019-022 Questioned Costs: None Statistical Sample: No Context: We tested five equipment expenditures of over $5,000 and noted that four lacked documentation of vested interest. The Agency had an agreement on file for each client, but the agreement did not establish the Agency?s vested interest in the equipment. Each of the four clients received a driving system modification ranging from $5,270 to $31,917. We did not consider these costs to be questioned, as it appeared the equipment was still in use. The Agency?s corrective action plan stated it would review its policies to ensure that they are in compliance with State and Federal regulations and make any changes required. Per the Summary Schedule of Prior Audit Findings, the corrective action plan had been completed as of June 30, 2020; however, we noted that the new policy requiring all purchases over $5,000 to require a vested interest form signed by the client was not implemented until September 30, 2020. Total Federal aid expenditures for the fiscal year was $2,148,630. Cause: The Agency did not implement its new procedures until September 30, 2020, to ensure that the Agency had a vested interest in equipment over $5,000. Effect: The Agency is not in compliance with State and Federal regulations. Additionally, when policies and procedures are not followed, there is an increased risk for the loss or misuse of funds. Recommendation: We recommend the Agency comply with State and Federal regulations and maintain a vested interest in all equipment over $5,000. Management Response: Nebraska VR?s previous Equipment Recoupment chapter exempted certain items from being recouped. Since Vested Interest was a part of the equipment recoupment process, items on the equipment recoupment exemption list were also exempted from vested interest. Based on last year?s audit finding, a separate chapter on Vested Interest was issued on September 30, 2020 that requires vested interest on all equipment over $5,000, regardless of whether or not the equipment is being recouped. The items reviewed in this audit were all purchased prior to the implementation of the new chapter, so the acceptance agreement forms used did not include the revised language regarding vested interest. As of September 30, 2020, all equipment $5,000 and over are required to have an Acceptance Agreement form (stating that VR retains a vested interest). In addition to revising the policy as described, Nebraska VR made adjustments to its case management system (QE2) and completed state-wide training for staff (September 2020). Additionally, in order to ensure appropriate implementation, a Nebraska VR Program Director is receiving quarterly reports of cases which fall within the requirements of this policy and is reviewing the file information to ensure compliant implementation of the chapter and applicable forms. The most recent quarterly review was conducted on February 12, 2021. Three (3) files were reviewed and all three were compliant with the Vested Interest chapter.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Reporting Grant Number & Year: Various, including H126A200039, FFY 2020 Federal Grantor Agency: U.S. Department of Education Criteria: According to the Reporting Manual for the Case Service Report (RSA-911) (June 2017): In accordance with 34 CFR 361.12, VR agencies must implement policies and procedures that ensure the proper and efficient administration of the VR program, including those necessary to carry out all functions for which the State is responsible under this program. These methods must include procedures to ensure accurate data collection and financial accountability. It is incumbent on VR agencies to establish policies and procedures that ensure the accurate collection, retention, and timely reporting of all data. A good internal control plan requires procedures to ensure that the data reported is accurate. Condition: The Agency was not pulling in the Start Date of Employment in Primary Occupation (data element 350) accurately on the RSA-911 report. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The RSA-911 report is a set of data elements that State VR agencies must submit on a quarterly basis. We tested the RSA-911 report for the period ending March 31, 2020. We selected 25 clients to trace the seven key line items identified on the compliance supplement to the Agency?s case management system. Three of 25 client records did not include a Start Date of Employment in Primary Occupation on the RSA-911 report; however, per the Agency?s case management system, the clients had started employment and there should have been a date reported. Cause: The reporting code was not pulling in the information onto the report correctly. Also, the Agency did not have adequate procedures to ensure that the report was complete and accurate. Effect: Inaccurate information was reported to the Federal government. Recommendation: We recommend the Agency implement procedures to ensure data is reported properly. Management Response: VR discovered a bug in the reporting code that occurred due to changes in RSA requirements. The errant reporting code sets the Start Date of Employment in Primary Occupation (data element 350) if a client is in Employment Follow-up. There are times when a client is placed in Employment Follow-up and then the case is closed (successful outcome) in the same quarter. In cases that are closed, the client is no longer in Employment Follow-up, so the Start Date of Employment in Primary Occupation (data element 350) was not reported.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Reporting Grant Number & Year: H126A180039, FFY 2018; H126A190039, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.302(a) (January 1, 2020): [T]he state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. According to the RSA-2 report instructions (October 25, 2013), direct administration costs are to be entered as follows: Enter the amount expended on direct costs, including administration personnel, and all other VR and SE program administrative expenses. Other administrative expenses include staff travel, rent utilities, and supply costs, etc. of administration, district, and field offices, as well as personnel costs of supervisors who do not manage a caseload or perform the functions of a VR counselor. Per 34 CFR ? 361.5(2) (July 1, 2019), administrative costs are defined as follows: Administrative costs under the vocational rehabilitation services portion of the Unified or Combined State Plan means expenditures incurred in the performance of administrative functions under the vocational rehabilitation program carried out under this part, including expenses related to program planning, development, monitoring, and evaluation, including, but not limited to, expenses for ? * * * * (viii) Operating and maintaining designated State unit facilities, equipment, and grounds, as well as the infrastructure of the one-stop system; (ix) Supplies; A good internal control plan requires procedures to ensure expenditures are reported properly. Condition: The Agency did not accurately report expenditures on the annual RSA-2 report. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency records all costs at each of its field offices to line 2.A.1. Services Provided by Agency Field Office Staff. On the 2019 RSA-2 report, the Agency reported $11,353,615 on this line. However, this amount includes rent, supplies, utilities, and other costs that should have been reported on line 1.A. Direct Administration Costs, totaling $1,603,084. Cause: The Agency considers all expenditures incurred at the field offices as Services Provided by Agency Field Office Staff. Effect: Inaccurate information was reported to the Federal government. Recommendation: We recommend the Agency update its procedures to ensure expenditures are reported properly. Management Response: Nebraska VR has historically reported Administrative Costs based on the definition from the federal regulations cited in the instructions for the RSA-2 (34 CFR 361.5(b)(2)) - (2) Administrative costs under the vocational rehabilitation services portion of the Combined State Plan means expenditures incurred ?in the performance of administrative functions.? The Regulations provide examples of expenditures, all of which Nebraska VR reports as administrative costs, if they are incurred ?in the performance of an administrative function?. The instructions for the RSA2 define Administration Expenditures to include ?staff travel, rent, utilities, and supply costs, etc. of administration, district, and field offices?. For the administrative staff housed in our field offices, Nebraska VR has reported expenditures for their travel, rent, utilities, supplies, etc. as administrative costs. However, the rent, travel, utilities, supplies for field staff (e.g. specialists, associates, etc.) are not incurred ?in the performance of an administrative function?, so Nebraska VR has not been reporting these expenditures as administrative costs. Nebraska VR has verified with RSA that the definition of administrative expenditures on the RSA-2 was expanded to include additional cost categories, such as ? A. Personnel costs of district and field office supervisors, unless the supervisor is managing a caseload or performing functions of the VR counselor; and B. Staff travel, rent, utilities, and supply costs, etc. of field offices, with the exception of travel costs directly related to the provision of VR services, which are not administrative (34 C.F.R. 361.5(c)(2)(xii).

Program: CFDA 84.287 ? Twenty-First Century Community Learning Centers ? Allowability & Subrecipient Monitoring Grant Number & Year: S287C170027, FFY 2018; S287C180027, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per Title 2 CFR ? 200.403 (January 1, 2020), allowable costs must be necessary, reasonable, and adequately documented. Title 2 CFR ? 200.430(i)(1) (January 1, 2020) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Title 2 CFR ? 200.331 (January 1, 2020) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal funds passed through for authorized purposes and in compliance with applicable regulations. Condition: The Agency did not have adequate support on file for 7 of 15 subrecipient aid payments tested. Repeat Finding: 2019-024 Questioned Costs: $74,030 known (S287C180027) Statistical Sample: No Context: We tested 15 subrecipient payments, totaling $365,843, and noted that $74,030 did not have adequate documentation to support that expenditures were allowable and in accordance with Federal cost principles. Several employees? salaries were included in the reimbursement request, and there was not adequate support to tie the documentation to the amounts being requested for reimbursement. For three subrecipients, there was not adequate support for the allocation of time worked; three subrecipients did not have adequate support, such as payroll registers to tie timesheets to actual hours paid or the timesheets did not support the hours paid; and one subrecipient did not provide support for purchased services and supplies, such as invoices, receipts, and contracts for a total of $12,872. The limited monitoring performed by the Agency did not include adequate support to ensure the subrecipients used the subaward for allowable activities. Furthermore, two subrecipients were overpaid $100 and $173, respectively, as costs requested for reimbursement did not agree to the general ledger reports of actual costs incurred. Subrecipient aid payments for the fiscal year ended June 30, 2020, totaled $5,750,290. The sample tested totaled $365,843. Based on the sample tested, the case error rate was 46.67% (7/15). The dollar error rate for the sample was 20.24% ($74,030/$365,843), which estimated potential dollars at risk for fiscal year 2020 to be $1,163,859. Cause: Inadequate procedures. Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to monitor subrecipients, including reviewing both detailed supporting documentation for expenditures and payroll documentation for each subrecipient. We further recommend adequate documentation be maintained to support that expenditures are allowable and in accordance with Federal cost principles. Management Response: The Budget Management Specialist under the Office of Budget & Grants Management and the 21st CCLC Director under the Office of ESEA Programs conduct a desk review of each reimbursement request, which includes the grantee general ledger, to assure expenditures are allowable, reasonable and within the budget and performance period. If there are any unusual or questionable expenditures, sub-grantees are contacted to provide additional documentation or justification. Virtual visits and programmatic desk monitoring under the Office of ESEA Programs are additional strategies utilized to mitigate risk. All programs receive and on-site programmatic monitoring visit in year 3 of the 5-year grant where the 21st CCLC director reviews selected financial documentation and employee time and effort information. The Nebraska 21st CCLC program utilizes a risk-assessment instrument to identify programs that may require interim programmatic monitoring or additional technical assistance. On behalf the Nebraska?s FFY 2018 and FFY2019 Single State Audit Resolution?s the Nebraska Department of Education engaged in Federal corrective action plans commencing in April 2019 through December 2020. Per the USED, a reasonableness check of reimbursement requests (or primary documentation) did not identify questioned costs or meet the Standards for Internal Control in the Federal Government (Green Book) or under the 2CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The Nebraska Department of Education diligently over this timeframe and under the guidance of USED Federal Compliance Specialists and to recognize Federally approved practices worked with other State Department of Education SEAs to establish the Grant Compliance Section under the Office of Budget & Grants Management. This section is a dedicated unit to federal internal controls and Federal award fiscal activities. On July 1, 2020, the Department deployed a standardized practice of sub-recipient internal controls: fiscal monitoring policy and procedures for LEAs subrecipients under 2 CFR ? 200.332, control environment, risk assessment, technical assistance through the lifecycle of a grant, non-compliance measures, single audit practices, and sub-recipient fiscal monitoring. Fiscal monitoring reviews financial primary documentation (including 2 CFR ? 200.430(1)(i) noted) and establishes that a sub-recipient has internal controls in place for these Federal awards supported by policies, procedures, and engages in established practices. Fiscal monitoring also provides one-on-one technical assistance where and when it is needed as well as through scheduled events through the year. Sequential sampling monitoring ensures that the NDE monitors all subrecipients effort at any given point in time on a 1-to-3-year cycle based on level of risk (23 data-driven evidenced based indicators), level of award and if under a corrective action from prior monitoring cycles. The Nebraska FFY20 Single State Audit encompassed review of reimbursement request primary documentation and programmatic monitoring outside of the Grant Compliance Section?s internal control standards for sub-recipient fiscal monitoring, questioned costs, and non-compliance systematic activities performed each year.

Program: CFDA 84.367 ? Supporting Effective Instruction State Grants ? Allowability Grant Number & Year: S367A170026, FFY 2018; S367A180026, FFY 2019; S367A190026, FFY 2020 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR ? 200.403 (January 1, 2020) contains certain factors affecting the allowability of costs, stating, in part: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. * * * * (g) Be adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2020) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award: an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: Three of 25 payments tested were not in accordance with Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2019-026 Questioned Costs: $29,669 known (S367A180026) Statistical Sample: No Context: For one payment tested to a school district, a time and effort summary was provided that stated the employee worked 100% on one Federal program. However, payroll documentation provided by the school showed that the employee also worked on another Federal program. As such, the time and effort certification is not a valid method to document time worked. The Agency also took exception to the time and effort summary in its subrecipient monitoring of the school district. One payment tested reimbursed a school district $50 for admission to an observation tower in Chicago, Illinois. The expense did not appear to meet the definition of professional development under 20 U.S.C 7801(42). For another payment, the school district incurred a lodging expense that appeared excessive. Five individuals stayed three nights for a conference in Austin, Texas. The total room rate billed, prior to taxes, was $3,241, which equates to a room rate of $216 per night. The U.S. General Services Administration (GSA) rate for that location was $145 per night, or $2,175 for the trip. The difference is $1,066. The hotel was not at the conference location but was nearby, and the employees also had a rental car. Aid payments for the fiscal year ended June 30, 2020, totaled $8,876,443. The sample tested totaled $813,335. The dollar error rate for the sample was 3.65% ($29,669/$813,335), which estimated potential dollars at risk for fiscal year 2020 to be $323,990. Cause: Inadequate procedures. Effect: Without adequate supporting documentation and adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure adequate documentation is maintained to support that expenditures are allowable and in accordance with Federal cost principles. We also recommend the Agency ensure all expenses are reasonable and necessary for the Federal program. Management Response: The $50 reimbursement for admission to an observation tower was provided as professional development under 20 U.S.C 7801(42) as this was considered reasonable educational experience rather than entertainment, which could have been shared in the classroom. The total amount of the reimbursement to school district was $596,401, making the $50 fee immaterial and insignificant. The lodging reimbursement for 5 individuals for 3 nights to attend a conference at the Austin Convention Center was provided as this was reasonable effort to avoid the higher costs of staying at the Austin Convention Center with further effort and savings acquired by utilizing the most economical carpooling method of renting a car for transportation of 5 people over the course of 3 days verse other higher cost modes of transportation and/or higher individual transportation costs.

Program: CFDA 84.367 ? Supporting Effective Instruction State Grants ? Special Tests Grant Number & Year: S367A170026, FFY 2018; S367A180026, FFY 2019; S367A190026, FFY 2020 Federal Grantor Agency: U.S. Department of Education Criteria: 34 CFR ? 299.7(a)(1) (July 1, 2019) states: Expenditures of funds made by an agency, consortium, or entity under a program listed in ?299.6 (b) for services for eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the amount of funds expended for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of those children and their teachers and other educational personnel. Good internal control requires procedures to ensure that non-public schools receive an equitable proportion of funds. Condition: Two of nine districts tested with non-public schools had an incorrect calculation of the per-pupil rate. Repeat Finding: No Questioned Costs: $1,328 known (S367A180026) Statistical Sample: No Context: For one of the nine public schools, administrative costs (indirect costs) of $500 were added to the total LEA Allocation; however, this amount was not included in the school?s approved budget. The result is that the amount available to the public school and the non-public school was incorrect. The amount available to the public school was under calculated by $413. For the other school, $1,000 of administrative/indirect costs were budgeted for the year; however, the $1,000 of administrative/indirect costs were not added to the total LEA Allocation, which lowered the NDE per-pupil rate to $24.65, instead of $25.31. The result is that the amount available to the public school and the non-public school was incorrect. The amount available to the public school was overcalculated by $915. Cause: Inadequate procedures. Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards will not be in compliance with requirements of the program. Recommendation: We recommend the Agency implement procedures to ensure the per-pupil cost amounts are calculated correctly. Management Response: NDE agrees with the finding.

Program: CFDA 93.575 ? Child Care and Development Block Grant; CFDA 93.658 ? Foster Care Title IV-E ? Allowable Costs/Cost Principles Grant Number & Year: 0G1901NECCDD, FFY 2019; 01901NEFOST FFY2019 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: Per 45 CFR ? 75.405(a) (October 1, 2019): A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per 45 CFR ? 75.303 (October 1, 2019): 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. Per 45 CFR ? 98.67(a) (October 1, 2019): Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds. Per the Cost Allocation Plan (CAP) cost pool 25C21920 FO Child Protection and Safety Services: The Child Welfare and Adult Protective and Safety Services include prevention activities and coordination, child and adult protective services, foster care and independent living, adoption, domestic violence, safety and treatment services, and educational initiatives. There are approximately 334 FTEs in the cost center . . . allocated to the benefiting programs based on the CFSS RMTS results. Per the CAP cost pool 25C21460 Economic Assistance Policy Chief: The Economic Assistance (EA) office develops policies, procedures and regulations for the direct aid to beneficiaries for EA programs. There are approximately four FTEs in the cost center . . . . The cost center will be allocated to benefiting cost centers based on SSW RMTS results. Good internal control requires procedures to ensure that all payroll costs are properly coded to ensure that costs are allocated to the proper funding source for activities performed. Condition: Two of 25 employees tested were not charged to the proper grant. Repeat Finding: No Questioned Costs: $1,786 known; 0G1901NECCDD Statistical Sample: No Context: We tested one paycheck each for 25 employees paid with Federal funds and noted the following: ? One employee, a Program Specialist, had his time coded to Child Care Economic Assistance Policy, CFDA 93.575; however, the employee?s time should have been charged similarly to that of his supervisor, which was charged to Temporary Assistance to Needy Families (TANF), CFDA 93.558. As a result, the Child Care Development Block Grant was overcharged $1,786, and TANF was undercharged $1,786. Federal payroll charged to the Child Care Cluster totaled $7,455,188 for the fiscal year. ? Another employee had payroll of $1,761 charged 100% to Foster Care Title IV-E and CAP cost pool 25C21920 FO Child Protection and Safety Services; however, the employee should have had payroll charged to CAP cost pool 25C43160 ? Child Welfare Administration. The employee was formerly a child and family services specialist (CFSS), which correctly allocates to cost pool 25C21920; however, she was promoted to program specialist, and her payroll coding was not updated properly. CAP cost pool 25C21920 distributes costs to various programs based on the Random Moment Time Study, while CAP cost pool 25C43160 is charged 100% to Child Welfare. We could not determine the dollar error associated with this issue because the Agency no longer completes the ?Step Down,? a restatement of the CAP that provides a method to calculate the effect of changes in the CAP. The Agency charged $109,693,316 in payroll costs to Federal funds during the fiscal year ended June 30, 2020. Cause: The Agency failed to update coding when employees shifted positions and activities. Effect: Payroll costs were not allocated properly to benefitting programs. Recommendation: We recommend the Agency improve procedures to ensure that employees? time is recorded properly and charged to benefitting programs. Management Response: Agree

Program: CFDA 93.658 ? Foster Care Title IV-E; CFDA 93.778 ? Medical Assistance Program ? Allowable Costs/Cost Principles Grant Number & Year: 2001NEFOST, FFY 2020; 2005NE5ADM, FFY 2020; 1905NE5ADM, FFY 2019 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2019): 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. Per 45 CFR ? 75.405(a) (October 1, 2019), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? Per the CAP, the cost center Field Office Resource Development is: [A]llocated to the benefiting programs based on Time and Effort Reports prepared by the DHHS Resource Developers in the cost center. The costs for MLTC [Medicaid] activities will be further split into Medicaid 50% and Children?s Health Insurance Program (CHIP) based on eligibility status. Per the CAP, the cost center Central Services and Supplies is: [F]or the department?s centralized offices . . . [c]osts include office supplies, communications, data services, postage, printing services . . . rent . . . . Similar costs for the offices located with a service office or at a residential facility are directly identified and not included in the allocated cost center . . . . These costs will be allocated to all benefiting cost centers based on the labor hours, LH2, related to each cost center. Per the CAP, LH2 is defined as ?For DHHS [Agency] FTEs [fulltime equivalencies] excluding those at 24-hour facilities and Field Offices.? Per the CAP, the cost center Children and Family Services Director?s Office ?is responsible for the overall direction and management of the division . . . . The cost center will be allocated to all other cost centers in the division based on the labor hours, LH1, in each cost center.? Per the CAP, LH1 ?includes all DHHS FTEs but only one-third of those located at the 24-hour facilities.? A good internal control plan requires procedures to ensure that programs are charged costs in accordance with relative benefits received and the CAP. Condition: The Agency lacked adequate procedures to ensure costs were allocated properly to benefitting programs in accordance with the approved CAP. The Agency did not properly allocate costs in accordance with relative benefits received for the labor hours allocation tested or the time and effort allocation tested. A similar finding has been noted since 2013. Repeat Finding: 2019-028 Questioned Costs: $363,998 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The following errors were noted: Time and Effort We tested the Field Office Resource Development cost center for the quarter ended March 31, 2020, which allocated $1,175,528 to benefiting programs. ? All the MLTC, hours were allocated to Medicaid when they should have been allocated to both Medicaid and CHIP. These errors caused $34,150 to be allocated to Medicaid that should have been allocated to CHIP, resulting in Federal questioned costs of $17,075 to the Medicaid program and an undercharge to CHIP. ? One staff assistant originally worked in the resource development section, but switched to the Protection and Safety division after her supervisor terminated. Her pay was not updated to charge to the new business unit. Therefore, Foster Care was overcharged $1,870 with corresponding undercharges to various Federal and State programs. The questioned costs noted are for the cost centers tested; similar errors would likely occur in other cost centers and quarters. A total of nine cost centers are allocated based on Time and Effort; we tested two of these and had issues with one. Total costs allocated via Time and Effort were $3,617,414 for the quarter ended September 30, 2019, and $3,434,143 for the quarter ended March 31, 2020. Labor Hours The Central Services and Supplies cost center for the quarter ended September 30, 2019, allocated $2,043,441 to benefiting programs. ? Total hours allocated were 669,727. The contractor included 269,539 hours for field offices and 5,045 hours for facilities that should have been excluded. This oversight resulted in numerous undercharges and overcharges to Federal and State programs. We could not determine the dollar error associated with this issue because the Agency no longer completes the ?Step Down,? a restatement of the CAP in Excel that provides a method to calculate the effect of changes in the CAP. However, we did note that the largest cost center variance resulted in questioned costs to Medicaid of $316,747 (Federal Share). The Children and Family Services Director?s Office cost center for the quarter ended March 31, 2020, allocated $1,220,722 to benefiting programs. ? Labor hours used were for the wrong quarter ? December 31, 2019, data was used for the March 31, 2020, quarter. ? The Agency allocated costs to the incorrect cost center as follows: See Findings and Questioned Costs for chart/table. ? Total labor hours during the March 2020 quarter were 1,777,467, but the Agency failed to include 17,004 hours for temporary salaries. ? These oversights resulted in numerous undercharges and overcharges to Federal and State programs ? not only for the cost center tested but also for all cost centers that allocate based on labor hours. We could not determine the dollar error associated with this issue because the Agency no longer completes the ?Step Down,? a restatement of the CAP in Excel that provides a method to calculate the effect of changes in the CAP. However, we did note that the largest cost center variance resulted in questioned costs to Foster Care of $28,306. Fifty-three cost centers are allocated based on labor hours; we tested three of these and had issues with two of them: a 67% error rate. Total costs allocated via labor hours were $15,032,130 for the quarter ended September 30, 2019, and $13,346,948 for the quarter ended March 31, 2020. Cause: Clerical errors. Effect: When costs are not allocated correctly, programs are not charged in accordance with relative benefits received. Recommendation: We recommend the Agency implement procedures to ensure programs are charged costs in accordance with relative benefits received. Management Response: Agree

Program: Various, including CFDA 93.778 ? Medicaid ? Allowable Costs/Cost Principles Grant Number & Year: Various, including 2005NE5ADM, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2019): 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. 45 CFR ? 75.403 (October 1, 2019) requires costs to be reasonable, necessary, and adequately documented. Per the CAP, the cost center IST Fiscal Projects Billing is: OCIO payments relative to NFOCUS system . . . . Costs associated with the IST Application SVCS NFOCUS Application Office will be allocated to the benefiting programs based on the NFOCUS end of quarter count of recipients receiving benefits associated with each program that benefits from the system. 45 CFR ? 75.405 (October 1, 2019) states, in part, the following: (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Good internal control requires procedures to ensure contract payments are reasonable, and costs are allocated in accordance with Federal requirements. Condition: Operating expenditures were neither adequately supported nor reasonable, resulting in questionable costs to Federal programs. A similar finding was noted in the prior audit. Repeat Finding: 2019-029 Questioned Costs: $60,074 known Statistical Sample: No Context: We randomly selected 26 Agency operating expenditures paid with Federal funds and noted the following: ? The Agency paid First Data Government Solutions LP (First Data) $66,749 to monitor Eligibility and Enrollment Solution projects during November 2019. However, the Independent Verification & Validation (IV&V) report, provided by First Data indicated that First Data found no data, identified no risks, made no observations, and participated in no meetings since August, 2019. Furthermore, the Agency was not able to provide supporting documentation that First Data was providing actual and necessary services at this time. The contract with First Data was from December 2016 through November 2019 to provide monthly IV&V reports on the project; however, the terms of the contract state: The State, in its sole discretion, may terminate the contract for any reason upon thirty (30) calendar day?s [sic] written notice . . . . The State may, at any time work is in progress, by written agreement, make alterations in the terms of work as shown in the specifications, require the Contractor to make corrections, decrease the quantity of work, or make such other changes as the State may find necessary or desirable. Because there appears to have been no activity on the project during this time, the Agency should have amended or terminated the contract and avoided making this payment to First Data. The transaction was paid 90% Federal funds and 10% State funds. As a result, we question costs of $60,074, the Federal portion of the payment. ? Two payments tested, totaling $277,164, were for technology fees by the Department of Administrative Services Office of Chief Information Officer (OCIO). The Agency allocated these costs among the different programs, based on point-in-time reports listing the number of registered users on each program. The Agency did not document these point-in-time reports; thus, the auditor was unable to verify that costs were allocated properly. Additionally, all of these costs were coded to CAP BU 25C20944 ? IST Fiscal Project Billing, this BU is specifically for ?OCIO Payments relative to NFOCUS Systems.? However, charges included were for MMIS, CHARTS, and NFOCUS, and other fees; thus, the coding of charges related to MMIS, CHARTS, and other fees to this BU resulted in an overstatement of costs coded to NFOCUS, and an understatement of costs coded to CHARTS and other programs. For the two payments tested, the NFOCUS CAP BU overcharges totaled $65,642 ($6,904 CHARTS/$58,738 Other Fees). Due to the nature of the error and lack of documentation on file, questioned costs for individual Federal programs could not be determined. ? One $87,239 payment to the OCIO was for 164,601 software and license purchases for the Access Manager Program. The Agency was unable to provide supporting documentation that 164,601 licenses were actually purchased on behalf of the programs charged. The total Federal sample tested was $398,587, and operating expenditures paid with Federal Fund 40000 during the fiscal year totaled $114,246,515. Cause: Inadequate policies and procedures for review and documentation of expenses. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk that programs are not being charged the proper amount. Payments to contractors without any documented service or benefit increases the risk of wasting State and Federal funds. Recommendation: We recommend the Agency improve procedures to ensure that cost allocations are properly documented, and that documentation is retained on file. We further recommend procedures be improved to ensure the State receives adequate services or benefits from a contractor before payments are made. Management Response: Partially Agree APA Response: We disagree that 45 CFR ? 95.626 requires an IV&V contractor to be paid for periods during which services are not provided.

Program: CFDA 10.557 ? Special Supplemental Nutrition Program for Women, Infants, and Children; CFDA 93.243 ? Substance Abuse and Mental Health Services Projects of Regional and National Significance; CFDA 93.674 ? John H. Chafee Foster Care Program for Successful Transition to Adulthood ? Allowability & Subrecipient Monitoring Grant Number & Year: 203NE706W1003, FFY 2020; H79SP080988, FFY 2020; G1901NECILP, FFY 2019 Federal Grantor Agency: U.S. Department of Agriculture; U.S. Department of Health and Human Services Repeat Finding: 2019-006, 2019-030 Questioned Costs: $151,670 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Summary: Audit finding 2020-011 (Lack of Adequate Subrecipient Monitoring), included in Part II of this report, relates to both the financial statements and Federal awards. The Agency administers various programs, paid with Federal and/or State funds, which involves granting subawards to other entities to carry out the activities of the program. During our testing of reimbursements made to subrecipients, we noted that the Agency lacked adequate procedures to ensure the expenses being reimbursed were reasonable and proper. A similar finding was noted in the previous audit. Recommendation: We recommend the Agency improve procedures for monitoring subrecipients. Such monitoring should ensure monthly reports are accurate and agree to support, and expenditures are in accordance with State and Federal requirements. Management Response: See Finding 2020-011

Program: CFDA 93.069 ? Public Health Emergency Preparedness; CFDA 93.889 ? National Bioterrorism Hospital Preparedness Program ? Allowability & Subrecipient Monitoring Grant Number & Year: NU90TP921891-01, FFY 2019; NU90TP922039-01, FFY 2020; U3REP190555A-01, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2019) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 45 CFR ? 75.302(a) (October 1, 2019) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? Good internal control requires procedures to ensure financial activity is recorded properly in the accounting system. 45 CFR ? 75.403 (October 1, 2019) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR ? 75.430(i)(1) (October 1, 2019) states, as is relevant, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: * * * * (C) The non-Federal entity?s system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 45 CFR ? 75.430(i)(3) (October 1, 2019) states, in relevant part, the following: [C]harges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 45 CFR ? 75.431 (October 1, 2019) states, in relevant part, the following: (c) The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker?s compensation insurance (except as indicated in ?75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities . . . . (d) Fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individual employees or by allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. Condition: Subrecipient monitoring procedures were inadequate, occurring for only 6 of 31 subrecipients. For the subrecipients that were monitored, the Agency did not adequately follow up on the deficiencies that were noted during monitoring to ensure corrective action was implemented. A similar finding was noted in the prior audit. Repeat Finding: 2019-032 Questioned Costs: $541,554 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: The Agency paid 31 subrecipients and one contractor during the fiscal year ended June 30, 2020. The Agency contracted for agreed-upon procedures of subrecipient expenditures for the 2020 fiscal year; however, the contractor was able to complete procedures for only six subrecipients before being requested to pause work due to the onset of the COVID-19 pandemic, which was directly impacting the subrecipients. For the six reports the contractor was able to complete, the contractor reviewed and obtained documentation for samples of transactions and other support available for varied quarters reimbursed through the fiscal year ended June 30, 2020. Upon completion of each subrecipient?s review, the contractor prepared a report providing the findings to the Agency. The Agency forwarded only one contractor report to the applicable subrecipient. No other documented communication occurred between the Agency and the subrecipients regarding findings noted, and there was no attempt to recoup questioned costs that were reported by the contractor. We tested 20 payments (19 subrecipient payments and one contractor), totaling $555,586. Of this sample, two subrecipients had completed agreed-upon procedures reports available for review, and one subrecipient provided detailed support with the reimbursement request. All 19 subrecipient payments tested lacked adequate documentation to support that expenditures were for actual and allowable costs. As a result, we question $541,554 of the $555,586 tested. During testing, we noted the following (most subrecipients had more than one type of error): ? For four payments tested, the subrecipients provided inadequate documentation to support the amounts charged to the subawards for personnel costs, including salaries and wages, fringe benefits (e.g., pension plan, health and life insurance, etc.), and taxes. One claim did not have support for the pay rates of each employee and for each employee?s enrollment in an insurance plan. For the three other payments, support for pay rates was available; however, for two, actual time worked was not provided (budgeted hours were used), as well as lacking support for insurance amounts and, for one, the allocation of hours charged was calculated incorrectly. These errors resulted in $100,348 in questioned costs. ? For 15 aid payments tested, charges for personnel costs were entirely unsupported. The subrecipients were charged for personnel costs based on the budget justification spreadsheet. There was no detailed support on file for these amounts charged, such as timesheets, payroll registers, pay rate and insurance enrollment documentation, etc.; therefore, we question all the personnel costs tested for these payments, totaling $264,075. ? For 14 payments tested, expenditures were charged to the subaward for items such as office supplies, training materials, office space/rent, computer equipment, travel, and contractual services. There was no support for these items, such as receipts, invoices/bills, purchase orders, cancelled checks, bank statements, etc. Questioned costs for non-personnel costs, excluding indirect costs, totaled $139,723. ? For 12 aid payments tested, subrecipients charged indirect costs to the grant. For all 12 payments, because the indirect costs are based on amounts questioned, indirect costs are questioned as well, totaling $37,408. Total Government Aid Payments (subrecipient aid and contractual aid) for this program for the fiscal year ended June 30, 2020, totaled $4,199,211. Federal payment errors noted were $541,554. The total sample tested was $555,586. The dollar error rate for the sample was 97.47% ($541,554/$555,586). This estimates the potential dollars at risk for the fiscal year to be $4,092,971 (dollar error rate multiplied by the population). Cause: The Agency?s internal controls for subrecipient monitoring were not followed. Effect: Without adequate subrecipient monitoring procedures, as well as follow-up procedures, to ensure subrecipient expenditures are allowable, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve subrecipient monitoring procedures to ensure subrecipient payments are actual and allowable costs in accordance with Federal regulations. We also recommend the Agency follow up on subrecipient deficiencies noted. Management Response: Partially agree. DHHS suspended its sub recipient monitoring contract during the COVID-19 federally declared emergency. This action was taken as both the DHHS Public Health Emergency Preparedness and Response unit and its sub recipients, including local public health departments, were occupied with pandemic response activities.

Program: CFDA 93.556 ? Promoting Safe and Stable Families ? Allowability & Subrecipient Monitoring Grant Number & Year: G1901NEFPSS, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2019) directs an Agency to ensure compliance with Federal requirements through the use of sound internal controls. A good internal control plan requires the pass-through entity to establish controls to ensure subrecipients use Federal awards in accordance with Federal compliance requirements, including procedures for monitoring of subrecipients? fiscal activities related to Federal expenditures. 45 CFR ? 75.352(d) (October 1, 2019) requires a pass-through entity to monitor the activities of a subrecipient to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. 45 CFR ? 75.403 (October 1, 2019) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. According to 45 CFR ? 75.511(a) (October 1, 2019), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate subrecipient monitoring procedures. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2019-034 Questioned Costs: Unknown Statistical Sample: No Context: Subrecipient payments for Promoting Safe and Stable Families (PSSF) for the fiscal year 2020 totaled $722,688. We tested one payment to a subrecipient for $73,407 for March 2020 expenses, of which $65,273 was payments passed through to other contractors, and $8,134 was for payroll and other direct and indirect costs. The Agency did not obtain detailed documentation for this payment. The Agency requested documentation for four of the subrecipient?s contractors for April through June 2020 expenses, reimbursed by the Agency in State fiscal year 2021. The Agency received Support Service Funding Requests and general ledger listings; however, detailed support such as timesheets, invoices, and receipts were not included. Also, the contracts between the subrecipient and the subcontractors were not included. Therefore, we were unable to determine if the payments were in accordance with contract and grant provisions. The Agency subsequently provided the contract for one of the subcontractors; however, the support provided was only a general ledger listing and was not sufficient to determine the payment was in accordance with the contract and grant provisions. Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure subrecipients are monitored, and adequate documentation is maintained to support that expenditures are allowable and in accordance with Federal requirements. Management Response: Agree

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability Grant Number & Year: #1701NETANF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2019), ?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.? Per 45 CFR ? 75.403 (October 1, 2019), allowable costs must be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure overpayments are returned timely to the Federal grant. Condition: The Agency erroneously made $257,314 in TANF overpayments in March 2019 to 822 families. This was a finding in the prior audit, and the majority has still not been repaid. Repeat Finding: 2019-036 Questioned Costs: Unknown Statistical Sample: No Context: On February 27, 2019, the Agency realized cash assistance payments to families for March were the same amounts from the prior month. In many instances, this resulted in overpayments. The Agency made $257,314 in overpayments to 822 families. For overpayments, the Agency sent demand letters to the recipients and subsequently set up accounts receivable. We reviewed 28 payments in detail in the prior audit and noted that 21 were Federal-funded and had overpayments of $6,454. In the current audit, we reviewed those 21 cases, which were tested and identified as Federal-funded in the prior audit. These 21 had outstanding overpayments of $4,903 at January 2020. As of February 8, 2021, $4,395 still had not been repaid. Fourteen of the 21 had no collections since January 2020. Cause: The Agency disagrees that overpayments due to Agency errors need to be returned to Federal funds when detected. The Agency does not return overpayments to the Federal grant until they are repaid or recouped from individuals. Effect: The Federal grant was overcharged due to Agency error, and the Agency has not repaid the Federal grant. Recommendation: We recommend the Agency implement procedures to ensure overpayments are returned timely to the Federal grant. The Agency could consider repaying the Federal grant immediately out of State general funds, and then depositing any eventual repayments/recoupments to general funds. Management Response: Does Not Agree. The Agency is returning overpayments in accordance with the DHHS collection policy. The Federal awarding agency, ACF, has previously stated we should follow our internal policies in regards to overpayments. APA Response: The Agency does not dispute having expended Federal funds improperly. The Agency is solely culpable for not only making those invalid expenditures but also failing to correct them in a timely manner. Consequently, the Agency should act responsibly by taking proactive measures to rectify its mistake ? not rely upon the actions of other parties, who are not at fault for the improper disbursements, to provide the necessary remedy. Having mishandled the Federal funds at issue, the Agency should ensure that those monies are returned to the Federal grantor immediately.

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Reporting Grant Number & Year: #1801NETANF, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 265.3(a) (October 1, 2019), states must collect on a monthly basis, and file on a quarterly basis, a TANF Data Report (ACF-199) and a Separate State Plan-Maintenance of Effort (SSP-MOE) Data Report (ACF-209). These reports include disaggregated information on families receiving TANF and SSP-MOE assistance. Information reported includes demographic data, the amount of assistance received, educational level, employment status, work participation activities, citizenship status, and earned and unearned income. Per 45 CFR ? 265.7 (October 1, 2019), the ACF-199 and ACF-209 reports must be complete and accurate. Condition: We requested the ACF-199 and ACF-209 reports for six cases. Two of six cases tested were not reported properly. A similar finding was noted in the prior audit. Repeat Finding: 2019-038 Questioned Costs: None Statistical Sample: No Context: The ACF-199 and ACF-209 are data reports electronically submitted to the Federal government. The reports are generated automatically. Therefore, it is important that the Agency review a sample of these submissions to ensure they are accurate. During our testing of six cases, we noted the following errors: ? For one case, the family was in neither the Separate State Plan nor the Solely State Funded Plan, so the Agency should have provided an associated ACF-199 report to the Federal government. However, no report was created or provided. ? For another case, the family was in neither the Separate State Plan nor the Solely State Funded Plan, so the Agency should have provided an associated ACF-199 report to the Federal government. However, no ACF-199 report was created or provided; instead, the Agency provided an ACF-209 report, which is meant for families in the Separate State Plan. The Agency was unsure why these errors occurred. Cause: The Agency did not devote adequate resources to ensuring the ACF-199 and ACF-209 reports were complete and accurate. Effect: Increased risk of significant information being reported incorrectly, which could result in Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure the ACF-199 and ACF-209 reports are complete and accurate. Management Response: Agree

Program: CFDA 93.563 ? Child Support Enforcement ? Allowability & Subrecipient Monitoring Grant Number & Year: 0G1901NECSES, FFY 2019; 0G2001NECSES, FFY 2020 Federal Grantor Agency: U. S. Department of Health and Human Services Criteria: Criteria: 45 CFR ? 75.303 (October 1, 2019) requires an Agency to ensure compliance with Federal requirements through the use of effective internal controls. A good internal control plan requires the pass-through entity to establish controls to ensure subrecipients comply with Federal requirements, including procedures for the proper monitoring of subrecipients? fiscal activities. 45 CFR ? 75.403 (October 1, 2019) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 45 CFR ? 75.352(d) (October 1, 2019) requires a pass-through entity to monitor the activities of a subrecipient to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. A good internal control plan requires procedures to ensure adequate supporting documentation is being collected prior to payment. Condition: Monitoring procedures were not adequate to ensure payments to subrecipients were for allowable expenditures. Seven of 27 payments tested did not have adequate supporting documentation for the amounts claimed. Repeat Finding: No Questioned Costs: $2,370 known (0G1901NECSES, $203; 0G2001NECSES, $2,167) Statistical Sample: No Context: The Agency has subaward agreements with County Clerks and County Attorneys to assist in the administration of the Child Support Enforcement (CSE) program. These subrecipients submit quarterly CSE claims to the Agency requesting reimbursement for various program expenditures, including salaries and benefits, various operating expenses, and indirect costs. The Agency reviews the quarterly claims and invoices or supporting documentation submitted with the claims. We tested 27 payments to subrecipients and identified the following items: ? One payment had no support for the employer?s share of insurance costs of $1,791. ? One payment included an invoice of $352 that was paid on another claim. ? One payment included unreasonable lodging costs of $105. ? One payment lacked support for meals and registration costs of $94. ? Two payments had unreasonable mileage reimbursements, totaling $28. ? One payment did not have supporting documentation for the percentage of time worked in the Clerk?s office for two employees. Federal questioned costs totaled $2,370. The total for payments tested was $694,698, and payments to subrecipients during the fiscal year totaled $9,393,338. The dollar error rate for the sample tested was .34% ($2,370/$694,698), which estimates the potential dollars at risk for fiscal year 2020 to be $31,937 (dollar error rate multiplied by population). Cause: Inadequate review of documentation remitted. Effect: Noncompliance with Federal regulations could result in sanctions. Without adequate monitoring procedures, there is an increased risk Federal awards could be used for improper/unallowable costs. Recommendation: We recommend the Agency strengthen its procedures to monitor subrecipients, including procedures to ensure expenditures are in accordance with Federal requirements, and adequate documentation is maintained. Management Response: Agree

Program: CFDA 93.575 and 93.596 ? CCDF Cluster ? Allowability & Eligibility Grant Number & Year: #G1901NECCDF, FFY 2019; #G1901NECCDM, FFY 2019; #G2001NECCDF, FFY 2020; #G1901NECCDD, FFY 2019; #G2001NECCDD, FFY 2020; #G2001NECCDM, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 42 USC 9858K(b) states, ?With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for? (1) any services provided to such students during the regular school day[.]? 45 CFR ? 98.67(a) (October 1, 2019) states, ?Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.? Title 392 NAC 4-003.01A states, ?The Department pays by attendance, not enrollment. Payment is not made for time when the child is not receiving care[.]? Title 392 NAC 5-001.01 states, in relevant part, ?Before furnishing any service, each Provider must sign Form CC-9B agreeing: . . . 7. To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]? Title 392 NAC 4-001 says, ?The worker notifies the Provider and the client of the client?s eligibility and the amount of the client?s fee on an authorization notice.? Title 392 NAC 4-003.02, ?Care for 6 or more hours must be billed by the day. Care for 10 or more hours in one day may be billed through hourly units for the 10th, 11th, and 12th hours . . . .? Title 392 NAC 4-002.01 requires the client to ?contact the worker within ten days when: 1. The client?s situation has changed (e.g., address, income, family composition, need for child care, child care schedule)[.]? Title 392 NAC 3-008.01 states, in part, that care is authorized only if each parent or caretaker: 1. Is employed; 2. Is actively seeking employment. The case manager may authorize child care for Employment First clients as defined in the EF Self-Sufficiency Contract. For nonEF clients, the case manager may authorize child care for two consecutive calendar months per program year July 1 through June 30 to enable the client to seek employment. Following the loss of employment, the client may receive two consecutive calendar months. Each time the client loses employment, s/he is entitled to two months of child care to allow him/her to seek employment; 3. Is participating in an EF activity that is included in the EF Self-Sufficiency Contract[.] The Child Care Provider Handbook (Handbook), dated January 2008, states, in relevant part, ?You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour . . .? Additionally, the Handbook states, ?You and the client/parent/caretaker must sign the calendar at the end of the billing period.? Good internal control requires procedures to ensure that payments are made: 1) in accordance with Federal and State requirements; and 2) for hours attended up to the hours noted on the authorization notice. Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. Repeat Finding: 2019-040 Questioned Costs: $2,066 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 40 child care claims and noted 16 with errors. Some payments had more than one type of error. ? One claim tested was for child care authorized while the parent was participating in the Employment First (EF) program. However, the parent participated in zero hours of EF activities for the claim period. The EF service plan was to ?continue care for the children, prepare meals, and help out? in support of her husband achieving self-sufficiency as a para legal. The parent was to care for the child; therefore, payment to the child care provider for nine days is not allowable. ? For three claims tested, the attendance calendar parent signatures did not appear proper. For one claim, the parent?s signature did not match the signature on the application. Therefore, it appears the attendance calendar was not signed by the parent, as required. For another claim tested, the attendance sheet provided had no parental signature. Also, for the third claim, the parent?s signature was dated almost one year after the service was provided. ? For two claims tested, the Agency was unable to provide the attendance sheets; therefore, the child care billed could not be verified or determined if in compliance with State and Federal requirements. ? For five claims tested, the hours claimed and paid did not mathematically agree to the attendance sheet provided. Two claims were not rounded properly. For three claims, the Provider failed to comply with Provider Agreements and NAC 392, which require care for six or more hours to be billed by the day; care for 10 or more hours in one day may be billed through hourly units. ? For one claim tested, the provider claimed two days of care when school was in session. After we questioned, the Agency verified that the child was at school on those days. For another claim tested, the Provider claimed nine hours of care on a school day, which would not be allowable. ? For three claims tested, child care was billed and paid over the authorized amount. A total of 17.36 hours was paid in excess of the service authorizations. Federal payment errors noted for the sample tested were $1,379. The total Federal sample tested was $7,449, and total child care Federal assistance claims for the fiscal year were $35,438,875. Based on the sample tested, the case error rate was 40% (16/40). The dollar rate for the sample was 18.51% ($1,379/7,449), which estimates the potential dollar risk for fiscal year 2020 to be $6,559,736 (dollar rate multiplied by the population). In addition to the $1,379 Federal questioned costs noted on the sample items tested, we also noted $687 of Federal questioned costs on other line items of the claims reviewed, which resulted from questionable signatures, service authorization exceeded, and failure to provide attendance calendars. Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and claims are in accordance with regulations. Effect: Ineffective review of claims increases the risk for misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency take the necessary action to recover the overpayments. Management Response: Agree

Program: CFDA 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: Various, including #G2001NECCDF, FFY2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.41 (October 1, 2019), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.03: To determine compliance with licensing regulations, the Department will conduct unannounced inspections: 1. A minimum of once each year of child care centers licensed for 29 or fewer children; and 2. A minimum of twice each year to child care centers licensed for 30 or more children. Per 391 NAC 3-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.] Per 391 NAC 4-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection, unless the center is located in a health care facility or school that receives more frequent sanitation inspections[.] A good internal control plan requires adequate documentation to be maintained to support compliance with health and safety requirements. Condition: The Agency did not have adequate procedures in place to ensure health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. Repeat Finding: 2019-042 Questioned Costs: None Statistical Sample: No Context: The Agency has two tiers of providers that are subject to health and safety requirements. These are child care centers and family child care homes. Each type of provider is subject to separate but similar State regulations. We tested 40 child care providers subject to health and safety requirements. We noted the following: One child care center did not have the required semi-annual inspections completed. There was only one inspection performed on May 16, 2019. This inspection was not signed by the Child Care Inspection Specialist who performed the inspection. No inspections were completed during calendar year 2020. Another child care center required to have semi-annual inspections did not have any inspections completed during calendar year 2019 and only one inspection was completed in calendar year 2020, after the audit period on December 11, 2020. For one child care center tested, a sanitation inspection has not been performed since July 25, 2016. Three child care centers tested did not have a fire inspection performed within the last two years: See Schedule of Findings and Questioned Costs for chart/table. For two inspections tested, the Agency could not provide documentation containing the provider?s signature, certifying all information provided during the review was true and correct. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care providers. This should include establishing a documented review of sanitation requirements for child care centers located in a school. These procedures should also include regular follow-up with the Fire Marshal or local fire departments to ensure the fire inspections are completed timely. Management Response: Partially agrees. The agency agrees that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children?s Services Licensing. The Agency disagrees with the finding, in part, because DHHS has policy and procedure for making timely referrals, as required by regulations. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure change in 2020; however, DHHS has no authority to require these entities to complete the inspections more promptly. The Agency also disagrees with the finding about fire and sanitation not being performed in a school-age-only childcare center located in a school. The Child Care Licensing Act was amended in 2018 to provide that school-age childcare programs operated in Nebraska Department of Education (NDE) approved or accredited schools shall be deemed to meet the standards of the State Department of Education for the care and protection of children. Neb. Rev, Stat, 71-1913 indicated that the requirements for DHHS to request the State Fire Marshal (SFM) or its? delegated authority to perform fire and sanitation inspections no longer apply to school age child care programs. DHHS has had extensive documented communication and follow up with these entities after the policy and procedure change in 2020; however, DHHS has no authority to require these entities to complete the inspections more promptly. To further improve policy and procedures requesting fire and sanitation documentation, the Office of Children?s Services Licensing will request a listing of inspections conducted in the schools and hospitals for School Age Only Child Care programs every November. APA Response: Per 45 CFR ? 98.41 the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. The Agency is the recipient of the Federal funds and is, therefore, ultimately responsible to ensure that fire and sanitation inspections are performed.

Program: CFDA 93.575 ? Child Care and Development Block Grant ? Allowability & Subrecipient Monitoring Grant Number & Year: #G1801NECCDF, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.352(d) (October 1, 2019) all pass-through entities must: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 45 CFR ? 75.352 provides the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal Award Identification. * * * * (iv) Federal Award Date . . . of award to the recipient by the HHS awarding agency; * * * * (xi) CFDA Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient?s records and financial statements as necessary for the pass-through entity to meet the requirements of this part[.] Allowable activities to improve the quality of child care services are detailed in 42 USC 9858e and include activities ?designed to improve the quality of child care services and increase parental options for, and access to, high-quality child care, and is in alignment with a Statewide assessment of the State's needs to carry out such services and care . . . .? A good internal control plan requires procedures to ensure compliance with Federal and State requirements. Condition: During our testing of subrecipient payments, we noted that the Agency did not have adequate documentation on file to support that payments were allowable. In addition, subawards did not include required information. A similar finding was noted in the prior audit. Repeat Finding: 2019-043 Questioned Costs: $63,355 known Statistical Sample: No Context: During the fiscal year, $6,091,941 was paid to child care subrecipients. The Agency paid $4,392,953 directly to subrecipients and paid $1,698,988 to the Nebraska Department of Education (NDE) related to subrecipient payments of NDE. We tested one subrecipient of the Agency and two NDE subrecipients. We noted the following: ? The Agency paid $3,884,700 during the fiscal year to one subrecipient, which in turn provided funds to school districts ?for activities relating to the quality of care for infants and toddlers.? We tested one payment for $1,123,591. The Agency reviewed a sample of expenditures for three of nine contractors. We noted several issues with the expenses sampled, including personnel costs not being adequately supported, some invoices not being on file, and documentation to support incentives being inadequate. Charges to the three contractors for the payment tested totaled $435,709, and we question costs of $63,355 in which documentation was not adequate to support the costs were reasonable, necessary, and allowable for the grant. We also noted the Agency did not provide the dollar amount made available under each Federal award and the CFDA number at time of disbursement, as required. ? NDE enters into subaward agreements with various subrecipients, including Educational Service Units, and pays those subrecipients from NDE funds. Then NDE requests reimbursement from the Agency. We tested two of nine NDE subrecipients, and the subawards did not include the Federal award date, the Federal awarding agency, or the requirement that auditors have access to records, and it did not identify the dollar amount made available under the Federal award and CFDA at time of disbursement. Cause: The Agency did not adequately and timely correct prior audit findings. Effect: The Agency did not comply with Federal requirements, and there is an increased risk for unallowable charges. Recommendation: We recommend the Agency implement procedures to improve subrecipient monitoring and ensure compliance with Federal requirements. Management Response: Agree

Program: CFDA 93.575 ? Child Care and Development Block Grant ? Period of Performance Grant Number & Year: #G1801NECCDF, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(d) (October 1, 2019): The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. Per 45 CFR ? 75.2 (October 1, 2019): Obligations, when used in connection with a non-Federal entity's utilization of funds under a Federal award, obligations means orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period. A good internal control plan requires procedures to ensure compliance with Federal regulations. Condition: Expenditures were charged to the FFY 2018 grant after the period of performance. A similar finding was noted in the prior audit. Repeat Finding: 2019-044 Questioned Costs: $980,526 known Statistical Sample: No Context: The FFY 2018 grant was required to be obligated by September 30, 2019. We tested one journal entry that transferred $980,526 claims for child care services from the State General Fund to the FFY 2018 Discretionary Fund grant. The claims were paid in February 2020 and, therefore, were not obligated as of September 30, 2019. Cause: Ineffective control procedures. The Agency has procedures to ensure each transaction has a separate preparer and approver; however, neither the preparer nor approver recognized that the underlying claims were outside the grant?s period of performance. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure expenditures charged are within the allowed time period. Management Response: Agree. FAPA will adjust procedures to ensure claims are identified properly in journal entries to make sure federal funding is not at risk. Procedures will updated to include timeliness of claims and reporting period.

Program: CFDA 93.658 ? Foster Care Title IV-E ? Reporting Grant Number & Year: #2001NEFOST, FFY 2020; #1901NEFOST, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. 45 CFR ? 75.302 (October 1, 2019) states, in part: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also ?75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . According to 45 CFR ? 75.511(a) (October 1, 2019), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate procedures to ensure Federal Financial Reports (FFRs) were accurate. A similar finding was noted in the prior audit. The Schedule of Prior Audit Findings says that the finding is complete. Repeat Finding: 2019-046 Questioned Costs: Unknown Statistical Sample: No Context: We tested the FFRs for the quarters ended September 2019 and March 2020 and noted the following: On the September 2019 report, Part 3 Line 5a, Maintenance Assistance Payments Operations, the expenditures were underreported due to including journal entries related to moving the State share of matching expenditures from the State General Fund to State cash funds. The March 2020 report, Part 3 Line 26a, Post Demonstration Costs Maintenance Assistance Payments Foster Family Home, underreported expenditures. The total expenditures reported agreed to the accounting system, but the Federal/State split did not agree. After further review, the auditor determined that transactions on one day appeared to be incorrectly charged. Instead of being split between Federal and State funds for Foster Care, the expenditures were split between State match for Foster Care and State funds for Child Welfare. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate review Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate and reconcile to the accounting system. Management Response: Agree

Program: CFDA 93.658 ? Foster Care Title IV-E ? Allowability Grant Number & Year: #1901NEFOST, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2019), costs must be necessary, reasonable, and adequately documented. Per Nebraska Foster Care Waiver terms and conditions, the State may use Federal Foster Care grant funds to pay for the following: [A]n expanded array of evidence-based programs and services that promote family stability and preservation. This array may include, but is not limited to: ? Parent Child Interaction Therapy (PCIT) ? Positive Parenting Program (Triple P) ? Wraparound Per Agency contracts with family support providers, mileage and travel time is to be submitted for payment on a Travel Log. Per the Parenting Time/Supervised Visitation Service Attachment, effective July 1, 2018, ?Established Rate?: 8. Travel Time and Distance shall be within 5 miles and 15 minutes per one-way trip of what is measured by MapQuest or Google Maps. One-Way trip shall be defined as the entire trip from initial starting address to the destination address where the Family Support Service starts, including all stops in between . . . . 9. DHHS shall pay the Contractor $18.00 per hour for time travelled to and from the location where the Parenting Time/Supervised Visitation Services are provided. The travel time shall be consistent with the length of time required to travel to deliver Parenting Time/Supervised Visitation Services in accordance with the DHHS Service Referral. Consistent shall be defined as being within fifteen (15) minutes of the time recorded by MapQuest or Google Maps. This 15 minutes will be considered a margin of error. If the length of time is more than fifteen minutes (15) over what is recorded on MapQuest or Google Maps, the Contractor shall note the reasons why on the travel log. If no explanation is provided on the Travel Log, DHHS will pay the Contractor for the length of time measured by MapQuest or Google Maps after rounding up to the nearest fifteen (15) minute increment . . . . 10. The mileage and travel time shall be submitted for payment on a Travel Log developed and provided by DHHS. The Travel Logs shall be submitted at the end of each month for services provided during the previous month. Travel time shall be rounded up to the nearest fifteen (15) minute increment for each one-way trip rate recorded on the Travel Log . . . . A good internal control plan requires procedures to ensure services billed are reasonable, and adequate supporting documentation is maintained for services provided. According to 45 CFR ? 75.511(a) (October 1, 2019), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: Three of 15 waiver expenditures tested were not adequately documented or were not reasonable. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2019-047 Questioned Costs: $227 known Statistical Sample: No Context: In 2013, the Federal grantor approved a waiver for the State to operate a child welfare demonstration project. The waiver allows for additional services to be provided that are not normally covered under Title IV-E Foster Care, but the demonstration project must remain cost neutral to the Federal government. During the fiscal year, the Agency charged $1,277,851 in waiver-based expenditures to the Foster Care grant. These expenditures were for travel time and mileage costs paid to contractors related to family support and parenting time/supervised visitation services. We selected 15 claims and noted the following: ? For one claim tested, the travel time was not in accordance with the contract, as the worker made three stops on the way to the visitation location to pick up the child and parent, and rounded the travel time for each stop separately. These three stops only constitute a single one-way trip. ? For another claim tested, the travel time was not in accordance with the contract, as one-way trips were not rounded properly. In addition, the travel time and mileage was not reasonable, as the worker claimed travel from/to their home in Silver Creek, Nebraska, which was approximately 24 miles from the contractor?s office in Columbus, Nebraska. ? For the third claim, the travel time and mileage was not reasonable, as the worker claimed travel from/to their home, which was approximately 47 miles from the contractor?s office. The worker?s home was in Grand Island, Nebraska, while the visitations and the contractor?s office were in Kearney, Nebraska. Federal questioned costs for the sample tested totaled $158. The Federal sample tested totaled $2,537. Total Federal population was $1,277,851. Based on the sample tested, the case error rate was 20% (3/15). The dollar error rate for the sample tested was 6.23%, which estimates the potential dollars at risk for fiscal year 2020 to be $79,610 (dollar error rate multiplied by population). In additional to the $158 Federal questioned costs noted on the sample items tested, we also noted $69 of Federal questioned costs on other line items of the claims reviewed. Cause: Inadequate review. The Agency allows the practice of workers travelling to/from their home. Effect: Unallowable costs were charged to the grant. Recommendation: We recommend the Agency implement procedures to ensure payments are proper and in accordance with State and Federal regulations. Management Response: Partially Agrees. Regarding the rounding up of one-way trips, the agency agrees that these claims were not in accordance with the contract language. This language was new to this contract and has been removed from successive contracts. Regarding Family Support Workers traveling from their home, there are many workers across the state who work from a home office rather than the business office. The agency believes it is unreasonable to require the worker to travel to an office location prior to a visit when the worker has no reason for going there. It creates an unreasonable amount of extra travel and waste of time for those workers to make these unnecessary trips.

Program: CFDA 93.658 ? Foster Care Title IV-E ? Allowability & Matching Grant Number & Year: #1801NEFOST, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.302(a) (October 1, 2019) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR ? 75.403 costs must be necessary, reasonable, and adequately documented. 45 CFR ? 75.306(b)(1) requires matching funds to be verifiable from the entity?s records. Per 45 CFR ? 1356.60(c) (October 1, 2019), ?Federal financial participation is available at the rate of fifty percent (50%) for administrative expenditures necessary for the proper and efficient administration of the title IV-E plan.? Good internal control requires procedures to ensure transactions are adequately supported and charged at the proper Federal Medical Assistance Percentage (FMAP). Condition: One of two journal entries tested was not adequately supported. Repeat Finding: No Questioned Costs: $564,081 known Statistical Sample: No Context: We tested a journal entry that moved $564,081 in Foster Care administration charges from State funds to the FFY 2018 Federal grant. The Agency did not identify specific underlying transactions transferred; instead, the Agency included detail for all Federal and State charges to the grant. Per review of the detail, there were insufficient underlying transactions from State funds. Over $8 million in Federal administration charges were detailed, but only $337,346 of State funds prior to the journal entry. Consequently, there was not adequate documentation to support that costs transferred to Federal funds were allowable or that administrative expenses were matched properly. Cause: Inadequate procedures and review. Effect: Increased risk for errors and loss of funds. Recommendation: We recommend the Agency improve procedures to ensure transactions are adequately supported and charged at the proper matching rate. Management Response: Agree

Program: CFDA 93.659 ? Adoption Assistance ? Allowability & Matching Grant Number & Year: #1601NEADPT, FFY 2016 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.302(a) (October 1, 2019) states: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Per 45 CFR ? 75.403 costs must be necessary, reasonable, and adequately documented. 45 CFR ? 75.306(b)(1) requires matching funds to be verifiable from the entity?s records. Per 45 CFR ? 1356.60 (October 1, 2019) Federal financial participation for adoption assistance payments are ?available at the rate of the Federal medical assistance percentage as defined in section 1905(b), 474(a)(1) and (2) and 479B(d) of the Act as applicable, definitions, and pertinent regulations as promulgated by the Secretary, or his designee.? The Federal medical assistance percentage (FMAP) for FFY 2016 grants was 51.16%. Good internal control requires procedures to ensure transactions are adequately supported and charged at the proper FMAP. Condition: One journal entry tested was not adequately supported or charged at the proper FMAP. Repeat Finding: No Questioned Costs: $280,429 known Statistical Sample: No Context: We tested a journal entry that moved $472,096 Adoption Assistance aid payments from State funds to the FFY 2016 Federal grant. The Agency did not identify specific underlying transactions transferred; instead, the Agency included detail for all Federal and State charges to the grant. We reviewed the detail, and after adjustment for two entries related to prior audit findings, we noted total aid of $27,819,587. At the FMAP of 51.16% for FFY 2016, the allowable Federal share would be $14,232,501; however, the Agency charged $14,512,930. The variance of $280,429 is considered questioned costs. Cause: Inadequate procedures and review. Effect: Increased risk for errors and loss of funds. Recommendation: We recommend the Agency improve procedures to ensure transactions are adequately supported and charged at the proper matching rate. Management Response: Agree

Program: CFDA 93.659 ? Adoption Assistance ? Allowability Grant Number & Year: #1901NEADPT, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.2 (October 1, 2019) states: Improper payment: (1) Means any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements; . . . Per 45 CFR ? 75.403 costs must be necessary, reasonable, and adequately documented. Good internal control requires procedures to timely correct improper payments. Condition: The Federal share of an adoption assistance overpayment was not returned to the Federal grant. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: In September 2019, the Agency erroneously paid a claim for $127,260 with a daily rate of $9,090 for 14 days. The rate should have been $9.90 per day. The Agency discovered the error in January 2020 and established an overpayment for $127,121. However, the Agency did not perform a journal entry to credit the grant for the Federal share ($66,840) of the overpayment. The Agency is withholding 50% of all payments to the payee until the balance is repaid, and at December 15, 2020, a total of $2,723 was recouped. At the present rate, it will take over 35 years to recoup the overpayment. After the auditors brought this issue to the Agency, the Agency performed a journal entry on January 28, 2021, to credit the grant for the Federal share of the overpayment. Cause: Clerical error. The system utilized to process assistance payments has edit checks for rate limits, but it was not set up for the adoption subsidy service code. Effect: Increased risk for errors and loss of funds. Recommendation: We recommend the Agency improve procedures to ensure assistance payments are allowable and accurate. We further recommend the Agency credit the Federal grant for overpayments on a timely basis. Management Response: Agree. NFOCUS has the capability to set limits on the rates entered. This was not being utilized at the time for this service. As soon as the error was discovered, a maximum limit was applied. In addition, a Service Authorization Monitoring report is run weekly which lists any authorizations created that exceed a certain threshold. However, the report was not picking up renewed/edited authorizations at the time. When this error was discovered, the report was modified to correct this.

Program: CFDA 93.659 ? Adoption Assistance ? Eligibility Grant Number & Year: #0G2001NEADPT, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 42 USC 671(a)(20)(A) requires the State have a plan that ?provides procedures for criminal records checks, including fingerprint-based checks of national crime information databases (as defined in section 534(f)(3)(A) of title 28), for any prospective foster or adoptive parent before the foster or adoptive parent may be finally approved for placement of a child . . . .? 42 USC 671(a)(20)(B)(i) states the following: [C]heck any child abuse and neglect registry maintained by the State for information on any prospective foster or adoptive parent and on any other adult living in the home of such a prospective parent, and request any other State in which any such prospective parent or other adult has resided in the preceding 5 years, to enable the State to check any child abuse and neglect registry maintained by such other State for such information, before the prospective foster or adoptive parent may be finally approved for placement of a child, regardless of whether foster care maintenance payments or adoption assistance payments are to be made on behalf of the child under the State plan under this part[.] Good internal control requires procedures to ensure documentation is maintained to support compliance with Federal regulations. Condition: The Agency did not have adequate documentation on file to support required background and registry checks were completed. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: For 4 of 30 adoption subsidies tested, there was not adequate support on file showing that the prospective adoptive parents satisfactorily met a criminal records check, including a fingerprint-based check. Therefore, the auditor was unable to verify that the adoptive parents had not committed any prohibited felonies. For three of these four, there also was not adequate support on file showing that the adoptive parents satisfactorily met a child abuse and neglect registry check. The adoptions in these cases occurred from 2007 to 2013. The Federal share of aid payments for the fiscal year ended June 30, 2020, totaled $22,157,164, on behalf of 5,135 children. Cause: Per Agency staff, these files were shredded due to the age of the file and the policy at the time, but the policy has since been changed. Effect: Without adequate support, there is an increased risk of noncompliance with Federal regulations and risk of improper payments. Recommendation: We recommend the Agency maintain adequate documentation showing background and registry checks were performed as required. Management Response: Agree. Prior to 2013, the agency was following State Patrol and FBI requirements that the documentation be shredded. Only after considerable discussions with State Patrol was the agency permitted to keep the records. Everything from 2014 onward has been has been kept on file.

Program: CFDA 93.667 ? Social Services Block Grant ? Allowability Grant Number & Year: #G1901NESOSR, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2019) provides, as is relevant, ?[A] State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditures of its own funds.? Per 473 NAC Appendix 473-000-201, ?Nebraska Social Services for Aged and Disabled Fee Schedule,? the rate for Home-Delivered Meals is $5.89 per meal. Per 473 NAC Appendix 473-000-501, ?Nebraska Social Services for Aged and Disabled Fee Schedule for Non-Emergency Transportation Services,? the base rate for transportation by a commercial wheelchair accessible van is $38. Per 473 NAC 5-002.06B, regarding Adult Day Care Frequency, states, ?A day is defined as six or more hours per day.? A good internal control plan requires procedures to ensure services were authorized, received, and performed in accordance with State and Federal requirements. Condition: Social Services Block Grant (SSBG) assistance payments tested did not comply with State and Federal regulations. A similar finding was noted in the prior audit. Repeat Finding: 2019-049 Questioned Costs: $7 known Statistical Sample: No Context: We tested five claims for SSBG services and noted three with errors. The claims were paid 90% with State funds and 10% with Federal SSBG funds. We noted the following: ? For one claim tested, the rate of transportation provided exceeded the allowable rate per regulations. ? For one claim tested, the rate of Home-Delivered Meals provided exceeded the allowable rate per regulations. The Agency was unable to provide documentation to support the approval of the increased rate. ? For one claim tested, the timesheet provided did not contain adequate information to verify the hours of service provided; therefore, the APA could not determine that six or more hours were provided each day, as required. The total Federal sample tested was $79, and Federal errors for payments tested were $7. Total SSBG Federal assistance payments for fiscal year 2020 were $1,195,960. Cause: Ineffective review. Effect: Ineffective review of claims increases the risk for misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. Management Response: Agree. The issues noted in the finding came from confusion within the RD staff on AD Waiver vs SSAD Policy.

Program: CFDA 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2019), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(1) states that personal assistance services not documented in the service plan are non-allowable services. Title 471 NAC 15-006 requires that the provider bill only for services actually provided and authorized, perform the personal assistance services noted on the service plan, and accurately document services provided on Form MC-37 ?Service Provider Timesheet.? Title 471 NAC 15-006.06C requires that, after receiving a provider?s timesheet and billing document, the beneficiary?s social service worker or designee must verify that ?the hours worked and services provided fall within the parameters of those authorized? by the service needs assessment. A good internal control plan requires procedures to ensure services provided agree to the service needs assessment. Condition: During testing of personal assistance service (PAS) claims, we noted that services provided did not agree to the service needs assessments. We also noted that the timing when services were provided did not appear reasonable. A similar finding was noted in prior audits. Repeat Finding: 2019-051 Questioned Costs: $118 known ($106 + $12 COVID-19) Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). Providers complete timesheets indicating that the services were provided and the times of services. We noted issues with four of five PAS claims tested, as follows: ? Units billed on the Service Provider Time Sheet did not agree to the minutes allotted by the SNA for services. The SNA details the tasks to be provided, the frequency allowed for each, and the number of minutes allotted for each task. One unit is 15 minutes. For example, on one day a provider worked six and three fourths hours from 8:00 am to 11:15 am and from 4:30 pm to 8:00 pm, claiming 27 units for the day, as follows: See Schedule of Findings and Questioned Costs for chart/table. In this example, 260 minutes or 18 units would be allotted for the tasks listed on the timesheet; however, the provider billed 27 units. Three of five claims tested had days for which the tasks listed on the timesheet did not agree to the units claimed. See Schedule of Findings and Questioned Costs for chart/table. ? Services detailed on the ?Service Provider Time Sheet? agreed to the SNA, but the timing when the services were provided did not appear reasonable. One provider worked from 8:00 am to 10:00 am and 8:00 pm to 10:00 pm on seven days. The provider claimed assistance with reminding the client to eat three times each day, which does not appear reasonable for the hours worked. ? One provider who billed 38.75 hours of PAS services for one week also billed 50 hours for chore services for another client during the same week. This provider received $142 for overtime during this week, and due to the provider billing for hours that did not agree to the units claimed, there are three hours that should not have been paid at the overtime rate. Additionally, it does not appear reasonable for the Agency to authorize almost 90 hours of services to be provided by one provider in one week. The following was the typical daily schedule for the provider for the week tested. See Schedule of Findings and Questioned Costs for chart/table. Federal payment errors in the sample totaled $118. The total Federal payments tested was $1,152, and the total Federal share of PAS claims for the fiscal year was $8,161,684. Cause: Procedures not adequate to prevent and/or detect errors. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient?s needs, as well as a risk of services being billed but not provided. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: Agree. The identified issues are the need for continued provider training and client/internal worker education on how to correctly complete a Service Needs Assessment for PAS, how that affects the billing, and audit checks of provider billing to ensure their billings match their Service Needs Assessment. Electronic Visit Verification was granted permission by CMS for a January 2021 implementation and was not in place to assist with issues identified in this survey.

Program: CFDA 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability and Eligibility Grant Number & Year: #1905NE5MAP, FFY 2019; #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2019): 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. Per 45 CFR ? 75.302(a), ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds.? 45 CFR ? 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-001.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources that the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. According to NAC Medicaid Eligibility Appendix 477-000-012, the Medicaid resource limit for a household size of one is $4,000. Per 477 NAC 23-001.05B1, ?In computing the amount of a unit?s total available resources, the potential sales value of all real property, other than the allowed exemption for the home, must be determined and used.? Per 477 NAC 23-001.05B5a, ?The disregard of any motor vehicle is not allowed when it has been determined that a client residing in a nursing home or an assisted living facility and receiving services through HCBS or PACE does not intend, or will not be able to return home if medical transportation is included in the payment to the facility[.]? 477 NAC 26-004.05(A) states in part, ?A portion of the income of the institutionalized spouse can be allocated to the community spouse when necessary to maintain the living standard of the community spouse,? and ?The allocation is subject to a minimum and maximum amount which is adjusted annually . . . The income of the community spouse is compared to a sum of the following factors: (i) The minimum maintenance allowance; (ii) Excess shelter costs, as defined; and (iii) A standard utility amount.? 471 NAC 12-007 states the following, in relevant part: When an individual requests admission to or continuous residence in a Medicaid-certified nursing facility (NF), the facility must implement the preadmission screening and resident review (PASRR) as defined in this chapter. An individual who has an indication or diagnosis of serious mental illness, intellectual disability or a related condition, or a dual diagnosis may be admitted to a nursing facility (NF) or continue to reside in a nursing facility (NF) only when the individual is determined to be appropriate for nursing facility (NF) services through the preadmission screening and resident review (PASRR). 471 NAC 12-006.02(D)(i) states the following: If the level of care (LOC) evaluator determines that the applicant meets nursing facility level of care (NF LOC) criteria and the client chooses to receive nursing facility (NF) services, the level of care (LOC) evaluator makes appropriate notifications. Title 45 CFR ? 75.511(a) (October 1, 2019) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure income, resources, and living arrangements are updated for changes timely, adequately documented, and verified. Condition: The Agency did not adequately verify the income and resources of individuals residing in nursing facilities to ensure limits were not exceeded, and the individuals were eligible. Additionally, one nursing facility payment tested was paid at a level of care that did not agree to the admission assessment. The Summary Schedule of Prior Audit Findings states the corrective action is complete. Repeat Finding: 2019-053 Questioned Costs: $1,056 known ($635 #1905NE5MAP; $383 #2005NE5MAP; $38 COVID-19) Statistical Sample: No Context: We tested 25 nursing facility payments and noted the following issues: ? For one recipient, the Agency paid a Nursing Facility on two different claims for the same day of care provided on October 14, 2019. Therefore, one day paid on the second claim is considered questioned costs, with a Federal share $45. ? One recipient owned a second property, which was not included as a resource. The 2019 assessed value of the property was $37,325, and the recipient reported a loan against the property. However, no documentation was obtained by the Agency to determine the value of the loan. If the property value had been included as a resource, the recipient would have been over the resource limit and ineligible for Medicaid. Therefore, the entire claim is considered questioned costs, with a Federal share of $376. ? Three recipients had title to vehicles that were not currently registered, and one recipient had title to a vehicle that was currently registered; however, none of these vehicles were included as resources. The Agency failed to inquire with the recipients to determine if the vehicles were still in their possession. ? For one recipient, the calculated community spouse maintenance allowance included a mortgage payment, real estate taxes, and homeowner?s insurance expense, which were last verified by the Agency in 2008 and 2014. The annual review of eligibility for the recipient completed in April 2019 and April 2020 by the Agency should have included a verification of the current amount of maintenance expenses paid by the recipient and the spouse of the recipient. ? One recipient level of care did not agree to the admission assessment. Nursing facilities receive reimbursement for services at the established level of care rate. A level of care resource classification known as Resource Utilization Groups (RUG) determines the daily payment rate. The RUG reflects a patient?s severity of illness and services required based on an admission assessment. We noted that the level of care listed on a claim for June 2019 nursing facility services was 180 but should have been 101, based on the admission assessment. This resulted in an overpayment of $1,207, with a Federal share of $635. Federal payment errors noted were $1,056. The total Federal sample tested was $52,218, and the total Federal nursing facility expenditures during the fiscal year were $221,611,077. Based on the sample tested, the case error rate was 32% (8/25). The dollar error rate was 2.02% ($1,056/$52,218), which projects the potential dollars at risk for fiscal year 2020 to be $4,476,544 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. Additionally, the Agency relies on the provider to submit a claim adjustment if the level of care paid does not agree to the established level of care from the admission assessment. Effect: If income and resources are not adequately verified, there is an increased risk recipients will be determined eligible for Medicaid inappropriately or determined eligible with an incorrect share of cost. Further, if the Agency does not pay for nursing facility services based on the level of care from the admission assessment, there is an increased risk that incorrect amounts will be paid for Medicaid claims, resulting in a loss of funds. Recommendation: We recommend the Agency implement procedures to ensure income and resources are adequately documented and verified. We also recommend the Agency implement procedures to ensure claims are paid at the correct level of care. Management Response: Agree. The department will continue to review policies and procedures and work to ensure field operations staff are properly trained. Additional guides and tip sheets will be made available as needed.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 447.253(b)(1)(i), (October 1, 2019) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR ? 447.253(g) (October 1, 2019), ?The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.? The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits) says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. AICPA Professional Standards AU-C Section 500.A32 states the following: Audit evidence obtained directly by the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the application of a control) . . . . Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies, facsimiles, or documents that have been filmed, digitized, or otherwise transformed into electronic form, the reliability of which may depend on the controls over their preparation and maintenance. Title 45 CFR ? 75.511(a) (October 1, 2019) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure a risk assessment is performed on long-term care facilities, and those considered high risk are field audited in order to maintain the integrity of the Medical Assistance Program. Condition: We noted that the Agency did not perform field audits on any long-term care facilities. A similar finding was noted in prior audits. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2019-054 Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs risk assessments of the facilities each year and identifies which facilities are high-risk. During fiscal year 2020, no facilities were identified as high-risk and no field audits were performed for any facilities identified as high-risk in prior years. In prior audits we noted that during fiscal year 2016 the Agency identified nine high-risk facilities for the period ended June 30, 2015; only three had field audits performed. The Agency did not document why field audits were unnecessary for the others. We also noted one high-risk facility identified in fiscal year 2017 had not yet had a field audit. During fiscal year 2018, the Agency identified 23 high-risk facilities for the period ended June 30, 2017. During fiscal year 2019, the Agency identified 21 high-risk facilities for the period ended June 30, 2018; however, the 21 facilities were no longer determined to be high-risk for the period ended June 30, 2019. The Agency has since issued a Request for Proposal for Contractual Services on July 10, 2020, seeking to find a qualified bidder to provide Medicaid reimbursement services, including performing field and desk audits for long-term care facilities. However, no contract has not been awarded as of September 17, 2020. Cause: The Agency did not dedicate adequate resources to the task of field audits. Effect: When facilities do not have periodic field audits, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency devote adequate resources to field audits of long-term care facilities. Management Response: Partially Agrees. The department agrees that field audits for the years in the report were not yet completed. However, the department disagrees with the finding on the basis that the years in question are still within the timeframe allowed in state statute to complete the field audits identified as ?high risk? through the course of the annual desk audit reviews. APA Response: Although the State Plan allows the Agency to initiate an audit within five years, it does not seem reasonable for the Agency to delay initiation of an audit of a provider identified as high risk. High-risk providers should be audited as soon as possible to ensure issues are resolved timely and to reduce the risk of errors or abuse occurring.

Program: CFDA 93.778 ? Medical Assistance Program; 93.778 ? COVID-19 Medical Assistance Program ? Allowability Grant Number & Year: #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 45 CFR ? 75.403 (October 1, 2019) requires costs to be necessary, reasonable, and adequately documented. Title 45 CFR ? 75.302 (October 1, 2019) requires financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to a level of expenditures adequate to establish that the use of these funds were in accordance with applicable regulations. Title 45 CFR ? 75.302 also requires each state to expend and account for Federal awards in accordance with State laws and procedures. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Per 45 CFR ? 75.303 (October 1, 2019), an Agency must establish and maintain effective internal control to ensure compliance with Federal requirements. Condition: Depreciation amounts included in the provider rate for the Beatrice State Development Center (BSDC) were not adequately supported. BSDC is a State facility of the Agency. A similar finding was noted in the prior audit. Repeat Finding: 2019-055 Questioned Costs: $64,021 known ($57,505 and $6,516 COVID-19) Statistical Sample: No Context: BSDC is a State intermediate care facility for individuals with developmental disabilities. Medicaid reimburses the State for the cost of care of Medicaid-eligible individuals. The Agency prepares a cost report to determine the cost per day to be reimbursed. In addition to depreciation from the EnterpriseOne system, the Agency also used a depreciation schedule from an unknown source that was not adequately supported. Depreciation amounts used in the rate calculation totaled $232,675, but only $127,585 was supported by EnterpriseOne, leaving $105,090 unsupported. The Federal share of $64,021 was unsupported and is questioned costs. Cause: Agency failed to correct finding noted since 2017. Effect: If inaccurate or unsupported information is used to calculate the Medicaid cost per day, there is an increased risk of the rate being inaccurate and the State overcharging Medicaid for services. Recommendation: We recommend the Agency ensure that all costs are adequately documented and in accordance with Federal requirements. Management Response: Agree.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #2005NE5MAP, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per Title 42 CFR ? 455.104(b) (October 1, 2019), the State Medicaid Agency must obtain the following disclosures from the disclosing entity: (1)(i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. * * * * (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). 42 CFR ? 455.101(c) (October 1, 2019) defines a person ?with an ownership or control interest? as, in part, a person or corporation that: (a) Has an ownership interest totaling 5 percent or more in a disclosing entity; (b) Has an indirect ownership interest equal to 5 percent or more in a disclosing entity; Additionally, under 42 CFR ? 455.101 a person ?with an ownership or control interest? includes ?an officer or director of a disclosing entity that is organized as a corporation,? and a ?managing employee? includes ?a general manager, business manager, administrator, director, or other individual who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization, or agency[.]? Per 42 CFR ? 455.436 (October 1, 2019), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment . . . . Per 42 CFR ? 455.412 (October 1, 2019), the State Medicaid Agency must also: (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. 45 CFR ? 75.303(a) (October 1, 2019) requires the Agency to ?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.? Good internal control requires procedures to ensure all required disclosures are provided. Condition: Medicaid providers were not screened properly or disclosures were not obtained for managing employees or persons with ownership or controlling interest. A similar finding was noted in the prior audit. Repeat Finding: 2019-059 Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid providers (16 Long-Term Care facilities, 7 Hospitals, and 2 Intermediate Care Facility for Intellectually Disabled). We noted the following: ? Nine providers tested did not have adequate ownership screening or disclosures. The providers failed to disclose any managing employees or persons with ownership or controlling interest during the enrollment or revalidation process; as a result, only the organization was screened and disclosed. The Agency did not have procedures to reject or follow up on disclosure forms that were clearly incomplete. Further, each of the providers submitted documentation, including lists of officers, directors, and other managing employees, when they submitted applications for their annual license in 2020. This documentation was available on the Agency?s website; however, the Agency did not review the documentation to ensure proper disclosures were made by the providers. ? Two providers tested did not have license verification performed. One provider was revalidated in June 2019, and the other provider was a new provider who registered in September 2017. The State Medicaid agency must revalidate the enrollment of all providers regardless of provider type at least every five years in accordance with 42 CFR ? 455.414. Cause: The Agency relies on the provider?s disclosure to be complete, true, and accurate. During the fiscal year, the Agency made changes to the online provider enrollment portal to ensure proper disclosures from providers are made going forward; however, these changes had no effect on providers who did not go through the revalidation process or were not newly enrolled in the program during the fiscal year. The Agency also relies on the provider enrollment system to notify them of the steps required to be performed for provider enrollment; however, for license verifications, the step is not in the system and the Agency has to perform manual procedures to ensure the provider is licensed and that the license has not expired or has no current limitations. This manual process was overlooked by the Agency. Effect: Without adequate procedures to ensure providers are screened and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. We also recommend the Agency implement procedures to ensure license verifications are performed. Management Response: Partially Agrees. The Department disagrees with the first bullet regarding Medicaid providers not being properly screened or disclosures not obtained for managing employees or persons with ownership or controlling interest. The Department follows State and Federal law involving mandatory disclosures but verification of disclosures is not required. Further, no viable primary source verification exists to validate complete and accurate disclosures. The Department partially agrees with the second bullet regarding the missed licensed screening and has since taken steps within the provider screening and enrollment system to prevent the missed manual license screening from reoccurring. Interventions with providers practicing without licenses are handled retrospectively. Steps are being taken to verify that providers are licensed appropriately. APA Response: 45 CFR ? 75.303 requires the Agency to ?[e]stablish 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.? It is not sufficient for the Agency to rely on the provider?s disclosures. Obvious errors and omissions should be reviewed to ensure compliance with Federal regulations.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability Grant Number & Year: #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2019) requires the Agency to ?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.? Title 45 CFR ? 75.302 requires each state to expend and account for Federal awards in accordance with state laws and procedures. 403 NAC 5-004.12(A) states, in part, the following: The following limitations apply to In-Home Residential Habilitation: * * * * (iii) This service cannot be provided in conjunction with Habilitative Community Inclusion . . . . The ? 1915(c) Home and Community-Based Services Waiver, effective June 1, 2018, through September 30, 2019, states, in part, the following: In-Home Residential Habilitation service is individually-tailored supports for a waiver participant that assists with the acquisition, retention, or improvement in skills related to living in the community . . . . This service cannot be provided in conjunction with Habilitative Community Inclusion and Adult Companion service. Good internal control requires procedures to ensure costs are in accordance with State and Federal requirements. Condition: We tested 25 claims paid from the Comprehensive Developmental Disability Waiver and noted that one payment did not comply with State and Federal requirements. Repeat Finding: No Questioned Costs: $178 known Statistical Sample: No Context: For one claim tested, the individual received 9.25 hours of In-Home Residential Habilitation in July 2019; however, the Federally approved waiver noted that In-Home Residential Habilitation services could not be provided in conjunction with Habilitative Community Inclusion services. The individual also received 2.25 hours of Habilitative Community Inclusion during July 2019. Although no overlapping hours were billed, this was not in accordance with the waiver and, therefore, we question the 9.25 hours with $178 Federal share of questioned costs. In-Home Residential services were removed from the waiver approved effective October 1, 2019, and replaced with Independent Living and Supported Family Living Services. Federal payment errors for the sample tested were $178. The total Federal sample tested was $27,889, and total CDD payments for the fiscal year was $185,207,977. The dollar error rate for the sample was 0.64% ($178/$27,889), which estimates potential dollars at risk for fiscal year 2020 to be $1,185,331 (dollar error rate multiplied by population). Cause: The former Division Director was allowing Habilitative Community Inclusion and In-Home Residential services for the same individual. Effect: Increased risk for unallowable charges and noncompliance with regulations. Recommendation: We recommend the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: Does not agree. DHHS does not agree with the finding. DHHS observes that the phrase `in conjunction with? is an idiomatic expression with `in combination with? or `together with? as common definitions. The restriction in 403 NAC 5-004.12(A) and the federally approved waiver concerns the concurrent provision of the In-Home Residential Habilitation service with the Habilitative Community Inclusion service, not the concurrent authorization of the services. APA Response: The funds at issue were approved and received during the same month; therefore, it is difficult to countenance the claim that they were not ?provided in conjunction with? ? or, as noted in the agency?s response, ?in combination with? or ?together with? ? each other in violation of Federal regulations and their derivative State counterparts. Because this comment addresses the provision of Federal funds pursuant to a waiver approved under Federal law, the APA must continue to report the present concern unless authoritative Federal guidance directs otherwise.

Program: 93.898 ? Cancer Prevention & Control Programs for State, Territorial & Tribal Organizations ? Allowability & Subrecipient Monitoring Grant Number & Year: 17NU58DP006278, FFY 2020 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303(a) (October 1, 2019) requires the Agency to ?[e]stablish and maintain effective internal control over the Federal award . . . .? Good internal control requires procedures to ensure costs are reasonable and adequately documented. Per 45 CFR ? 75.403, costs must be reasonable, necessary, and adequately documented. Per 45 CFR ? 75.404, ?A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.? 45 CFR ? 75.353 states: With prior written approval from the HHS awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in ?75.201. 45 CFR ? 75.201(b) states, in part: [P]ass-through entities as permitted in ?75.353, may use fixed amount awards (see ?75.2 Fixed amount awards) to which the following conditions apply: (1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The HHS awarding agency or pass-through entity may use fixed amount awards if the project scope is specific and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost . . . . Condition: Subrecipient transactions were paid as fixed amount subawards but did not have adequate documentation that the award was based on a reasonable estimate of actual costs. A similar finding was noted in the prior audit. Repeat Finding: 2019-061 Questioned Costs: $30,000 known Statistical Sample: No Context: We tested one payment of $30,000 for ?Milestone Clinic Assessment,? which agreed to the fixed amount subaward. After we requested support, the Agency obtained from the subrecipient a listing of salaries and benefits by individual and overhead and printing. Expenses listed totaled $29,924. However, there was no support on file to verify the salaries, benefits, or that the time spent was accurate or actual costs. Additionally, there was no support to verify the overhead and printing costs were related to the assessments or were the actual costs. Documentation was not adequate to support the fixed amount paid was a reasonable basis of actual cost. Subrecipient payments for the fiscal year totaled $906,104. Cause: The Agency did have Federal grantor approval for fixed amounts subawards; however, supporting documentation provided to the auditors was not adequate to determine the amounts were reasonable. Effect: When amounts paid are not adequately documented, there is an increased risk that charges will be excessive. Recommendation: We recommend the Agency maintain adequate documentation to support that fixed amount subawards are based on a reasonable estimate of actual costs. Management Response: Does Not Agree. The Centers of Disease Control and Prevention has approved the Fixed Cost Subaward agreement with Partnership for a Healthy Lincoln. The funder has reviewed the cost reimbursement for each deliverable, the required documentation for reimbursement of the deliverable, and has approved all activities and budget as submitted. Activities performed under the scope of this contract are required activities under the federal awards they support. CDC has ability to review costs across all 67 national programs and has approved Nebraska?s cost as being reasonable. APA Response: Per 45 CFR ? 75.201(b)(1), fixed amount subawards are allowable if ?adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost.? Documentation was not adequate to support that the fixed amounts were a reasonable estimate of actual costs.

Program: CFDA 17.225 ? Unemployment Insurance (UI) ? Federal; CFDA 17.225 ? COVID19 ? Unemployment Insurance ? Federal; CFDA 17.225 ? Unemployment Insurance ? State ? Allowability & Eligibility Grant Number & Year: FFY 2019 and FFY 2020 Federal Grantor Agency: U.S. Department of Labor Repeat Finding: No Questioned Costs: $462,992 known (UI ? Federal, $3,408; COVID19 ? UI ? PEUC Federal, $1,946; COVID19 ? UI ? FPUC Federal, $299,009; COVID19 ? UI ? PUA Federal, $34,335; UI ? State, $124,294) Statistical Sample: No Summary: Audit finding 2020-019 (Inadequate Controls, Improper Payments and Possible Fraudulent Claims), included in Part II of this report, relates to both the financial statements and Federal awards. The APA sent confirmation requests to claimants and employers, performed a random sample of benefit payments, and matched benefits to State employees. Our procedures revealed the following: ? Failure to perform key control procedures ? Potential fraudulent claims based on confirmation responses ? Ineligible payments to inmates ? Payments to individuals with excessive wages The APA randomly selected 60 claimant benefit payments (8 from July 1, 2019, through March 31, 2020, and 52 from April 1, 2020, through June 30, 2020). The random sample consisted of 50 regular UI payments and 10 PUA payments. We reviewed the claims to ensure that adequate supporting documentation was on file, and controls were in place, to determine whether eligibility was proper. The total sample tested was $59,463, and questioned costs for payments tested were $39,229. Total payments to those claimants were $330,553 for fiscal year 2020, and additional payments of $153,136 from July 1, 2020, to October 22, 2020. Total benefit payments for the fiscal year ended June 30, 2020, were $811,758,290. Based on the sample tested, the dollar error rate for the sample was 65.97% ($39,229/$59,463), which estimates the potential dollars at risk for fiscal year 2020 to be $535,534,130 (dollar error rate multiplied by population). We noted additional questioned costs during testing, totaling $423,763, for fiscal year 2020. Recommendation: We recommend the Agency implement procedures to prevent fraudulent or improper UC benefit claims from being paid. Those same procedures should also ensure compliance with State and Federal requirements, ensuring the following: 1) recipients of benefits are eligible for those payments; 2) weekly benefit amounts are calculated correctly; 3) individuals do not receive payments from more than one program during the same week; 4) claims are reviewed by staff when necessary; 5) benefit overpayments are recouped; 6) each claimant?s last separation from employment is adjudicated; and 7) approved STC plans are followed. Lastly, we recommend the Agency reactivate the quarterly cross-match procedures required by Federal regulation, as well as consider reviewing those past quarters when the process had been discontinued for possible overpayment and recoupment of ineligible benefits. Management Response: NDOL disagrees with finding 2020-019

Program: CFDA 17.225 ? Unemployment Insurance ? Federal; CFDA 17.225 ? Unemployment Insurance ? State ? Special Tests and Provisions Grant Number & Year: FFY 2019 and FFY 2020 Federal Grantor Agency: U.S. Department of Labor Criteria: States annually compute an ?experience rate? for contributing, or tax-remitting, employers. The employer?s ?experience? with the unemployment of former employees is the dominant factor in the computation of the employer?s annual State UI tax rate. The computation of the employer?s annual tax rate is based on State UI law (26 USC 3303). Per 2 CFR ? 200.302(a) (January 1, 2020), ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.? Neb. Rev. Stat. ? 48-652(3)(a) (2020 Cum. Supp.) provides the following: Each experience account shall be charged only for benefits based upon wages paid by such employer. No benefits shall be charged to the experience account of any employer if: (i) Such benefits were paid on the basis of a period of employment from which the claimant (A) left work voluntarily without good cause, (B) left work voluntarily due to a nonwork-connected illness or injury, (C) left work voluntarily with good cause to escape abuse as defined in section 42-903 between household members as provided in subdivision (1) of section 48-628.13, (D) left work from which he or she was discharged for misconduct connected with his or her work, (E) left work voluntarily and is entitled to unemployment benefits without disqualification in accordance with subdivision (3) or (5) of section 48-628.13, or (F) was involuntarily separated from employment and such benefits were paid pursuant to section 48-628.17; and (ii) The employer has filed timely notice of the facts on which such exemption is claimed in accordance with rules and regulations adopted and promulgated by the commissioner. The State maintains accounts on State UI taxes received or due from individual employers and the UI benefits charged to the employer. Good internal controls require procedures to ensure that employers are properly charged in accordance with State statute. Condition: During testing of employers? accounts, we noted that 4 of 25 employers tested were not properly charged unemployment taxes. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency used the Benefit Payment System (BPS) to process payments to claimants from July 1, 2019, to September 30, 2019. Then the Agency switched to the Geographic Solutions Unemployment System (GUS) starting on October 1, 2019, to process payments to claimants. In both BPS and GUS, the Agency would determine if the employer should be charged or non-charged. Any charges to employers would then be recorded in the Tax Management System (TMS), which is the system used to track the employers? accounts. See the table below for the issues noted. See Schedule of Findings and Questioned Costs for chart/table. The net amount undercharged within the sample was $5,339. The total sample tested was $141,909, and the total population was $237,274,076. The dollar error rate for the sample was 3.76% ($5,339/$141,909), which estimates the potential amount undercharged for fiscal year 2020 to be $8,921,505 (dollar error rate multiplied by population). Cause: System errors and inadequate procedures. Effect: Without adequate procedures for charging properly for benefits, there is an increased risk of not only employers being charged improperly but also noncompliance with both Federal regulation and State statute. Recommendation: We recommend the Agency improve procedures to ensure employers are charged properly for benefits in accordance with both Federal regulation and State statute. Management Response: NDOL disagrees. As stated in 26 CFR section 31.3302(a)-3(a)(1), the ?credits? referenced in the section are the amount of ?contributions? paid by the employer under state law. As defined in Neb. Rev. Stat. ?48-602(12), contributions are the federal portion of the combined tax paid by an employer. 26 CFR section 31.3302(a)-3(a)(1) requires that the amount of taxes paid by an employer must be properly reported in order for the employer?s FUTA credits to be properly calculated. Benefits charged under Neb. Rev. Stat. ?48-652 are evidence of the experience of an employer but have no tie to the amount of contributions reported under 26 CFR section 31.3302(a)-3(a)(1). The charging of benefits may affect an individual employer?s tax rate in subsequent years but does not affect the amount of taxes collected by the Department. As per subsection (4) of Neb. Rev. Stat. ?48-649.03, tax rates are based upon ?the amount of benefits paid from combined tax during the four calendar quarters ending on September 30 of the preceding year? irrespective of whether the benefits were chargeable to a specific employer or the pool account. The charging of benefits has no impact on the amount of combined tax collected. The Auditor?s assertion that NDOL has ?consistently? failed to meet the requirements of ?48-652(3)(a) is unsupported by historical records. The charging of benefits to employer experience accounts has been a part of the USDOL TPS review process since the TPS reviews began in 1996. NDOL has received a passing score on the charging portion of the TPS review each year since 2008. APA Response: An employer is taxed based on the employer?s experience rating, which is affected by how much that employer is charged for benefits received by claimants. When charged improperly, therefore, the employer will not be taxed properly. As noted above, 2 CFR ? 200.302(a) requires, ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.? This is problematic given that the Agency has failed to comply consistently with the requirements of ? 48-652(3)(a). We noted a 16% error rate for the employer accounts tested.

Program: CFDA 12.401 ? National Guard Military Operations and Maintenance (O&M) Projects ? Cash Management Grant Number & Year: Appendices ? W91243-19-2-1001, FFY 2019; W91243-20-2-1001, FFY 2020; and W91243-20-2-1024, FFY 2020 Federal Grantor Agency: U.S. Department of Defense Criteria: Title 2 CFR ? 200.305(a) (January 1, 2020) states, in part, ?For states, payments are governed by Treasury-State CMIA agreements and default procedures codified at 31 CFR Part 205 . . . .? Title 31 CFR Part 205 (July 1, 2019) implements the Cash Management Improvement Act (CMIA) and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2019, through June 30, 2020, requires the program to request Federal funds in accordance with the pre-issuance funding technique by which funds are to be requested and deposited in a State account not more than three business days prior to the disbursement of funds. Master Cooperative Agreement (October 2015), Article V ? Payment, Section 503, Payment by Advance Method, states, ?The advance payment method shall be according to procedures established in, NGR 5-1, Chapter 11, and 2 CFR ? 200.305.? National Guard Regulation (NGR) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, ?[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).? A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year. A similar finding was noted in the prior audit. Repeat Finding: 2019-068 Questioned Costs: None Statistical Sample: No Context: We noted the timing of four of five drawdowns tested was not in compliance with NGR 5-1. Funds were expended from 53 to 154 calendar days after the drawdown of Federal funds, which exceeded the 45-day maximum per NGR 5-1. We also noted that five of five drawdowns tested were not in compliance with the applicable funding technique outlined in the CMIA Agreement. Funds were expended from 27 to 105 business days after the drawdown of Federal funds, which exceeded the three business day maximum, as outlined in the CMIA Agreement. A similar finding was noted during the previous audit. In its Corrective Action Plan for the prior-year finding, the Agency indicated the following: The Nebraska Military Department will continue to exercise all efforts to minimize the time between the drawdown of federal funds and their disbursement for program purposes. Due to the complexity of the funding structure and funding sites within the Department, the Nebraska Military Department plans to follow-up with DAS-Accounting to seek an exception to the CMIA, based on the nature of compliance requirements. However, the Agency noted that due to other operational priorities, it did not follow-up with DAS-Accounting during the fiscal year ended June 30, 2020, to seek the exception. Cause: Funds were drawn down in order to have adequate money available at the end of the State and Federal fiscal years. The Agency?s policy was to follow the NGR requirements of 45 days rather than the CMIA Agreement requirement of three business days. Effect: The Agency is not in compliance with Federal cash management requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard Regulations. Management Response: The Agency acknowledges the finding. We also note that the requirement per the CMIA Agreement which requires the program to request Federal funds in accordance with the pre-issuance funding technique and that such funds are to be requested and deposited in a State account not more than three business days prior to the disbursement of funds is not a reasonable standard for the National Guard Military Operations and Maintenance Program. The program must forecast expenses in order to drawdown adequate federal funds and yet in some cases, utility costs and building repair and maintenance costs for example, the exact amounts are not known at the time of request for funds. Thus, monthly Cash Flow documents estimating anticipated expenditures are used in order to have adequate funds available to meet the State Prompt Payment Act standard of 45 days. Using the 45 day standard as outlined in National Guard Regulation 5-1 is more appropriate for the drawdown and disbursement of funds for this program.

Program: CFDA 21.019 ? Coronavirus Relief Fund (CRF) ? Allowability Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: 42 USC 801(d) (2020) states, in relevant part, that a State, Tribal government, and unit of local government shall use funds from the Coronavirus Fund (CRF) to cover only costs that are ?necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19).? 2 CFR ? 200.303 (January 1, 2020) requires the non-Federal entity to establish and maintain effective internal controls to ensure compliance with Federal regulations. A good internal control plan requires procedures to ensure costs are proper and adequately supported. Condition: Three of six journal entry charges tested did not have adequate documentation to support that costs were allowable. Repeat Finding: No Questioned Costs: $387,108 known Statistical Sample: No Context: We tested six journal entry line items, totaling $1,408,005, and noted the following: ? Two items tested were Nebraska Department of Veteran?s Affairs (NDVA) reimbursements. NDVA requested reimbursement from the Agency for COVID-19 related expenditures it incurred at the four veterans? homes it administers in the State of Nebraska and at its central office. Included in the requests were amounts claimed for ?absentee staff coverage,? which involved staff absent as a result of COVID-19 related issues, such as family care or need to self-quarantine. NDVA claimed reimbursement at the overtime wage rate of the NDVA employee who covered the shift of the absent NDVA staff member. During the fiscal year ended June 30, 2020, the Agency reimbursed NDVA a total of $840,585, using CRF funds on 10 payment documents. We tested two of the reimbursements, totaling $266,614. We noted the spreadsheets NDVA used to claim reimbursement included an error in the formula used to calculate overtime wage rates for NDVA employees covering staff who were absent due to COVID-19 related issues. This error resulted in NDVA being reimbursed $21,203 in total more than it should have, as summarized below: See Schedule of Findings and Questioned Costs for chart/table. ? We tested a $109,443 payment that the Agency made to a temporary medical staffing company for assistance with COVID-19 testing. The billing was for work completed during three separate time periods. The majority of the work was billed based on hourly rates, as outlined in a rate schedule, with the exception of two workers whose work was billed at salaried rates of $4,000 per week. During our testing, we noted the following issues: o The company invoiced the Agency a total of $24,000 for the salaried workers. However, the $4,000 per week rate paid for these workers was not included in the rate schedule provided, and no other support was on file showing this rate was proper. Additionally, no timesheets or other documentation was on file to support work being performed by these workers for two of the three time periods billed. o The amount paid for hours worked by one hourly worker was not calculated correctly, resulting in an overpayment of $120. Questioned costs for the payment tested was $24,120. The Agency paid a total of $893,644 to the vendor during the fiscal year ended June 30, 2020. ? We tested a $168,000 payment the Agency made to the Fairfield Inn in Crete, NE, under the Nebraska Accommodation Project (NAP). The hotel was intended to be utilized as a quarantine site for individuals exposed to COVID-19. The Agency executed a contract with the hotel that allowed it to utilize the entire hotel for purposes of lodging individuals, including members of the public, as determined by the Agency. The contract included a termination clause that allowed the Agency to terminate the agreement with 48 hours? written notice and receive a prorated refund. Only one individual utilized the hotel. The Agency did not exercise the termination clause in the contract. We reviewed similar payments the Agency made to hotels using CRF funds and noted three additional payments to hotels, totaling $173,785, for quarantine purposes that the Agency could not quantify or provide support for the number of individuals, if any, utilizing the hotels. See below for a summary of the hotel payments reviewed: See Schedule of Findings and Questioned Costs for chart/table. Questioned costs for the hotels tested was $341,785. The Agency paid a total of $372,255 to hotels under COVID-19 hotel contracts/agreements during fiscal year 2020. CRF expenditures totaled $48,343,274 for the fiscal year ended June 30, 2020, of which $5,490,258 was charged through journal entry transactions. Cause: The spreadsheet NDVA used to support the billing included a formula error. The Agency stated that is was ?directed to pay the invoices without supporting documentation (which Deloitte was to obtain at a later date and reconcile with them).? The vendor said the second issue was caused by an error in its billing system. Effect: When amounts charged are not supported adequately, there is increased risk for unallowable costs and misuse of funds. Recommendation: We recommend the Agency implement procedures to ensure charges to Federal awards are proper and adequately supported. Management Response: We concur with the overtime calculation error finding for Nebraska Department of Veterans Affairs resulting in a reimbursement error for eligible costs. The corrected formula is now being used. Regarding the costs incurred for contracting hotels for use in the State's COVID-19 response, in accordance with Center for Disease Control and Prevention guidelines (see CDC Interim U.S. Guidance for Risk Assessment and Work Restrictions for Healthcare Personnel with Potential Exposure to SARS-CoV-2, dated 3/11/21) and Federal Emergency Management Agency best practices (see COVID-19 Best Practice Information: Healthcare Worked and Responder Safety, dated 5/7/20), the state contracted hotels for use as quarantine/isolation sites for first responders, healthcare workers and other public safety workers. In addition, the State recognized the potential impact of COVID-19 on meat processing plant employees, estimated to be approximately 26,000 workers in Nebraska, and added those populations to the groups eligible to use the contracted hotels. Quarantine and isolation measures were necessary to address disease control among the identified groups. Securing facilities and medical staff to support sites that were readily available to meet diverse population requirements, provided the flexibility to address unknown and not easily predictable capacity requirements associated with a rapid onset of pandemic disease progression. Safe and appropriately staffed isolation locations were required to protect essential public safety and healthcare workers deemed critical to protect lives and preserve a critical workforce to avoid even greater disruptions to the food supply chain. APA Response: The APA understands the use of hotels as isolation shelters for healthcare workers and first responders and has no objection whatsoever to implementation, per CDC guidelines, of an appropriate COVID-19 response. Pursuant to a contract with one of the hotels, however, the Agency spent $168,000 for only one person to stay there. In doing so, the Agency failed to exercise its option to terminate the agreement and receive a prorated refund. Similarly, the Agency was unable to provide adequate support for the individuals and dates stayed in any of the three other hotels to which a combined total of $173,785 was paid for quarantine/isolation services. Based on minutes provided after fieldwork, only a fraction of the hotel rooms paid for were utilized.

Program: 20.205 ? Highway Planning and Construction ? Reporting Grant Number & Year: All open Federal Grantor Agency: U.S. Department of Transportation Criteria: 2 CFR ? 200.302(a) (January 1, 2020) provides the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR ? 200.302(b)(1) requires financial management systems to identify all Federal awards received and expended and the Federal programs under which they were received. 2 CFR ? 200.302(b)(3) requires the following: Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. A good internal control plan requires the auditee to reconcile the Schedule of Expenditures of Federal Awards (SEFA) to the financial statements to ensure the schedule is complete and accurate. Good internal control also requires management to design the information system to achieve objectives, including compliance with Federal requirements. Condition: The Agency lacked adequate procedures for reconciling SEFA expenditures to EnterpriseOne in a timely and complete fashion. As noted in Finding 2020-021, the funding source for expenditures is not recorded or maintained on EnterpriseOne. Repeat Finding: 2019-069 Questioned Costs: Unknown Statistical Sample: No Context: The Agency does not enter CFDA information in EnterpriseOne. Vendor payments are recorded into the Agency?s Payment System (RPS), which then interfaces with the State?s accounting system to record the transactions and create payments to those vendors. When the Agency records vendor payments for construction projects, those cost records are sent to the Agency?s Project Finance System (PFS), which is used to track road construction projects. PFS then allocates the project costs to the different funding sources (e.g., State funds, local funds, Federal funds). The Agency?s accounting systems are not set up to provide a full general ledger to be easily run by Federal program. In order to provide a detailed listing of expenditures by Federal program, the Agency would need to run a separate detailed listing of expenditures for each project?s Control Number and manually identify the Federal expenditures, as the Control Number would include both Federal and non-Federal expenditures. We requested the Agency perform this manual reconciliation for CFDA 20.205, which is comprised of 542 control numbers, totaling $416,514,319. The process was time-consuming, so the Agency focused primarily on higher-dollar control numbers. Eventually, the Agency was able to identify the majority of the expenditures to transaction-level detail. However, 300 control numbers, totaling $33,779,321, were left unreconciled. Cause: The Agency?s accounting systems are not set up to provide for a full general ledger to be easily run by Federal program, and the Agency does not enter CFDA information into EnterpriseOne. Effect: Without a full general ledger, it is impossible to review all transactions to ensure they are allowable in accordance with Federal regulations, increasing the risk for misuse of funds and inaccurate reporting. Recommendation: We recommend the Agency implement procedures to ensure all expenditures reported on the SEFA can be traced to EnterpriseOne transaction-level detail. We further recommend the Agency establish an adequate interface between the RPS system and the State?s Accounting System to ensure the funding is recorded properly. Management Response: NDOT?s recording of federal reimbursement as a revenue in the State?s Accounting System to a cash fund following the expenditure of state funds is a long-standing practice done with the knowledge of DAS State Accounting. Specific, unique revenue object codes have been created in EnterpriseOne and are used to separately account for federal reimbursement. Since these are state expenses at the time of payment and state cash funds are used, there is not a need to record federal information to the expenditure. After the state expenses are identified in NDOT?s Project Finance System for potential federal reimbursement, the federal information is recorded there. This practice was established long ago as a reflection of the fact that the federal reimbursement could take place months and even years following the initial state expense. NDOT recently conferred with Federal Highway Administration (FHWA) Nebraska Division financial staff regarding the Auditor?s comments and recommendation and received assurances from them that they are confident that NDOT can provide expenditure summaries from NDOT?s systems by CFDA number that agrees to FHWA records. Further, an assurance was received that NDOT has proper accounting controls in place from their federal perspective. They?ve advised NDOT is able to provide information that enables FHWA to reconcile from total project costs of the project to federal reimbursed costs and verify that the reimbursement was done at the appropriate federal participation percentage.

Program: 20.505 ? Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research ? Allowability & Subrecipient Monitoring Grant Number & Year: NE-2019-012-000, FFY 2016 Federal Grantor Agency: U.S. Department of Transportation Criteria: 2 CFR ? 200.331(d) (January 1, 2020) requires pass-through entities to do the following: Monitor the activities of the subrecipient as necessary to ensure that the sub-award is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the sub-award; and that sub-award performance goals are achieved. 2 CFR ? 200.403 (January 1, 2020) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR ? 200.511(b) (January 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: The Agency did not have adequate documentation on file to support that payments were for allowable activities and in accordance with allowable cost principles. The Agency also did not perform adequate subrecipient monitoring. A similar comment was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2019-070 Questioned Costs: $49,672 known Statistical Sample: No Context: A Metropolitan Planning Organization (MPO) is a forum for cooperative transportation decision-making for metropolitan planning areas. The Agency did not perform adequate monitoring of the one MPO tested. The Agency reimbursed the MPO for costs reported on a quarterly basis. However, the Agency did not obtain support for $49,672 of the $95,604 reimbursed to the MPO. Subrecipient payments for fiscal year 2020 totaled $121,005. Cause: The Agency did not have adequate procedures to monitor whether subrecipients complied with Federal requirements. Effect: Increased risk for misuse of funds. Recommendation: We recommend the Agency implement procedures to monitor subrecipients. Additionally we recommend the Agency obtain and maintain adequate documentation to support that costs are allowable and in accordance with Federal requirements. Management Response: NDOT Transit reviews each invoice for allowable costs and contacts the MPO for additional information.

Program: CFDA 20.509 ? Formula Grants for Rural Areas; 20.509 ? COVID-19 Formula Grants for Rural Areas ? Allowability & Subrecipient Monitoring Grant Number & Year: NE-2018-015-00, FFY 2016; NE-2019-013-00, FFY 2017; NE-2020-013-00, June 17, 2020, to September 30, 2023 Federal Grantor Agency: U.S. Department of Transportation Criteria: 2 CFR ? 200.403 (January 1, 2020) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. 2 CFR ? 200.331(d) (January 1, 2020) requires the pass-through entity to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. 2 CFR ? 200.430(i)(1) (January 1, 2020) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR ? 200.405(a) (January 1, 2020), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? 2 CFR ? 200.511(b) (January 1, 2020) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: The Agency did not have adequate subrecipient monitoring procedures. The Agency did not have adequate support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2019-071 Questioned Costs: $212,788 known (NE-2018-015-00, $11,301; NE-2019-013-00, $150,269; NE-2020-013-00, COVID-19, $51,218) Statistical Sample: No Context: During the fiscal year, the Agency paid $10,360,227 to 61 subrecipients. Subrecipients receive assistance to provide transportation services to rural areas based on their operating deficit and their non-operating costs. To receive reimbursement, the subrecipient provides a report of its operating revenue, operating costs, and non-operating costs. The subrecipient receives Federal reimbursement for 50% of its operating deficit (operating costs less operating revenues) and 80% of its non-operating costs. During the fiscal year, the Agency received a CARES Act grant that reimbursed subrecipients 100% of operating and non-operating costs. We tested 25 payments, 21 of which were payments to subrecipients. Documentation on file for the payments included worksheets prepared by the subrecipient. The Agency did perform financial desk reviews for subrecipients; however, the reviews tested were not adequate. Questioned costs of $212,788 were noted for the following reasons: ? For 19 subrecipients tested, documentation was not adequate to support personnel charges were allowable and in accordance with Federal cost principles. The Agency did not have timesheets, time certifications, or other payroll documentation on file for all reimbursement requests. In some cases, payroll documentation was on file, but there was not adequate support to verify that the correct amount was charged to the program, as there was no documentation to support the employees? full salary or the benefits received, such as workers? compensation and health insurance premiums. ? For three subrecipients tested, fuel costs were not adequately supported. Receipts were not provided supporting the fuel costs. ? For four subrecipients tested, maintenance expenses were not adequately supported. Sales taxes were paid on the maintenance expenses for two subrecipients. The Agency did not obtain support for the reimbursement of a car wash for a subrecipient, and the Agency did not have documentation to support the allocation of expenses for the other subrecipient. ? For 17 subrecipients tested, capital costs were not adequately supported. The Agency did not obtain invoices for expenses such as rent, insurance, and transportation costs. Furthermore, allocations used by the subrecipients were not always supported to ensure costs charged to the program were proper. o One subrecipient was sometimes unable to meet transportation demands with its own buses and drivers, so it purchased cab tickets and sold the tickets back to the public for less than the purchase price. Because the cab ticket purchase is classified as a non-operating expense and the subsequent sale is classified as operating revenue, the Federal and State reimbursement rates are different for each side of the transaction. As a result, the subrecipient makes a profit every time it buys and sells a cab ticket, instead of providing service through its normal operations. ? The Agency did not review fare revenue, which could include receiving supporting documentation, performing analytical review, or any other procedures. Fares reduce the Federal reimbursement; therefore, if not reported properly, Federal reimbursements could be excessive. We also noted that the Agency did not perform subrecipient monitoring for three subrecipients. During fiscal year 2020, these subrecipients were reimbursed a total of $857,452. Questioned costs are unknown for these subrecipients. Federal payment errors noted were $114,533 in the sample and $98,255 outside of the sample. The total Federal sample tested was $321,187, and the total Federal expenditures, excluding Agency payroll and adjusting entries, was $12,330,526. Based on the sample tested, the dollar error rate was 35.66% ($114,533/$321,187), which estimates the potential dollars at risk for fiscal year 2020 to be $4,397,066 (dollar error rate multiplied by population). Cause: Inadequate procedures, documentation, and oversight. Reviews were not adequate to ensure subrecipient costs were in accordance with Federal requirements. Effect: Without adequate subrecipient monitoring, there is an increased risk that costs will not be allowable, reasonable, or necessary. Recommendation: We recommend the Agency strengthen procedures to ensure subrecipient expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT Transit conducts in-depth reviews of subrecipients during the fiscal year. A notation is made on each worksheet of every monthly reimbursement invoice that includes information regarding questionable costs requiring follow-up and justification to determine if the expense is allowable. The City of Norfolk Public Transit purchases cab tickets to sell at a reduced rate for use by passengers during hours when the public transit system is not available. The revenue generated by the sale of these tickets is reported as other revenue. The City seeks reimbursement for the administrative burden of purchasing, selling and tracking the cab tickets by claiming an administrative fee as local match. Norfolk Public Transit does not profit from the partnership with the local cab company, and the program provides a valuable transportation resource for the community. Fare revenue is not reviewed due to the inconsistent nature of each agency?s fare structure. Rural transit agencies funded through the Section 5311 program are not required to charge fares. However, when fares are collected the dollar amount per trip is determined locally and could vary based on distance traveled, passenger age, destination, etc. Reviewing fare revenue would require reviewing multiple driver logs per month per agency to identify fares collected and origins/destinations to compare to the current fare schedule. The level of effort required outweighs the potential risk. APA Response: Subrecipients tested did not have adequate documentation to support the expenditures were in accordance with Federal cost principles. Review of revenues is important to ensure subrecipients are not increasing the Federal reimbursement by under-reporting revenues.

Program: Various, including CFDA 93.778 ? Medical Assistance Program (Medicaid) ? Allowable Costs/Cost Principles Grant Number & Year: Various, including #1905NE5ADM, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 2 CFR ? 200.403 (January 1, 2019) states, in part, the following: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: * * * * (g) Be adequately documented . . . . 2 CFR ? 200, Appendix V, subsection (G)(4), (January 1, 2019) states, in part, the following: Billing rates used to charge Federal awards must be based on the estimated costs of providing the services, including an estimate of the allocable central service costs. A comparison of the revenue generated by each billed service (including total revenues whether or not billed or collected) to the actual allowable costs of the service will be made at least annually, and an adjustment will be made for the difference between the revenue and the allowable costs. These adjustments will be made through one of the following adjustment methods: (a) a cash refund including earned or imputed interest from the date of transfer and debt interest, if applicable, chargeable in accordance with applicable Federal cognizant agency for indirect costs regulations to the Federal Government for the Federal share of the adjustment, (b) credits to the amounts charged to the individual programs, (c) adjustments to future billing rates, or (d) adjustments to allocated central service costs. Per the DAS Facility Use Manual (Rev. 6-10-2015), Section XIII (?Your Lease?), ?Rental rates are based on Facility historical operation costs and projected market price changes. Each Facility is budgeted to operate on a break even basis.? A good internal control plan requires procedures to ensure the following: ? Rate charges are equitable, reflect actual costs incurred, and are periodically reviewed so that charges are appropriate for the services provided. ? Adequate documentation is maintained to support rates charged, including documentation for the approval of those rates. ? Internal service rates are published and available for State agency review and applied consistently for all State agencies. ? Leasing and contract agreements are in effect for the period of services billed. Condition: We noted that the Agency?s Materiel Division and Building Division did not maintain adequate documentation to support that charges were reasonable, equitable, and consistently applied. Additionally, the Agency did not have adequate documentation to support the allocation of Lincoln grounds keeping and Lincoln security costs in developing the building rental rates. A similar finding was noted in the prior audit. Repeat Finding: 2018-008 Questioned Costs: Unknown Statistical Sample: No Context: We tested seven receipt items (four Building Division, three Materiel Division) to determine whether the rates billed were proper. These divisions offer services such as office leasing and printing. We noted the following: Building Division ? One April 2019 payment tested did not have a current Memorandum of Agreement in effect. The Agency billed the Department of Health and Human Services a monthly rate of $2,121 to allow six employees to work in the Agency?s office space. The Agreement was in effect until June 30, 2018, and no renewal agreement was made after that date. ? The rental rate charged to agencies for building space includes an allocation for indirect costs for administration, grounds keeping, security, and energy management. We noted that the Agency did not have adequate support for the allocation for Lincoln grounds and Lincoln security indirect costs in developing the building rental rates. The grounds keeping allocation was split 46% turf maintenance, 31% snow removal, and 23% parking maintenance and clean up; the Agency did not have support for the split. The fiscal year 2019 indirect allocations for grounds keeping and security were $380,958 and $641,123, respectively. This was also noted in the prior audit. Materiel Division ? Our prior audits noted that the Print Shop had not reviewed and updated its rates since the fiscal year ended June 30, 2010. We noted that printing rates for 24 cost centers were based on calculations from fiscal year 2008, with a 10% rate increase. No support was provided to support that the rates were reasonable. In the prior audit, Agency staff stated that the current accounting system did not provide the information needed to determine a rate-per-cost center, but the goal was to implement a revised system that could be used to develop new rates starting with fiscal year 2021. However, the Agency is no longer moving forward with that revised system. ? One cost center rate for plate printing was not charged based on actual costs or published rates. The Agency utilizes plates for some printing jobs. A metal plate is typically used to print large batches, and plastic plates are used for smaller batches. The raw material cost is far higher with metal plates. Because of the associated raw material costs, the published rate listing had two separate plate printing rates, as shown in the table below. In fiscal year 2019, the Agency combined the two plate printing rates for metal and plastic based on usage, to create an average cost of $24.52. As a result, agencies printing with plastic plates was overcharged, and printing on metal plates was undercharged. ?See Schedule of Findings and Questioned Costs for chart/table? ? The Agency established a 35% markup surcharge rate for special purchases, paper costs, plate material, special order supplies, and colored ink. However, the Agency did not have adequate documentation to support the reasonableness of the markup percentage rate. This was first noted during our audit of the Materiel Division for the period July 1, 2009, through December 31, 2011. Additionally, the markup percentage was applied inconsistently; for envelopes, the Agency charged a markup percentage rate of 25%. ? Two receipts tested for Print Shop work orders lacked adequate support for cost center rates. The cost center 808 ?Miscellaneous Amount? did not have a standardized rate. For the receipts tested, rates billed to this cost center varied between $30 and $4,005. The Agency did not provide adequate support for the following miscellaneous rates billed: o One miscellaneous rate of $334 included $48 in storage costs and $286 for 20 clerical labor hours for managing multiple daily printing jobs a month. The rate was calculated using the labor rate from fiscal year 2008. Additionally, no support was provided to show the labor hours charged was reasonable. o One miscellaneous rate was for seal ink (used for stamp seals) made by the Print Shop. The rate was calculated using a quarter hour labor cost of $12. Labor hours were calculated based on fiscal year 2008 information, with a 10% increase for fiscal year 2019. No documentation was provided to support that the 10% rate increase was reasonable. Cause: Lack of supporting documentation and adequate procedures. Per Agency staff, the current accounting system did not provide the necessary information to develop Print Shop rates by cost center. Effect: Without adequate controls and procedures to ensure rates are equitable and based on actual costs, there is an increased risk that Federal programs will be overcharged for services. Without adequate procedures to ensure billings are proper and consistently charged, there is an increased risk that agencies and Federal programs will not be treated equitably. Recommendation: We recommend the Agency maintain adequate documentation to support rent charges. We also recommend that procedures ensure rates are equitable and reflect the actual costs incurred for services provided. We further recommend all rates be charged consistently. Management Response: The review and the setting of assessments, rates and surcharges occurs every two years (even years). Each review includes some changes and refinements. The SWAP review was for the FY18-19 which was the second fiscal year of that biennium. Some changes were made during the biennial review for the current biennium FY20-21. The development of assessments, rates and surcharges for the next biennium ? FY21-23 began in January 2020. The estimated costs used are based on historical costs and estimated increases during the final fiscal year of the current biennium and then the estimated costs for the new biennium. DAS has started a new review of its various rate setting procedures including the Building Division indirect cost allocations. Procedures will be developed to ensure a Memorandum of Agreement is in place for each rate being charged. Data that supports our decision making will be used to set rates and allocations. Materiel, Print Shop and Central Finance staff have been working with the JDE IT Team regarding extracting the data needed to assist and support the development of Print Shop rates.

Program: Various, including CFDA 93.767 ? Children?s Health Insurance Program ? Reporting Grant Number & Year: Various, including #1805NE5021, FFY 2018 Federal Grantor Agency: Various, including U.S. Department of Health and Human Services Criteria: A good internal control plan requires adequate procedures to ensure the Schedule of Expenditures of Federal Awards (SEFA) is properly presented. A good internal control plan also requires the auditee to reconcile the SEFA to the financial statements to ensure the schedule is complete and accurate. Title 2 CFR ? 200.510(b) (January 1, 2019) states, in part, the following: The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended . . . . At a minimum, the schedule must: * * * * (3) Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. For a cluster of programs also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal program. Neb. Rev. Stat. ? 81-1111(1) (Reissue 2014) states, in part, the following: Subject to the supervision of the Director of Administrative Services, the Accounting Administrator shall have the authority to prescribe the system of accounts and accounting to be maintained by the state and its departments and agencies, develop necessary accounting policies and procedures, coordinate and approve all proposed financial systems, and manage all accounting matters of the state?s central system. EnterpriseOne is the official accounting system of the State. Condition: Several programs did not have expenditures or the amount provided to subrecipients accurately reported on the SEFA. We notified the Agency of the errors, and the SEFA was subsequently adjusted. Also, as noted in Finding 2019-003, the Agency did not perform a reconciliation of the SEFA to the financial statements. A similar finding was noted in the prior audit. Repeat Finding: 2018-009 Questioned Costs: None Statistical Sample: No Context: The Agency is responsible for managing the accounting matters of the State and certifying the data collection form for the Statewide Single Audit. The Agency compiles the SEFA from information provided by the individual agencies and submits it to the auditor. During our review, we noted the following: ? The Federal SEFA is supposed to mirror its State counterpart, but there was a $25,113,256 variance between the two. In most cases, it appears that new programs were added to the State SEFA but were not also added to the Federal SEFA. There were 27 programs on the State SEFA that were not included on the Federal SEFA. ? The Agency reported prior-year expenditure amounts for the Blind & Visually Impaired Commission. ? The Agency did not report CFDAs 64.014 and 64.015 for the Department of Veteran?s Affairs. ? The Department of Health and Human Services did not accurately report expenditures for several programs, including those detailed below: ?See Schedule of Findings and Questioned Costs for chart/table? There were 67 programs for various State agencies that needed correction. The total expenditures and amounts provided to subrecipients originally reported and per the final SEFA were as follows: ?See Schedule of Findings and Questioned Costs for chart/table? Cause: The Agency did not have adequate procedures to ensure amounts that were not directly from the accounting system were accurate. The Agency established a specific account code for aid to subrecipients, but not all agencies utilized this account code. Effect: Increased risk for the SEFA to be inaccurate, which could lead to Federal sanctions or programs not audited that should be. Recommendation: We recommend the Agency implement procedures to ensure the SEFA is complete and accurate. Management Response: Administrative Services will continue working to educate internal teammates in the preparation of complete State and Federal SEFA information. Administrative Services will also continue to educate partnering State agency personnel responsible for providing SEFA information to help ensure it is both complete and reported accurately.

Program: CFDA 84.010 ? Title I Grants to Local Educational Agencies ? Subrecipient Monitoring & Special Tests and Provisions Grant Number & Year: S010A180027, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per 20 USC 6311(h)(1)(C) (2018), ?Each State report card required under this subsection shall include the following information: . . . (iii)(II) high school graduation rates, including four-year adjusted cohort graduation rates . . . .? Per 2 CFR ? 200.303(a) (January 1, 2019) the non-Federal entity must do the following: 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. Per 2 CFR ? 200.331: All pass-through entities must: . . . (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward . . . . Condition: The Agency does not have adequate procedures to ensure local educational agencies (LEAs) maintain appropriate documentation for removing students from the regularly adjusted cohort rate. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: A State educational agency (SEA) and its LEAs must report graduation rate data for all public high schools at the school, LEA, and State levels using the four-year adjusted cohort rate. To remove a student from the cohort, a school or LEA must confirm, in writing, that the student transferred out, emigrated to another country, transferred to a prison or juvenile facility, or is deceased. To confirm that a student transferred out, the school or LEA must have official written documentation that the student enrolled in another school or in an educational program that culminates in the award of a regular high school diploma. A student who is retained in grade, enrolls in a GED program, or leaves school for any other reason may not be counted as having transferred out for the purpose of calculating graduation rate and must remain in the adjusted cohort. Title I Federal regulations require the SEA to ensure LEAs are maintaining appropriate documentation for removing students from the regularly adjusted cohort rate. The Agency has guidance for the LEAs to complete the appropriate documentation for removing students from the regularly adjusted cohort rate, but no procedures to ensure the LEAs are following this guidance. Cause: The Agency was unaware that such procedures needed to be implemented. Effect: When the Agency is not monitoring appropriate documentation for removing students from the regularly adjusted cohort rate, there is an increased risk the LEAs will not be in compliance with the Federal requirements. Recommendation: We recommend the Agency implement review procedures to ensure LEAs are maintaining appropriate documentation for removing students from the regularly adjusted cohort rate correctly in accordance with Federal guidance. Management Response: NDE agrees and added a step in our monitoring process to address the removal of students from the graduation cohort.

Program: CFDA 84.027 and 84.173 ? Special Education Cluster (IDEA) ? Allowability & Subrecipient Monitoring Grant Number & Year: H027A170079, FFY 2018; H027A180079, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR ? 200.403 (January 1, 2019) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2019) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR ? 200.331(d) (January 1, 2019) requires pass-through entities to do the following: Monitor the activities of the subrecipient as necessary to ensure the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] 2 CFR ? 200.511(b) (January 1, 2019) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal funds passed through for authorized purposes and in compliance with all applicable regulations. Condition: The Agency did not have adequate subrecipient monitoring procedures. For 16 of 25 subrecipient aid payments tested, documentation was not adequate to support that the amounts paid were in accordance with Federal requirements. A similar finding was noted in the prior audit. Additionally, the Summary Schedule of Prior Audit Findings states, ?Detailed accounting records have been collected to support all subrecipient aid payments.? However, as noted during testing, adequate support was not obtained for all subrecipient aid payments. Repeat Finding: 2018-012 Questioned Costs: $871,433 known (H027A170079, $660,525; H027A180079, $210,908) Statistical Sample: No Context: We tested 25 subrecipient payments, totaling $4,148,180, and noted that $871,433 did not have adequate documentation to support that expenditures were allowable and in accordance with Federal cost principles. Documentation provided with the reimbursement request usually included a general ledger printout and invoices for some expenses. The Agency did not have time-and-effort logs, time certifications, or other payroll documentation on file for all reimbursement requests. In some cases, time-and-effort logs were on file, but there was not adequate support to verify that the correct amount was charged to the program, as there was no documentation to support the employees? full salary. In addition, some invoices did not have adequate support to verify that the purchases were for the Special Education program. For example, transportation services for $118,698, college training for $11,408, and the purchase of three vehicles for $123,243 did not have adequate support to ensure the costs were for Special Education students. Federal payment errors noted within the sample were $871,433. The total Federal sample tested was $4,148,180, and total subrecipient aid expenditures paid with Federal funds during the fiscal year were $61,575,867. The Federal dollar error rate for the sample was 21.01% ($871,433/$4,148,180), which estimates the potential dollars at risk for fiscal year 2019 to be $12,937,090 (dollar error rate multiplied by population). Cause: Inadequate procedures. The Agency hired two individuals to perform fiscal monitoring of the school districts on a three-year rotation, with the goal of helping the school districts improve their documentation. However, as of December 19, 2019, the Agency had completed the fiscal monitoring for only seven schools. Effect: Without adequate supporting documentation and monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to monitor subrecipients, including a review of payroll documentation from each subrecipient. We further recommend adequate documentation be maintained to support that expenditures are allowable and in accordance with Federal cost principles. Management Response: The Department of Education continually evaluates policies and procedures to ensure compliance with Federal and State guidance. We will review procedures to monitor adequate documentation be maintained to support that expenditures are allowable and in accordance with Federal cost principles.

Program: CFDA 84.027 and 84.173 ? Special Education Cluster (IDEA) ? Earmarking Grant Number & Year: H027A160079, FFY 2017; H027A180079, FFY 2019; H173A180077, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: 34 CFR ? 300.705 and 300.816 (July 1, 2018) describe how funds are to be allocated to the Local Education Agencies (LEAs) for the IDEA Part B and IDEA Preschool Grant Programs. 34 CFR ? 300.705(b) (July 1, 2018) states, in relevant part, the following: For each fiscal year for which funds are allocated to States under ?300.703, each State shall allocate funds as follows: * * * * (3) After making allocations under paragraph (b)(1) of this section, as adjusted by paragraph (b)(2) of this section, the State must ? (i) Allocate 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary schools and secondary schools within the LEA?s jurisdiction; and (ii) Allocate 15 percent of those remaining funds to those LEAs in accordance with their relative numbers of children living in poverty, as determined by the SEA. 34 CFR ? 300.816(c) (July 1, 2018) states, in relevant part, the following: After making allocations under paragraph (a) of this section, the State must ? (1) Allocate 85 percent of any remaining funds to those LEAs on the basis of the relative numbers of children enrolled in public and private elementary schools and secondary schools within the LEA?s jurisdiction; and (2) Allocate 15 percent of those remaining funds to those LEAs in accordance with their relative numbers of children living in poverty, as determined by the SEA. Good internal controls require procedures to ensure that membership counts are correct for the public school district, which includes ensuring that the non-public school counts are included in the correct public school district. Condition: The Agency did not allocate funds correctly for 5 of 25 subrecipients tested. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: Allocations are made to the LEAs based on the total membership counts of the public school districts and the number of children living in poverty in the public school district. The membership counts must also include the number of children who attend non-public schools within the public school district. We tested the allocation for 25 school districts that were paid during the fiscal year ended June 30, 2019. We tested the 2017-2018 school year allocation for 16 school districts, and the 2018-2019 allocation for 9 school districts. The Agency did not include the non-public school membership counts within the correct public school districts for 2 of the 16 schools tested for the 2017-2018 allocation and 3 of the 9 schools tested for the 2018-2019 allocation. As a result of including the non-public schools membership counts in the incorrect public school districts, the allocations to the public school districts were incorrect. Variances ranged from $3,375 over-allocated to $57,073 under-allocated. The total dollar error noted for school year 2017-2018 for the schools tested was $9,302 for grant H027A160079. The total dollar error noted for school year 2018-2019 for the schools tested was $60,250 for grant H027A180079 and $68 for grant H173A180077. Cause: Employee error. Effect: Without adequate procedures to ensure the allocation to school districts is correct, there is an increased risk the LEAs will not be allocated the correct amount. Recommendation: We recommend the Agency implement procedures to ensure that the allocation of funds to the LEAs is correct. Management Response: The Nebraska Department of Education Special Education Office will implement additional procedures to verify the accuracy of non-public school membership totals applied to the appropriate public school district Individuals with Disabilities Education Act (IDEA) allocation calculations.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Allowability Grant Number & Year: H126A190039, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.403 (January 1, 2019), allowable costs must be necessary, reasonable, and adequately documented. Per Title 92 NAC 72-005.01, ?The program shall retain a vested interest in any items of equipment in which its share of the current market value is $5,000 or more.? 2 CFR ? 200.302(b) (January 1, 2019) states, in relevant part, the following: The financial management system of each non-Federal entity must provide for the following . . . (4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. Condition: The Agency did not have documentation showing that the program retained a vested interest in equipment in which its share of the current market value is at least $5,000. A similar finding was noted in the prior audit. Repeat Finding: 2018-013 Questioned Costs: None Statistical Sample: No Context: All three equipment expenditures tested lacked documentation of vested interest, as follows: ? For one client tested, the Agency did not have an agreement to establish the Agency?s vested interest in equipment. The client received a Silencer Hydraulic Chute for $19,500 to assist him with his farm duties. ? For two clients tested, the Agency had an agreement, but the contract did not establish the Agency?s vested interest in the equipment. The clients received a driving system modification for $34,842 and $58,890 to assist with driving. The equipment cost more than $5,000 for each of these clients, yet the Agency did not have equipment agreements that formally established the Agency?s vested interest in these items. However, we did not consider these costs to be questioned, as it appeared the equipment was still in use. Per the Summary Schedule of Prior Audit Findings, Nebraska VR implemented a process on April 1, 2019, within their case management system to ensure equipment agreements are completed for all equipment purchases going forward that exceed $5,000. For one of the contracts observed, signed April 1, 2019, the agreement did not establish the Agency?s vested interest in the equipment. Per discussion with the Agency, exceptions are carved out in the program manual for personalized equipment that is not traced in the VR?s system. However, there are no provisions for exceptions in the NAC regulations. Total Federal aid expenditures for the fiscal year was $2,611,900. Cause: The Agency implemented a new process on April 1, 2019; however, the Agency is excluding certain items due to the personalized nature of the equipment. There are no exclusions provided for in State regulations, and there is no evidence that the equipment would not have any salvage value. Effect: The Agency is not in compliance with State and Federal regulations. Additionally, when policies and procedures are not followed, there is an increased risk for the loss or misuse of funds. Recommendation: We recommend the Agency comply with State and Federal regulations and maintain a vested interest in all equipment over $5,000. Management Response: Nebraska VR implemented a process on April 1, 2019 in their case management system to ensure equipment agreements are completed. The three purchases reviewed during this audit were all authorized prior to the new process being implemented.

Program: CFDA 84.126 ? Rehabilitation Services Vocational Rehabilitation Grants to States ? Eligibility Grant Number & Year: H126A190039, FFY 2019 Federal Grantor Agency: U.S. Department of Education Criteria: 29 USC ? 722(b)(3)(F) (2018) states, in relevant part, the following: The individualized plan for employment shall be developed as soon as possible, but not later than a deadline of 90 days after the date of the determination of eligibility described in paragraph (1), unless the designated State unit and the eligible individual agree to an extension of that deadline to a specific date by which the individualized plan for employment shall be completed. Per the Vocational Rehabilitation (VR) Program Manual: The IPE is to be completed within 90 days of the date the client was determined eligible for VR. If the IPE is approved 91 days or more after the Eligibility Decision VR must: ? Obtain the client?s agreement to the extension ? Identify the date when the IPE will be completed ? Provide an explanation as to why the time required for IPE Approval has exceeded 90 days must be documented. A good internal control plan requires procedures to ensure Individual Plans for Employment (IPEs) are developed within 90 days of eligibility determination. Condition: For 5 of 5 clients tested, the IPE was not developed within 90 days of eligibility determination. Additionally, there was no documentation of an agreement allowing for the extensions of the deadline to a specific date. A similar finding was noted in the prior audit. Repeat Finding: 2018-014 Questioned Costs: None Statistical Sample: No Context: For 5 of 5 clients tested, the IPE was not developed within 90 days of eligibility determination; the IPEs were 948 to 1,587 days late. There was no documentation of an agreement allowing for the extensions of the deadline to a specific date. Cause: The system function to require IPE extensions past 90 days was implemented on October 2, 2019. Prior to this date, offices were not documenting extensions. Effect: The IPE?s purpose is to document the client?s goal for employment, the services needed, and the job being pursued. When the IPE is not completed timely, the client is left without a formal plan for success, jeopardizing his or her opportunity to succeed in the program. Additionally, the Agency is not in compliance with 29 USC ? 722(b)(3)(F), as well as its own program manual. Recommendation: We recommend the Agency implement procedures to ensure that IPEs are developed within 90 days of eligibility. Management Response: During October 2019 Nebraska VR implemented a change to their case management system that requires an IPE be completed within 90 days or an extension be completed. The IPE?s reviewed during this audit were for clients that applied prior to the system change being put into place.

Program: CFDA 84.287 ? Twenty-First Century Community Learning Centers ? Allowability & Subrecipient Monitoring Grant Number & Year: S287C160027, FFY 2017 and S287C170027, FFY 2018 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR ? 200.403 (January 1, 2019), allowable costs must be necessary, reasonable, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2019) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR ? 200.331 (January 1, 2019) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means. (3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by ?200.521 Management decision. * * * * (f) Verify that every subrecipient is audited as required by Subpart F?Audit Requirements of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ?200.501 Audit requirements. A good internal control plan requires that adequate documentation be maintained to support amounts claimed by and paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal funds passed through for authorized purposes and in compliance with applicable regulations. Finally, good internal control requires procedures to ensure audits are reviewed. Condition: The Agency did not have adequate support on file for 15 of 19 subrecipient aid payments tested. Additionally, subrecipient Single audits were not obtained timely. Repeat Finding: No Questioned Costs: $449,034 known (S287C160027, $61,564; S287C170027, $387,470) Statistical Sample: No Context: We tested 19 subrecipient payments, totaling $722,311, and noted that $449,034 did not have adequate supporting documentation to support that expenditures were allowable and in accordance with Federal cost principles. Supporting documentation was provided with the reimbursement request; however, this was usually a general ledger printout and some invoices. Some reimbursement requests included a time-and-effort log or time certification for one employee; however, several employees? salaries were included in the reimbursement requests. In addition, the payroll documentation did not contain adequate detail for allocated payroll to determine the amounts claimed were proper. The monitoring performed by the Agency did not include adequate support to ensure the subrecipients used the subaward for allowable activities. Subrecipient aid payments for the fiscal year ended June 30, 2019, totaled $6,543,605. Based on the sample tested, the case error rate was 78.94% (15/19). The dollar error rate for the sample was 62.17% ($449,034/$722,311), which estimates potential dollars at risk for fiscal year 2019 to be $4,068,159 (dollar error rate multiplied by population). We also noted that the Agency did not monitor non-profit subrecipients to ensure: 1) Single audits were completed when required; 2) the audits were reviewed timely; and 3) findings contained therein were followed-up and management decisions issued. Total payments to the three non-profit subrecipients during fiscal year 2019 were $1,806,994. Cause: Inadequate procedures. Effect: Without adequate supporting documentation and adequate monitoring procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the Agency improve procedures to monitor subrecipients, including reviewing both detailed supporting documentation for expenditures and payroll documentation for each subrecipient. We further recommend adequate documentation be maintained to support that expenditures are allowable and in accordance with Federal cost principles. Finally, we recommend the Agency ensure subrecipient audits are reviewed timely. Management Response: The fiscal analyst and 21st CCLC director conduct a desk review of each reimbursement request, which includes the grantee general ledger, to assure expenditures are allowable, reasonable and within the budget and performance period. If there are any unusual or questionable expenditures, sub-grantees are contacted to provide additional documentation or justification. Virtual visits and desk monitoring are additional strategies we use to provide oversight. All programs receive an on-site monitoring visit in year 3 of the 5-year grant where the director reviews selected financial documentation and employee time and effort information. The Nebraska 21st CCLC program utilizes a risk-assessment instrument to identify programs that may require interim monitoring or additional oversight. A revised Nebraska 21st CCLC monitoring checklist was implemented for the 2019-20 school year and includes a section that identifies the uniform federal program requirements that in the future will be monitored by the NDE Grant Compliance office every 3 years. APA Response: A general ledger shows that costs were charged to the Program, but it does not provide support that the costs charged were proper and allowable per Federal guidelines. The on-site monitoring provided during the audit did not contain sufficient documentation to ensure that the subrecipient expenditures were reasonable and allowable.

Program: CFDA 84.287 ? Twenty-First Century Community Learning Centers ? Special Tests and Provisions Grant Number & Year: S287C160027, FFY 2017; S287C170027, FFY 2018 Federal Grantor Agency: U.S. Department of Education Criteria: Title 34 CFR ? 299.7(a)(1) (July 1, 2018) states, in relevant part, the following: Expenditures of funds . . . for services for eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the amount of funds expended for participating public school children and their teachers and other educational personnel . . . . 20 U.S.C. ? 7881(a)(1) (2018) provides the following: Except as otherwise provided in this chapter, to the extent consistent with the number of eligible children in areas served by a State educational agency, local educational agency, educational service agency, consortium of those agencies, or another entity receiving financial assistance under a program specified in subsection (b), who are enrolled in private elementary schools and secondary schools in areas served by such agency, consortium, or entity, the agency, consortium, or entity shall, after timely and meaningful consultation with appropriate private school officials provide to those children and their teachers or other educational personnel, on an equitable basis, special educational services or other benefits that address their needs under the program. A good internal control plan requires procedures to ensure services provided are equal on a per-pupil basis in accordance with Federal regulations. Condition: The Agency did not have procedures to ensure expenditures were equal on a per-pupil basis for private school and public school children. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The Agency required annual consultations between public schools and the non-public schools within each school district, but it failed to review or maintain appropriate documentation to support that expenditures were, in fact, equal on a per-pupil basis for private and public school children. The Agency required participating entities to have 10% of their openings available for non-public schoolchildren. The percentage was an approximation for the State, not based on the actual percentage per school district. If the openings were not filled, the participating entities were allowed to offer them to public school children; however, the State did not monitor this process or verify that equitable services were provided for compliance with Federal regulations. Cause: Lack of procedures to monitor and document compliance with participation requirements. Effect: Noncompliance with Federal regulations could result in sanctions. There is an increased risk for inequitable funding for public and private school children. Recommendation: We recommend the Agency implement procedures to ensure expenditures for public and private school children are equal on a per-pupil basis, and adequate documentation is maintained to support the Agency?s compliance with Federal regulations. Management Response: The Nebraska 21st CCLC program follows the guidance provided by staff at the US Department of Education to all SEAs regarding participation of eligible students attending a nonpublic school. The Nebraska 21st CCLC Grantee Assistance Guide includes a section on ?Nonpublic School Participants? and describes the annual consultation requirement. It specifically notes ?students who reside within the geographic boundaries of an eligible public school building receiving services from a 21st CCLC grant but attend a nonpublic school outside these boundaries or are home schooled are also eligible to attend the 21st CCLC program?. Under the ?Equitable Access? section of this guide it clearly states ?A public school or other public or private organization that is awarded a grant must offer to provide equitable services to nonpublic or home-schooled students and their families, if those students reside within the attendance area of the qualified public school buildings served by the grant.? All students (public and private) receive the same opportunities for academic support, enrichment and an afterschool snack. APA Response: There is no documentation that the subrecipients complied with the guidelines established by the State. Furthermore, there is no documented Federal guidance to support that the State?s practice meets the requirement of equitable funding between public and non-public schoolchildren.

Program: CFDA 84.367 ? Supporting Effective Instruction State Grant ? Allowability & Subrecipient Monitoring Grant Number & Year: S367A170026, grant period 7/1/2017 to 9/30/2019, and S367A180026, grant period 7/1/2018 to 9/30/2020 Federal Grantor Agency: U.S. Department of Education Criteria: 2 CFR ? 200.403 (January 1, 2019) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 2 CFR ? 200.430(i)(1) (January 1, 2019) states, in relevant part, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. 2 CFR ? 200.331 (January 1, 2019) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] A good internal control plan requires that adequate documentation be maintained to support amounts paid to subrecipients. Good internal control also requires procedures to ensure subrecipients are utilizing Federal funds for authorized purposes and in compliance with all applicable regulations. Condition: The Agency did not have adequate subrecipient monitoring procedures. For three of five subrecipient payments tested, documentation was not adequate to support that the amounts paid were in accordance with Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2018-015 Questioned Costs: $1,802,192 known (S367A170026, $1,531,578; S367A180026, $270,614) Statistical Sample: No Context: The Agency awards subgrants to schools for the Supporting Effective Instruction State Grant (Title IIA), and these subrecipients request reimbursement periodically during the fiscal year. The Agency requires supporting documentation to be provided with the reimbursement request. However, for payroll expenditures, the Agency required only a report from the subrecipients? accounting system that showed the amount paid with Title IIA funds to each employee. The Agency did not require time-and-effort logs, time certifications, or other payroll documentation. Subrecipient payments made by the Agency for the fiscal year totaled $9,031,171. We tested five subrecipient payments, totaling $2,231,473, and reviewed the monitoring for each. We noted that four of these payments tested included reimbursement for payroll expenses. Three of those payments did not have adequate documentation on file to support that payroll costs were allowable and in accordance with Federal cost principles, nor did the on-site reviews include documentation that Title IIA payroll records were adequately tested. Cause: Corrective action procedures were not fully implemented during the fiscal year. The Agency hired two individuals to perform fiscal monitoring of the school districts on a three-year rotation, with the goal of helping the school districts improve their documentation. As of December 19, 2019, the Agency had completed the fiscal monitoring for seven schools. Effect: Without adequate supporting documentation and adequate monitoring procedures, there is an increased risk that Federal awards could be used for improper/unallowable costs. Recommendation: We recommend the Agency continue to improve procedures to ensure subrecipient payments are in accordance with Federal requirements. Management Response: The Department of Education continually evaluates policies and procedures to ensure compliance with Federal and State guidance. We will review procedures to ensure subrecipient payments are in accordance with Federal requirements.

Program: CFDA 93.658 ? Foster Care Title IV-E ? Allowable Costs/Cost Principles Grant Number & Year: 1901NEFOST, FFY 2019 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: Per 45 CFR ? 75.405(a) (October 1, 2018): A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Per 45 CFR ? 75.303 (October 1, 2018): 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. Title 45 CFR ? 75.511(a) (October 1, 2018), requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure observations selected by workers are correct. Condition: The Agency did not have effective control procedures to ensure Random Moment Time Study (RMTS) observations were accurate. We tested 50 RMTS observations and noted six workers selected Foster Care Title IV-E, which results in charges to Federal funds, when they should have selected Not IV-E. A similar finding was noted since 2015. The summary schedule of prior audit findings states the corrective action plan is complete. Repeat Finding: 2018-017 Questioned Costs: $22,066 known Statistical Sample: No Context: The RMTS is conducted on an ongoing basis to provide data for the allocation of direct and indirect costs to various programs. The objective is to identify employee efforts directly related to programs administered by the Agency. The method is based upon the laws of probability and statistical sampling techniques. Children served by Children and Family Services are identified as either Title IV-E Foster Care (Federal and State-funded) or Foster Care Not IV-E (Child Welfare ? State-funded). To be eligible for Federal funding, cases must meet strict Federal criteria. During our initial testing of a random sample of 40 individual observations, we tested two cases where Foster Care IV-E was selected and four cases where Foster Care Not IV-E was selected. All four cases where workers selected Foster Care Not IV-E were correct. Both cases where workers selected Foster Care IV-E were incorrect as the children were not eligible for Foster Care IV-E funding. We selected 10 additional observations where IV-E was selected and found similar errors in four more observations. See table of issues noted below. ?See Schedule of Findings and Questioned Costs for chart/table? These errors resulted in an overcharge to Federal Foster Care IV-E funds of $22,066 and a corresponding undercharge to State funds. Looking at the total charged to Foster Care based on the RMTS each quarter, we observed that Foster Care appeared to bear an excessive portion of costs. Although IV-E Foster Care children make up only about 7.5% of the total children in the system, the Foster Care grant was charged approximately 34% of the Children and Family Services RMTS allocation. Federal payment errors noted in the sample were $22,066. The total Federal sample tested was $47,977, and total Federal Foster Care funds charged via the RMTS were $6,347,199. Based on the sample tested, the case error rate was 50% (6/12). The dollar error rate for the sample was 45.99% ($22,066/$47,977), which estimates the potential dollars at risk for fiscal year 2019 to be $2,919,077 (dollar error rate multiplied by population). Cause: Workers, supervisors, and the RMTS administrator did not review cases in adequate detail to ensure selection of IV-E Foster Care was appropriate. We have had similar findings for several years, yet the Agency has failed to train or supervise workers adequately to ensure observations submitted are correct. The Agency?s corrective action plan stated, ?[T]raining of SSWs [Social Service Workers] /CFSS [Child and Family Services Specialist] workers will be conducted in order to ensure that RMTS forms are being filled out correctly.? However, the support the Agency provided of the training conducted during the fiscal year showed that only 8 out of 126 workers who received training were Child and Family Service specialists, trainees, or supervisors. To provide perspective, as of the end of the fiscal year, the Agency had 519 Child and Family Service specialists, trainees, and supervisors. Effect: Random moment sampling is based on the laws of probability, which state, in essence, that there is a high probability that a relatively small number of random observations will yield an accurate depiction of the overall characteristics of the population for which the sample was taken. If RMTS observations are not accurate, there is an increased risk costs will be allocated incorrectly between programs. The Foster Care program was likely significantly overcharged. Recommendation: We recommend the Agency improve procedures to ensure random moment observations are accurate and adequately reviewed. Management Response: The Department agrees that training of all applicable workers was not conducted. However, in regards to the table of worker comments, the Department will point out that caseworkers being asked by an auditor if they correctly selected an RMTS activity from months prior are not likely to remember the circumstances of the case at that point in time. Concerning Foster Care RMTS hits making up a greater percentage than Foster Care clients do, this simply recognizes that different case types require different amounts of time to complete.

Program: Various, including CFDA 93.558 ? Temporary Assistance for Needy Families (TANF); CFDA 93.575 ? Child Care and Development Block Grant; CFDA 93.658 ? Foster Care Title IV-E; CFDA 93.667 ? Social Services Block Grant; CFDA 93.778 ? Medical Assistance Program (Medicaid) ? Allowable Costs/Cost Principles Grant Number & Year: Various, including 1901NETANF, FFY 2019; G1901NECCDF, FFY 2019; 1901NEFOST, FFY 2019; G1901NESOSR, FFY 2019; 1905NE5ADM, FFY 2019 Federal Grantor Agency: U.S. Department of Health & Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2018): 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. Per 45 CFR ? 75.405(a) (October 1, 2018): A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Title 45 CFR ? 75.511(a) (October 1, 2018), requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Per the Cost Allocation Plan (CAP), the cost center IST (Information Services and Technology) Services is allocated to other cost centers based on the labor hours in each cost center. Per the CAP, the cost center Legal Services General Legal Teams is ?allocated to the benefiting cost centers and programs based on Time and Effort reporting of the attorneys.? The cost center Child Support Enforcement Unit?s costs ?will be charged directly to the Child Support Enforcement Program.? Per the CAP, the cost center Field Office Resource Development is ?allocated to the benefiting programs based on Time and Effort Reports prepared by the DHHS [Agency] Resource Developers in the cost center.? The cost center Provider Relations Office 50% is charged ?directly to the Medicaid 50% Program.? The cost center Social Services Block Grant Administration?s ?direct and indirect costs will be charged directly to the Social Services Block Grant (Title XX).? Per the CAP, the cost center Field Office Social Services Casework is ?allocated to the benefiting programs based on the SSW [Social Service Worker] Random Moment Time Study Results.? Per the CAP, the cost center Field Office Child Protection and Safety Services is ?allocated to the benefiting programs based on the CFSS [Child and Family Services Specialist] Random Moment Time Study results.? Per the CAP, the cost center IST Fiscal Projects Administration is ?allocated to benefiting programs based on a time study that will be updated annually for the quarter ending 12/31.? Per the CAP, the cost center IST Services NFOCUS Applications is ?allocated to the benefiting programs based on the NFOCUS end of quarter count of recipients receiving benefits associated with each program that benefits from the system.? A good internal control plan requires procedures to ensure programs are charged costs in accordance with relative benefits received and the CAP. Condition: The Agency did not have adequate procedures to ensure costs were allocated properly to benefitting programs in accordance with the approved CAP. The Agency did not properly allocate costs in accordance with relative benefits received for all four CAP allocation methodologies tested: labor hours, time and effort, the Random Moment Time Study (RMTS), and non-payroll based allocations. A similar finding has been noted since 2013. The summary schedule of prior audit findings states the corrective action plan is complete. Repeat Finding: 2018-018 Questioned Costs: $972,409 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: The following errors were noted: Labor Hours The contractor omitted hours from its labor hours calculations in one of three cost centers tested, as follows: ?See Schedule of Findings and Questioned Costs for chart/table? This cost center allocated $1,426,364 for the quarter tested. We could not determine the dollar error associated with this issue because the Agency no longer completes the ?Step Down,? a restatement of the CAP in Excel that provides a method to calculate the effects of changes in the CAP. Fifty cost centers are allocated based on labor hours; we tested three of these and had issues with one of them: a 33% error rate. Total costs allocated via labor hours were $13,963,198 for the quarter ended December 31, 2018, and $15,835,746 for the quarter ended March 31, 2019. Time and Effort We tested the Legal Services General Legal Teams cost center for the quarter ended December 31, 2018, which allocated $802,148 to benefiting programs. Hours and costs for 23 attorneys were included within the allocation. One additional attorney worked entirely on Child Support Enforcement (CSE). Her hours were appropriately included in the cost center allocation, resulting in increased charges to CSE, but her costs were also inappropriately charged directly to CSE. Therefore, the CSE Federal grant was overcharged $35,380, while other Federal and State programs were undercharged. We also tested the Field Office Resource Development cost center for the quarter ended March 31, 2019, which allocated $1,230,050 to benefiting programs. Hours and costs for 63 resource developers were included within the allocation. We noted the following: ? Twelve additional resource developers worked entirely on Medicaid. Their hours were appropriately included in the cost center allocation, resulting in increased charges to Medicaid, but their costs were inappropriately charged directly to Medicaid. Therefore, Medicaid Federal funds were overcharged $66,604, while other Federal programs were undercharged. ? One additional resource developer charged time to several different programs. Her costs were appropriately charged directly to programs but her hours were inappropriately included in the cost center allocation. Therefore, SSBG and TANF were overcharged $9,403 and $8,836, respectively, while other Federal programs were undercharged. The questioned costs noted are for the cost centers tested, but similar errors would likely occur in other cost centers and quarters. Nine cost centers are allocated based on Time and Effort; we tested two of these and had issues with both. Total costs allocated via Time and Effort were $3,175,554 for the quarter ended December 31, 2018, and $3,677,833 for the quarter ended March 31, 2019. RMTS We tested the Field Office Social Services Casework cost center for the quarter ended December 31, 2018, which allocated $7,815,334 to benefiting programs. The Agency excluded certain observations if the worker selecting them did not normally work on that program. However, the observations selected by the workers were valid and should be included in the allocation, resulting in questioned costs to Federal Programs. Of the 1,290 observations that should have been used, 100, or 8%, were excluded, resulting in questioned costs to Federal programs and undercharges to other Federal and State programs. We also tested the Field Office Child Protection and Safety Services cost center for the quarter ended March 31, 2019, which allocated $8,115,997 to benefiting programs. Because of programming errors in the summary report used to allocate, the Agency charged Medicaid for non-Medicaid activities, and excluded some allocations for State-funded child welfare and Federal Foster Care IV-E. We informed the Agency of the issue, and it adjusted statistics on the June 30, 2019, quarter. However, simply adjusting the next quarter?s statistics does not properly correct dollar errors noted, resulting in $23,104 questioned costs to Federal programs. We also noted for this cost center that the Agency made a decreasing adjustment to the Guardianship Assistance Program but failed to make a corresponding increasing adjustment to Child Welfare, resulting in additional questioned costs to Federal programs of $131,250 and undercharges to other Federal and State programs. The known Federal share of questioned costs noted for RMTS total $574,567. These questioned costs are for the cost centers tested, but similar errors would likely occur in other cost centers and quarters. Eight cost centers are allocated based on the RMTS; we tested two of these, totaling $15,931,332, and had issues with both. Total costs allocated via the RMTS were $17,006,745 for the quarter ended December 31, 2018, and $19,908,569 for the quarter ended March 31, 2019. Non-Payroll Based Allocations We tested the IST Fiscal Projects Administration cost center for the quarter ended December 31, 2018, which allocated $770,103 to various programs that use the Nebraska Family Online Client User System (NFOCUS). According to the Cost Allocation Plan, the allocation methodology was to be a time study. However, when we reviewed the allocation detail, we discovered it was not based on a time study; instead of verifiable supporting documentation, the Agency used average money spent for each division, the amount of units/account numbers, lines of data, and several assumptions based on the experience of the supervisor within the unit. Documentation was inadequate to support that costs were allocated in accordance with the relative benefits received. We question the direct charges to Federal programs, totaling $270,965. We also tested the IST Services NFOCUS Applications cost center for the quarter ended March 31, 2019, which allocated $5,899,171 to various programs based on recipient counts. The Agency maintains the detail for the recipients for most of the programs, but not Medicaid or the Children?s Health Insurance Program (CHIP), which were allocated $2,672,139 and $436,153 of the total, respectively. The Agency was able to provide a report after the fact. It includes changes made since March 31, and the totals were higher. The variance was 3.03% for Medicaid and 2.03% for CHIP. Additionally, the Agency did not use the actual Medicaid and CHIP statistics because, due to employee turnover, the statistics were not accumulated in time. Instead, the Agency took the average of the three previous quarters. This resulted in questioned costs of $6,654 for Medicaid. Total costs allocated via non-payroll based methodologies were $7,458,381 for the quarter ended December 31, 2018, and $10,541,196 for the quarter ended March 31, 2019. Cause: Ineffective review. Similar errors have occurred for several years. Effect: When costs are not correctly allocated, programs are not charged in accordance with relative benefits received. Recommendation: We recommend the Agency implement procedures to ensure programs are charged costs in accordance with relative benefits received. Management Response: Labor Hours: The Department agrees that hours were omitted. Time and Effort Legal Services: The Department agrees there was an issue. The CSE attorney transferred from Legal Services to Economic Assistance Child Support Enforcement and was appropriately charged directly to CSE. However, the Department extracted labor hours based on job classification causing the attorney?s hours to be incorrectly included in the Legal Services cost center. This resulted in over-allocating to CSE by $35,380 and under-allocating to other Federal grants by $6,940. Time and Effort Resource Development Medicaid staff: The Department agrees there was an issue. These specific RD workers are dedicated entirely to Medicaid. When the structural change occurred to dedicate them to Medicaid, the Department charged them to the wrong business unit. This resulted in a Medicaid cost center incorrectly earning $66,604. Time and Effort Resource Development SSBG: The Department agrees there was an issue. The employee in question is no longer part of the RD group even though her job classification remains the same. The Department extracted labor hours based on Job Classification, causing the RD worker?s hours to be incorrectly included in the RD cost center. This resulted in over-allocating to SSBG and TANF by $18,239 and under-allocating to several other Federal grants by $18,239. RMTS Field Office Social Services Casework questioned costs of $420,557: Subsequent to Programmatic review in a prior year, it was determined that three codes should be removed from the SSW surveys, as SSWs no longer perform them. The intent was to change the survey, but the system was only reprogrammed to exclude these activities from the Allocation report that is used to report on RMTS. A recent review of the survey with Program staff results in the Department agreeing that two of the three codes should be included. This resulted in an over-allocation of $420,557 to several Federal Grants and an under-allocation of $316,465 to SSBG. RMTS Child Protection and Safety Services: The Department agrees that a dollar adjustment should have been performed instead of a statistical adjustment. The department notes this finding resulted in overcharging Federal programs by $131,250 while undercharging Federal programs by $215,206. IST Fiscal Projects Administration: Agree that the PACAP incorrectly stated time study when it was in fact a more robust analysis of the activities performed by the unit. The department disagrees that documentation was inadequate upon meeting with the IST Fiscal Projects Admin unit for further explanation of the analysis and believes this analysis is a more accurate depiction of the work they perform than a more simplistic study would have been. NFOCUS Applications: The Department believes report numbers at the point in time that they were processed were accurate, as retroactive eligibility causes the variance depending on when you pull the report. However, the Department agrees that the point in time report should be saved for documentation.

Program: Various, including 93.778 ? Medical Assistance Program (Medicaid); CFDA 93.575 ? Child Care and Development Block Grant (Child Care) ? Allowable Costs/Cost Principles Grant Number & Year: Various, including 1805NE5ADM, FFY 2018; G1701NECCDF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.403 (October 1, 2018) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. Per 45 CFR ? 75.405(a) (October 1, 2018): A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. Title 45 CFR ? 75.511(a) (October 1, 2018), requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure costs are adequately documented and allocated in accordance with relative benefits received. Condition: Operating expenditures were not adequately supported, resulting in questionable costs charged to Federal programs. A similar finding was noted in the prior audit. The summary schedule of prior audit findings states the corrective action plan is complete. Repeat Finding: 2018-020 Questioned Costs: $43 known ($38 1805NE5ADM; $5 G1701NECCDF) Statistical Sample: No Context: We randomly selected 25 Agency operating expenditures for testing and noted the following issues: ? We tested a $150 invoice for three hours of translation service. The Agency was unable to provide support that services were actually provided. The Agency had no support on file for one hour of service, and a note was on file for the other two hours of service stating that the appointment was canceled. Thirty-eight dollars was paid with Federal Medicaid funds and is considered questioned costs. ? We tested a $11,319 payment for licensing software maintenance that was allocated to various programs based on the number of licenses within each program. The Agency erroneously excluded several categories of licenses, which caused the allocation to be incorrect. A total of $192 was charged to Child Care. If all the license types had been included in the allocation, only $187 would have been charged to Child Care. The variance of $5 is considered questioned costs. ? We tested a payment for the verification of educational credentials. The payment was for eight verifications at a rate of $12.50 each, for a total charge of $100. However, the contract states the charge should be only $7.00 per verification, resulting in a total overpayment of $44. This payment was made with State funds, but it was coded to a cost center that is ultimately charged to both Federal and State programs through the quarterly cost allocation process. Additionally, the Agency did not pay this invoice for over a year due to employee turnover. This is not timely. ? We tested two payments to schools, totaling $3,778, for Medicaid administrative costs; the total Federal share of these types of payments was $5,514,892 during the fiscal year. The Agency has a contract with a third party to verify that amounts paid by the Agency are correct. However, the Agency did not monitor the contractor?s procedures or calculations to ensure they were adequate. Federal payment errors noted within the sample were $43. The total Federal sample tested was $181,645, and total operating expenditures paid with Federal funds during the fiscal year were $81,313,420. Cause: Inadequate review. Effect: Noncompliance with Federal and State requirements and a risk of loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure costs are adequately documented and allocated in accordance with relative benefits received. Management Response: The Department agrees with the finding. The Department has an ongoing process improvement project that is reviewing the payment process from start to finish. This will include the submission and review of all payments by program staff, procurement staff, and accounting staff.

Program: CFDA 10.557 ? Special Supplemental Nutrition Program for Women, Infants, and Children and CFDA 10.578 ? WIC Grants to States ? Allowability & Subrecipient Monitoring Grant Number & Year: 183NE706W1003, FFY 2018; 16163NE806W5003, FFY 2016; 173NE522G5210, FFY 2017 Federal Grantor Agency: U.S. Department of Agriculture Criteria: 2 CFR ? 200.303 (January 1, 2019) directs the Agency to ensure compliance with Federal requirements through the use of sound internal controls. A good internal control includes the establishment of controls to ensure subrecipients use Federal awards in accordance with Federal compliance requirements, including procedures for monitoring of subrecipients? fiscal activities related to Federal expenditures. 2 CFR ? 200.331(d) (January 1, 2019) requires a pass-through entity to do the following: ?Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.]? 2 CFR ? 200.403 (January 1, 2019) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. Condition: As noted in Finding 2019-006, for one subrecipient tested, the Agency did not have adequate monitoring procedures to support the allowability of subrecipient expenditures. A similar finding was noted in the prior audit. Repeat Finding: 2018-024 Questioned Costs: Unknown Statistical Sample: No Context: The Agency receives monthly reimbursement requests from local agencies. These requests list the expenses by cost categories. The monthly expense reports are reviewed by Agency staff when received for payment; however, no invoices or detailed documentation is submitted to support that the expenditures are allowable and in accordance with Federal regulations. The Agency later performs desk reviews of the local agencies, in which source documents are requested to support the line items selected from the monthly expense reports for testing. For the one subrecipient we selected for testing, the Agency performed a desk review of June 2018 expenses in September 2018. Of the $63,800 requested by the local agency, supporting documentation was obtained and reviewed for only $387. One of the largest expenses, salary and benefits of $46,119, was not reviewed. The Agency disbursed $938,500 in aid to the local agency during State fiscal year 2019. We did note, however, that the local agency also had a Single audit for the fiscal year ended September 30, 2018, with WIC audited as a major program, which would provide some assurance of compliance with Federal requirements. Therefore, we did not question any costs. In addition, during testing of expenditures for this subrecipient, we noted that an Agency business unit was assigned to CFDA 10.557 in EnterpriseOne; however, according to the grant award, the appropriate CFDA should be 10.578. For fiscal year 2019, there was $7,526 inappropriately recorded to CFDA 10.557. Cause: Inadequate monitoring procedures. Effect: When adequate monitoring is not performed, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures for monitoring subrecipients. Monitoring should include procedures to ensure monthly reports are accurate and agree to support, and expenditures are in accordance with Federal requirements. Management Response: Partially Agree

Program: CFDA 93.044 ? Special Programs for the Aging Title III, Part B, Grants for Supportive Services and Senior Centers; CFDA 93.045 ? Special Programs for the Aging Title III, Part C, Nutrition Services ? Allowability & Subrecipient Monitoring Grant Number & Year: All open, including #18AANET3SS, FFY 2018; #18AANET3CM, FFY 2018; #18AANET3HD, FFY 2018; #1901NEOASS, FFY 2019; #1901NEOACM, FFY 2019; and #1901NEOAHD, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with laws, regulations, and the provisions of contracts or grant agreements, and that performance goals are achieved. 45 CFR ? 75.403 (October 1, 2018) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR ? 75.405(a) (October 1, 2018) provides the following: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. 45 CFR ? 75.430(i)(1)(viii) (October 1, 2018) states, in relevant part, the following: Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . [.] 45 CFR ? 75.438 (October 1, 2018) states the following: Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the HHS awarding agency. 45 CFR ? 75.352(d)(3) (October 1, 2018) requires pass-through entity monitoring of the subrecipient to include the following: Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by ?75.521. 45 CFR ? 75.521 (October 1, 2018) states, in relevant part, the following: (a) General. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. While not required, the Federal agency or pass-through entity may also issue a management decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. * * * * (c) Pass-through entity. As provided in ? 75.352(d), Requirements for pass-through entities, paragraph (d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Condition: Subrecipient monitoring procedures were inadequate. The Agency did not follow up adequately on deficiencies noted by agreed-upon procedures to ensure that corrective action was implemented by the subrecipients. A similar finding was noted in the prior audit. Repeat Finding: 2018-025 Questioned Costs: $6,936 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: The Agency receives monthly expense reports from eight subrecipient Area Agencies on Aging (AAAs). These reports include attachments with a breakdown of the current month?s expenses by cost categories and indicate the amount of local matching funds used for each of the activities. The monthly expense reports are reviewed by Agency staff; however, no invoices or detailed supporting documentation are required at the time of payment. The Agency also reviews Single Audit reports submitted by the AAAs. For fiscal year 2019, the Agency engaged a contractor to perform agreed-upon procedures of the subrecipients? expenditures. The contractor sampled transactions for varied months throughout the fiscal year ended June 30, 2019. The contractor prepared a report for each subrecipient review that detailed various items of insufficient documentation, inadequate procedures, or noncompliance with Federal guidelines. The Agency then provided the subrecipients with a letter that briefly summarized the results of the agreed-upon procedures report with general recommendations for the subrecipient. Three of eight subrecipients did not have adequate follow-up to ensure compliance with Federal regulations. We noted the following: ? For one AAA, the agreed-upon procedures report noted that personnel costs were based on estimates and were not a reflection of actual time worked. Also, operating expenses were allocated to various programs, but the support was not adequate to ensure costs were charged based on relative benefits received. The AAA did not conduct a new time study or cost allocation plan for fiscal year 2019, but it indicated a new cost allocation plan would be implemented in fiscal year 2020. Known questioned costs for the payment tested were $5,056. ? One AAA was allocating personnel costs and other expenses based on budgeted amounts, which is not in accordance with Federal cost principles. The AAA did not submit a cost allocation plan or a time study for fiscal year 2019 and did not make any adjusting entries for the fiscal year. The Agency did not adequately follow-up on findings to ensure corrective action was taken. Known questioned costs for the payment tested were $1,860. ? One AAA charged a staff Christmas meal to the Federal grant. There was not adequate documentation to support that the charges were properly repaid. Known questioned costs total $20. We reviewed $354,694 in subrecipient payments and noted that $6,936 did not have adequate documentation to support that findings were corrected and adjustments made as needed. As a result, we question $6,936. The Agency paid $6,319,083 in aid to the eight AAAs during fiscal year 2019. We also reviewed two fiscal year 2018 subrecipient single audits. For both subrecipients tested, the Agency failed to issue a formal management decision on audit findings. Cause: Inadequate monitoring procedures. Effect: Without adequate follow-up procedures to ensure subrecipient expenditures are allowable, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures for following up on subrecipient deficiencies to ensure subrecipient payments are for actual and allowable costs, in accordance with Federal requirements. We further recommend the Agency issue management decisions for subrecipients? single audit findings. Management Response: Does not agree. The SUA fiscal team will review the expenses individually. The AAA with $5,056 in questioned costs is under a corrective action plan with multiple steps and documents due to the Department. The corrective action plan was submitted to the agency on 2/12/19 with follow-up communications about outstanding items sent on 6/3/19 and 9/6/19. Additional disallowance letters were sent by DHHS on 6/27/19, 7/18/19, and 9/26/19 before the disallowed amount was remitted by the agency to DHHS. The corrective action plan was provided to the auditor. The AAA with $1,860 questioned costs does have a cost allocation plan on file. The agency did not make adjusting entries. The agency in question was audited by the APA, and was under a corrective action plan with the APA as a result. The Department did not require a duplicate corrective action plan as a result. The agency responded to the APA regarding the corrective action plan on 11/9/18 with updated policies and submitted its completed time study to DHHS on 12/17/18. The AAA with a $20 charge did remediate this unallowable expense. Documentation was provided to the APA. APA Response: The disallowance letter referred to for the first subrecipient noted was for CFDA 93.043, Title III, Part D, services, which is not part of the Aging Cluster. No support was provided to show that findings were corrected and adjustments were made, or costs were returned, for CFDA 93.044 and 93.045 questioned costs. Regarding the second subrecipient, the Agency acknowledges that adjusting entries were not made. Documentation provided for the third subrecipient was inadequate, moreover, to support that the $20 was repaid.

Program: CFDA 93.069 ? Public Health Emergency Preparedness; CFDA 93.889 ? National Bioterrorism Hospital Preparedness Program ? Allowability & Subrecipient Monitoring Grant Number & Year: #1 NU90TP921891-01, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 45 CFR ? 75.302(a) (October 1, 2018) requires the State to have accounting procedures sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? Good internal control requires procedures to ensure financial activity is properly recorded in the accounting system. 45 CFR ? 75.403 (October 1, 2018) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. 45 CFR ? 75.430(i)(1) (October 1, 2018) states, as is relevant, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . ; (iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: * * * * (C) The non-Federal entity?s system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 45 CFR ? 75.430(i)(3) (October 1, 2018) states, in relevant part, the following: [C]harges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 45 CFR ? 75.431 (October 1, 2018) states, in relevant part, the following: * * * * (c) The cost of fringe benefits in the form of employer contributions or expenses for social security; employee life, health, unemployment, and worker?s compensation insurance (except as indicated in ?75.447); pension plan costs (see paragraph (i) of this section); and other similar benefits are allowable, provided such benefits are granted under established written policies. Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities . . . . (d) Fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individual employees or by allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. Condition: Subrecipient monitoring procedures were inadequate. The Agency did not adequately follow up on deficiencies that were noted during the subaward monitoring to ensure corrective action was implemented by the subrecipients. A similar finding was noted in the prior audit. Repeat Finding: 2018-026 Questioned Costs: $146,970 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: The Agency made payments to 30 subrecipients during the fiscal year ended June 30, 2019. The Agency used a contractor to perform agreed-upon procedures of the subrecipients, and reviewed and obtained documentation for samples of transactions and other support available for varied quarters throughout the fiscal year ended June 30, 2019. The contractor prepared a report for each subrecipient review. In most cases, the report noted various items of insufficient documentation or inadequate procedures to ensure that the subrecipient?s requests for reimbursement were allowable within Federal guidelines. The Agency then provided that report to the subrecipient, along with a letter containing instructions to see the results of the monitoring report and take any corrective actions needed for the recommendations noted and report back to the Agency within 30 days. However, a majority of the corrective action responses the Agency received indicated that the subrecipient would be making future changes to documentation and procedures. Furthermore, the corrective action responses did not result in refunding of payments that were questioned or obtaining additional documentation to support that the amounts questioned were allowable. We tested payments to six subrecipients, totaling $528,135. We then reviewed the Agency?s subrecipient monitoring documentation of these payments. During our review of the Agency?s documentation, we noted that the subrecipients had inadequate support or procedures to ensure expenditures were for actual and allowable costs for four of the six subrecipients? payments, or $146,970 of the $528,135 tested. Subrecipient payments for the fiscal year ended June 30, 2019, totaled $5,389,409. During testing, we noted the following (most subrecipients had more than one type of error): ? The Agency?s subrecipient monitoring reports for two subrecipients tested noted that salaries and benefits were not being charged in accordance with Federal requirements. One subrecipient?s timesheets did not include the total number of hours actually worked by program each day, as required. The other subrecipient was using budgeted time estimates. While the Agency requested corrective action plans from the subrecipients, there was no further follow-up by the Agency to recover the noted unallowable payments made. Nor did the Agency obtain documentation to support the subrecipient made the necessary corrections to charge salaries and benefits for actual time. The salary and benefits payments questioned total $109,602. ? For four subrecipients tested, we noted that various expenses lacked adequate or appropriate supporting documentation. The total amount questioned for the various expenses noted below is $37,368. We noted the following: o Four of the subrecipients tested had shared costs charged to the program, but lacked adequate documentation to support such charges or used an improper allocation method, including: 1) Costs allocated by budgeted full-time equivalent (FTE) method rather than actual time worked on the program for $1,280. 2) Costs allocated based on budgeted personnel hours rather than actual hours worked on the program for $498. 3) Costs allocated among multiple subawards based on the total funding provided by the subawards, rather than received benefits, totaling $6,695. 4) Costs of $2,025 split 50/50 with no documentation to explain why 50% was being charged to the subaward. o Costs not yet incurred were noted. One of the subrecipients tested was charging the program for costs that had not yet been paid by the subrecipient. For one of the costs, the subrecipient was using amounts from its budget rather than actual expenses paid, for a variance of $1,999. Another cost lacked documentation to support that $10,500 had been spent. o One of the subrecipients tested was charging the program to pay for a contracted employee who charged 100% of their time to the program. The contractor?s timesheets and expense reports, however, listed costs for other programs, leading to questions about the accuracy of the timesheets. With no further documentation provided to support the 100% allocation to the program, all of the salary, $13,000 for the contracted individual as well as associated costs for the individual (office space at $1,140 and telecommunication services at $231), were questioned. While the Agency requested corrective action plans from the subrecipients, further follow up by the Agency to recover the noted unallowable payments previously made to the subrecipient was not done. Cause: The Agency?s follow up on subrecipients? required corrective actions plans was insufficient. Effect: Without adequate follow-up procedures to ensure subrecipient expenditures are allowable, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures for following up on subrecipient monitoring?s corrective action plans to ensure subrecipient payments are for actual and allowable costs. Management Response: Partially agrees. There is disagreement between the University and APA on the allowability of their time tracking methodology. We have requested a management decision from the CDC and will proceed according to the outcome of that decision. On all subrecipients, we will seek further documentation from our subrecipients. We will determine any amounts to be repaid and collect those funds accordingly for return to the federal funding agency. We continually work to improve our procedures. In addition, prior to this audit finding we hired a Federal Aid Administrator II to help implement these procedures. This new position has ownership and oversight of our subrecipient monitoring and all related follow-up with subrecipients. We have already seen reductions in the time needed to complete subrecipient follow-up because of this, and expect continued improvement.

Program: CFDA 93.217 ? Family Planning Services ? Allowability & Subrecipient Monitoring Grant Number & Year: FPHPA076214, grant period 7/1/2015 to 8/31/2018; FPHPA006315, grant period 9/1/2018 to 3/31/2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2018) directs an Agency to ensure compliance with Federal requirements through the use of sound internal controls. A good internal control plan requires the pass-through entity to establish controls to ensure subrecipients use Federal awards in accordance with Federal compliance requirements, including procedures for monitoring of subrecipients? fiscal activities related to Federal expenditures. 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of a subrecipient to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. 45 CFR ? 75.302(a) (October 1, 2018) requires fiscal control and accounting procedures sufficient to permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to Federal award requirements. 45 CFR ? 75.403 (October 1, 2018) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. Condition: The Agency did not have adequate monitoring procedures to ensure payments to subrecipients were for allowable activities and costs. A similar finding was noted in the prior audit. Repeat Finding: 2018-027 Questioned Costs: $1,626,208 known (FPHPA076214 ? $417,900; FPHPA006315 ? $1,208,308) Statistical Sample: No Context: The Agency disbursed $1,626,208 to 13 subrecipients during fiscal year 2019. The subrecipients provided monthly reports to the Agency that included a breakdown of the expenses by cost categories for Family Planning funds and program income. The Agency did not require subrecipients to submit invoices or detailed supporting documentation with the monthly reports. During fiscal year 2019, the Agency obtained support for one expenditure, totaling $20,000, from one of the subrecipients? monthly reports. From this one expenditure, the Agency determined that $4,202 was unallowable and was returned to the State. No other monitoring procedures were performed during fiscal year 2019. Cause: The Agency did not allocate adequate resources towards monitoring. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk of costs being unallowable and not in compliance with Federal regulations, which could result in Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure expenditures are for allowable activities in accordance with Federal regulations. We also recommend subrecipient monitoring procedures be improved to include a review of all subrecipients. Management Response: Does not agree. NE DHHS Reproductive Health completed one desk audit during the state Fiscal Year 19, which was in January 2019. The Corrective Action Plan created for NE Reproductive Health?s previous finding, 2018-027, states ?NE Reproductive Health will request source documents from at least one subrecipient per year if staff remain at current levels.? NE Reproductive Health had previously identified a lack of capacity to conduct extensive Subrecipient monitoring in addition to managing the large Title X grant, monitoring pass-through funds from the Title V MCH block grant, and awarding/monitoring grants to local entities for colposcopy training and education from state general funds. Since no additional staff were hired during the state Fiscal Year 19, NE Reproductive Health completed one desk audit as planned for the Title X subawards in this period. It should be restated that NE Reproductive Health conducted pre-award assessments on subrecipients and reviewed monthly expenditure reports to ensure that actual expenses aligned with an approved budget, and thus were allowable, allocable and reasonable. APA Response: As mentioned in the response, the Agency required the review of source documents from ?at least? one subrecipient per year. This is, of course, a minimum requirement. Where problems have been shown to exist, one would expect a more aggressive approach towards safeguarding public funds. Reviewing only $20,000 of $1,626,208 in subrecipient expenditures is insufficient to ensure that funds were used in accordance with Federal regulations, especially as a similar finding and questioned costs have been noted since 2015. Moreover, the Agency found that $4,202 of the $20,000 was unallowable, which clearly indicates the need for additional review.

Program: CFDA 93.556 ? Promoting Safe and Stable Families; CFDA 93.671 ? Family Violence Prevention and Services/Domestic Violence Shelter and Supportive Services ? Allowability & Subrecipient Monitoring Grant Number & Year: G1701NEFPSS, FFY2017; G1801NEFVPS, FFY2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2018) directs an Agency to ensure compliance with Federal requirements through the use of sound internal controls. A good internal control plan requires the pass-through entity to establish controls to ensure subrecipients use Federal awards in accordance with Federal compliance requirements, including procedures for monitoring of subrecipients? fiscal activities related to Federal expenditures. 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of a subrecipient to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward. 45 CFR ? 75.403 (October 1, 2018) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. Condition: The Agency did not have adequate subrecipient monitoring procedures. A similar finding was noted in the prior audit. Repeat Finding: 2018-030 Questioned Costs: $338,250 known ($333,645 ? G1701NEFPSS; $4,605 ? G1801NEFVPS) Statistical Sample: No Context: Subrecipient payments for Promoting Safe and Stable Families (PSSF) for fiscal year 2019 totaled $876,653. We tested one payment to a subrecipient for $333,645, of which $290,010 was payments passed through to other contractors, and $43,635 was for payroll and other direct and indirect costs. The Agency did not obtain documentation for this payment. During fiscal year 2019, the Agency requested documentation for one payment of $29,000 made to one of the subrecipient?s contractors. The Agency received Support Service Funding Requests for rent/utilities/car repairs, invoices and contracts for the Family and Schools Together program, and timesheets; however, a detail list was not obtained in order to tie this support to the $29,000 payment. In addition, testing of one $29,000 payment to a contractor is not sufficient monitoring to ensure $876,653 in subrecipient payments was allowable and in accordance with Federal requirements. Subrecipient payments for Family Violence Prevention and Services/Domestic Violence Shelter and Supportive Services for fiscal year 2019 totaled $979,613. We tested two payments to subrecipients. ? The first payment was for $6,246, which consisted of $2,373 for payroll and $3,873 for other direct costs. Adequate documentation was on file for the payroll costs; however, no documentation was obtained for the other direct costs. The Agency did perform an on-site review, stating in its documentation that support was reviewed for other direct costs; however, the Agency did not maintain this support. ? The second payment was for $11,497, which consisted of $10,765 for payroll and $732 in other direct costs. The Agency did obtain timesheets and paystubs to support the payroll; however, no documentation was obtained for the other direct costs. The Agency did perform an on-site review, stating in its documentation that support was reviewed for other direct costs; however, the Agency did not maintain this support. Cause: Inadequate procedures. Effect: Without adequate subrecipient monitoring procedures, there is an increased risk for the misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure subrecipients are monitored, and adequate documentation is maintained to support that expenditures are allowable and in accordance with Federal requirements. Management Response: Agree

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability & Eligibility Grant Number & Year: #1701NETANF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2018), allowable costs must be reasonable, necessary, and adequately documented. Per 45 CFR ? 205.56(a)(1)(i) (October 1, 2018): The State agency shall review and compare the information obtained from each data exchange against information contained in the case record to determine whether it affects the applicant?s or the recipient?s eligibility or the amount of assistance. Per the ?Combined State Plan for Nebraska?s Workforce System? (July 12, 2018), Employment First Participation, pg. 237: Once a family applies for Aid to Dependent Children (ADC) cash assistance, all work-eligible individuals, unless they otherwise qualify for an exemption from Employment First, are referred to the Employment First program at the time of the intake interview. The work-eligible individual is required to complete an Employment First Self-Sufficiency Contract within five days of the referral and immediately engage in approved work activities. Dependent children age 15 or younger (including an emancipated minor) and dependent children age 16, 17, or 18 who are full-time students regularly attending an elementary or secondary school or a dependent child age 16 or 17 who is a full-time student and regularly attending college, are not required to participate in the Employment First program. Per 468 NAC 2-009.02, ?Earned income is money received from wages, tips, salary, commissions, profits from activities in which an individual is engaged as a self-employed person or as an employee.? Per NAC Appendix 468-000-209, the maximum ADC standard payment amount for a unit size of three is $450. A good internal control plan would require eligibility determinations and payments to be accurate. Condition: Three of 25 TANF cash assistance payments tested were not in compliance with State and Federal requirements. Repeat Finding: No Questioned Costs: $200 known Statistical Sample: No Context: During our cash assistance testing, we noted the following: ? For one case, a 17-year-old child in the unit was determined to be exempt from participation in Employment First due to student status. The student verification document showed that the individual was attending school half time or less; therefore, she should have been required to participate in Employment First. The individual was ineligible to receive ADC benefits for the month tested due to non-participation in Employment First, resulting in $36 in questioned costs. ? For one case, the individual informed the Agency of new employment on March 28, 2019; however, a worker closed the alert on April 5, 2019, without addressing the income from the new employment. The Agency never verified this income. Consequently, the income in the individual?s budget was understated, resulting in questioned costs of $155. ? For one case, the individual received $81 cash and credit for $9 against funds owed to the Agency in their first payment for December 2018. The family?s circumstances changed during the month, and they became eligible for an additional payment. The family received $369 in a second December payment for a total benefit of $459. The maximum payment amount for the family was only $450, resulting in questioned costs of $9. When calculating the second payment, NFOCUS failed to consider the $9 credit as a benefit to the family. Federal payment errors for the sample tested were $200. The total Federal sample tested was $9,922, and the total Federal cash assistance for the fiscal year was $18,171,251. Based on the sample tested, the case error rate was 12% (3/25). The dollar error rate for the sample was 2.02% ($200/$9,922), which estimates the potential dollars at risk for fiscal year 2019 to be $367,059 (dollar error rate multiplied by population). Cause: Worker errors and NFOCUS system error. Effect: The issues noted increase the risk that Federal funds will be paid to ineligible individuals, and Federal funds will be overpaid to eligible recipients. Recommendation: We recommend that the Agency implement procedures to ensure compliance with State and Federal regulations. Management Response: Agrees

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability Grant Number & Year: #1701NETANF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303(a) (October 1, 2018), the non-Federal entity must do the following: 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. Per 45 CFR ? 75.403 (October 1, 2018), allowable costs must be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure that overpayments are returned timely to the Federal grant. Condition: In March 2019, the Agency made $257,314 in TANF overpayments to 822 families. Most of those overpayments have not been returned to the Federal grant. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: On February 25, 2019, the Agency made cash assistance payments to families for March. On February 27, staff realized the same amounts from the prior month were paid. In many instances, the amount was the same. However, underpayments and overpayments were made. For underpayments, the Agency simply issued the difference to make the families whole. For overpayments, the Agency sent demand letters to the recipients and subsequently set up accounts receivable in NFOCUS. We reviewed 28 payments in detail and noted that 21 were Federally-funded and had overpayments of $6,454. Of that total, only $185 had been repaid as of June 30. As of January 17, 2020, $4,903 in Federal funds had still not been repaid on the 21 we reviewed. Based on our review of 28 payments, it is likely that most of the $257,314 has not been repaid. Cause: The Agency does not return overpayments to the Federal grant until they are repaid or recouped. Effect: The Federal grant was overcharged. Recommendation: We recommend the Agency implement procedures to ensure overpayments are returned timely to the Federal grant. The Agency could consider repaying the Federal grant immediately out of State general funds, and then depositing any eventual repayments/recoupments to general funds. Management Response: Does not agree. The Department agrees that an error was made in the NFOCUS system that improperly paid individuals the February benefit during the month of March in 2019. However, the stated cause of the finding was ?The Agency does not return overpayments to the Federal grant until they are repaid or recouped.? This would make it seem the issue is not the incorrect payment, but rather the manner in which we are recouping the overpayments and reimbursing the federal grant. This is the reason for the department?s disagreement. The department is following the current collection policy, which allows individuals to repay via recoupments from future benefits or via payment plans set up in NFOCUS. Further, the TANF grant is unique in that it does not have a specific period of performance. Therefore, the federal regulations do not contain a timeframe in which these amounts must be repaid. The department recognizes the auditor?s recommendation to repay the federal grant with state funds and then reimburse the state as repayment?s come in. The department disagrees with this course of action because the federal TANF regulations do not mandate it and taking such course of action could be viewed as a misuse of state general funds. APA Response: A deficiency in internal control over compliance exists when the design or operation of a control does not allow for prevention, or detection and correction, of noncompliance on a timely basis. The Agency does not dispute having expended Federal funds improperly. The Agency is solely culpable for not only making those invalid expenditures but also failing to correct them in a timely manner. Consequently, the Agency should act responsibly by taking aggressive, proactive measures to rectify its mistake ? not rely upon the actions of other parties, who are not at fault for the improper disbursements, to provide the necessary remedy. Having mishandled the Federal funds at issue, the Agency should ensure that those monies are returned to the Federal grantor immediately. We reject the claim that using State funds to resolve a financial error by a State agency would be inappropriate. To the contrary, we contend that such action is the proper method for redressing the Agency?s present error.

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Allowability, Subrecipient Monitoring & Reporting Grant Number & Year: #1701NETANF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 45 CFR ? 75.403 (October 1, 2018) requires costs to be reasonable, necessary, and adequately documented. Per 45 CFR ? 75.352 (October 1, 2018): All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal Award Identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier; (ii) Subrecipient?s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see ? 75.2 Federal award date) of award to the recipient by the HHS awarding agency; (v) Subaward Period of Performance Start and End Date; (vi) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (vii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current obligation; (viii) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (ix) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (x) Name of HHS awarding agency, pass-through entity, and contract information for awarding official of the pass-through entity; (xi) CFDA Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement; (xii) Identification of whether the award is R&D; and (xiii) Indirect cost rate for the Federal award (including if the de minimis rate is charged per ??75.414). Title 45 CFR ? 75.302 (October 1, 2018) requires that fiscal control and accounting procedures of the State be sufficient to permit preparation of required reports and permit the tracing of funds to a level of expenditures adequate to establish that the use of these funds was not in violation of applicable regulations. Per the Administration for Children & Families Instructions for Completion of State TANF Financial Report Forms, Line 27, Federal Unliquidated Obligations should be reported. Per 45 CFR ? 75.2 (October 1, 2018), ?obligations? are defined as follows: [W]hen used in connection with a non-Federal entity?s utilization of funds under a Federal award, obligations means orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles, required information is disclosed to subrecipients, Federal reports are accurate and include all applicable accounts and expenditures, and the Summary Schedule of Prior Audit Findings is accurate. Condition: Procedures to monitor expenditures of the Employment First (EF) subrecipient should be improved. A similar finding has been noted in prior audits since 2013. Repeat Finding: 2018-033 Questioned Costs: $34,930 known Statistical Sample: No Context: The Agency paid $7,777,572 during the fiscal year to its subrecipient ResCare to provide EF case management and program services for TANF recipients. The Agency paid ResCare monthly based on invoices submitted. We noted the following issues: ? The Agency?s financial monitoring of ResCare?s monthly invoices was inadequate. The Agency had a desk review process that involved requesting substantiating documentation for line items within the monthly invoices. We observed three of the Agency?s monthly reviews and noted the following: o Total salaries charged during the fiscal year were $4,525,276. The Agency reviewed salaries for four different months in the year; we selected the line item for March 2019 to review, for $442,620. The Agency reviewed timecards but did not adequately review payroll allocations for those employees not working solely on the grant. o Total fringe benefits charged during the fiscal year were $1,023,218. The Agency selected the line item for April 2019 to review, for $115,048. The Agency obtained documentation for 12 of the 662 line items and selected larger items to review; however, $38,812 was not reviewed. The Federal share, $34,930, is considered questioned costs. ResCare?s accounting records are complex, with numerous allocations and accruals, and the Agency did not address that complexity in its review. For the line items that were reviewed, we noted the following issues: benefit amounts were not traced to paystubs; workers? compensation amounts were not traced to actual payments; accruals were not reviewed adequately to ensure they were reversed; and the Agency did not recalculate FICA charges to ensure they were accurate. ? The Agency?s subaward with ResCare was effective July 1, 2018. The subaward did not communicate most of the information required by 45 CFR ? 75.352(a). We noted this in the prior audit. The Agency amended its contract on September 26, 2019, to communicate this required information, but the subrecipient?s unique entity identifier and the subaward period of performance start and end date were still missing. Additionally, the Agency stated that the Federal Award Identification Number was 1801NESORSR, but it was actually 1701NETANF. Both the grant year and the Federal program were incorrect. ? The Agency did not provide the dollar amount made available under each Federal award and the CFDA number at time of disbursement as required. This omission appears to have caused ResCare to record incorrectly all revenues received by the State as Federal funds. For ResCare?s December 31, 2018, Single Audit, $8,870,977 was reported on the Schedule of Expenditures of Federal Awards (SEFA), but the State provided only $8,008,107 in Federal funds. Of the $862,870 difference, $829,822 was State general funds misclassified by ResCare as Federal funds. ResCare?s SEFA was misstated. ? The July 1, 2018, subaward was for $9,805,139 for the first year of services. This constitutes an unliquidated obligation, and it should have been reported on Line 27 of the Agency?s ACF-196R report, but it was not. Agency staff acknowledged not tracking this line item for reporting purposes. ? Since 2013, we have noted that the Agency?s agreements with its EF contractors more closely resembled subrecipient, rather than vendor relationships. On July 1, 2018, the Agency ended its contracts with ResCare and another vendor, and signed a subaward with ResCare, officially making ResCare its sole EF subrecipient. However, the Summary Schedule of Prior Audit Findings for June 30, 2019, incorrectly stated, ?The Agency did not award the agreements as subawards.? Cause: Agency error. Effect: Inaccurate information reported to both the Federal government and ResCare. Without adequate financial monitoring, the Agency could be paying for unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure subrecipients comply with applicable cost principles, required information is disclosed to subrecipients, Federal reports are accurate and include all applicable accounts and expenditures, and the Summary Schedule of Prior Audit Findings is accurate. Management Response: Agree

Program: CFDA 93.558 ? Temporary Assistance for Needy Families (TANF) ? Reporting Grant Number & Year: #1701NETANF, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 265.3(a) (October 1, 2018), States must collect on a monthly basis, and file on a quarterly basis, a TANF Data Report (ACF-199) and a Separate State Plan-Maintenance of Effort (SSP-MOE) Data Report (ACF-209). These reports include disaggregated information on families receiving TANF and SSP-MOE assistance. Information reported includes demographic data, the amount of assistance received, educational level, employment status, work participation activities, citizenship status, and earned and unearned income. The ?Combined State Plan for Nebraska?s Workforce System? (July 2018), Separate State Program for Specified Exemptions, pgs. 249-250, states, in relevant parts, the following: Nebraska has implemented a separate state program for single-parent families receiving ADC cash assistance where the adult or minor parent qualifies for one of the specified exemptions . . . . * * * * 2. A parent or needy caretaker relative, guardian or conservator of a child under the age of 12 weeks . . . . The August 2019 OMB Compliance Supplement identifies key line items that contain critical information. The ACF-199 report?s key line items include Item 49 Work Participation Status and Item 50 Unsubsidized Employment hours. Per 45 CFR ? 265.7 (October 1, 2018), the ACF-199 and ACF-209 reports must be complete and accurate. A good internal control plan requires procedures to ensure that reviews of this data are adequately documented, issues noted are resolved timely, and all key line items are reported accurately. Condition: The Agency did not perform an adequate review of individual case information on a sample basis to ensure the accuracy of the ACF-199 and ACF-209 reports. We requested the ACF-199 and ACF-209 reports for 10 cases, which comprised 92 key line items. For one case, there was no corresponding ACF-209 report, so six key line items were not reported. For another case, two key line items were reported incorrectly. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The ACF-199 and ACF-209 are data reports electronically submitted by NFOCUS to the Federal government. The reports are automatically generated. Therefore, it is important that the Agency review a sample of these submissions to ensure they are accurate. The Agency?s procedure is for a program specialist to review three ACF-199 cases and three ACF-209 cases per month and work with program management and Information Technology staff if issues are noted with inaccurate data on the reports. We reviewed the samples for September 2018 and February 2019 and noted that the program specialist does not document her review of each case. She adds notes only if issues are noted. Since no issues were noted in September 2018, nor on four of the cases in February 2019, there was no evidence those cases were actually reviewed. The program specialist did note issues with a key line item on two of the cases from February 2019. She realized there are instances of the Agency reporting that childcare assistance was not received, when it actually was. This was an issue she originally noted in November 2017, and it has not yet been resolved. In fact, nothing was done to work on the issue between February 2018 and January 2020, or nearly two years. During our testing of 10 cases and 92 key line items, we noted that one case was not reported at all, and another case had errors: ? For one case, the parent was exempt from Employment First because she was a parent of a child under the age of 12 weeks. Therefore, the family was in the Separate State Plan, and the Agency should have provided an associated ACF-209 report to the Federal government. However, no report was created or provided, and the Agency was unsure why. ? For another case, the participant had met the work participation rate for the month, but the Agency?s Employment First subrecipient did not enter her hours into NFOCUS until after the reporting deadline. This caused two key line items to be misreported, as noted in the following table: ?See Schedule of Findings and Questioned Costs for chart/table? Cause: The Agency did not devote adequate resources to ensuring the ACF-199 and ACF-209 reports were complete and accurate. Effect: Increased risk of significant information being reported incorrectly, which could result in Federal sanctions. Recommendation: We recommend the Agency implement procedures to ensure reviews of ACF-199 and ACF-209 data are adequately documented, issues noted are resolved timely, and key line items are reported accurately. Management Response: Agree

Program: CFDA 93.568 ? Low-Income Home Energy Assistance (LIHEAP) ? Reporting Grant Number & Year: G18B1NELIEA, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2018) states, in part: ?Fiscal control and accounting procedures must be sufficient to (a) permit preparation of reports required by the statute authorizing the block grant . . . .? Per 45 CFR ? 96.82(a) (October 1, 2018): Each grantee which is a State or an insular area which receives an annual allotment of at least $200,000 shall submit to the Department, as part of its LIHEAP grant application, the data required by section 2605(c)(1)(G) of Public Law 97-35 (42 U.S.C. 8624(c)(1)(G)) for the 12-month period corresponding to the Federal fiscal year (October 1-September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. Per 42 USC ? 8624(c)(1)(G) (2018), the number and income levels of households are required to be reported. Good internal control requires procedures to ensure reported data is accurate. Condition: The income levels of households that received weatherization assistance were not reported accurately on the LIHEAP Household Report for the FFY 2018 grant. A similar finding was noted in the prior audit. Repeat Finding: 2018-034 Questioned Costs: None Statistical Sample: No Context: For FFY 2018, the ?LIHEAP Household Report-Long Form,? under ?Section II. Number of Assisted Households by Poverty Interval,? reported the number of households assisted by poverty level. The total number of households reported included: 38,638 heating assistance; 11,156 cooling assistance; 3,237 crisis assistance; and 147 weatherization assistance. We tested 10 households that received LIHEAP assistance and noted two weatherization assistance households were not reported in the correct poverty level. For one household tested, the income level was reported as 126-150% poverty, but it should have been reported in the 101-125% poverty category. For another household tested, the income level was reported as 101-125% poverty, but it should have been reported in the 76-100% poverty category. For this second household, it appears the incorrect annual poverty guidelines were used in the calculation of poverty level. Cause: Inadequate review procedures. Effect: When procedures are not performed to ensure reported data is accurate, there is an increased risk of noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure reports are accurate. Management Response: Agree

Program: CFDA 93.575 and 93.596 ? CCDF Cluster ? Allowability & Eligibility Grant Number & Year: #G1601NECCDF, FFY 2016; #G1901NECCDF, FFY 2019; #G1901NECCDD, FFY 2019; #G1901NECCDM, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 98.67(a) (October 1, 2018) states ?Lead Agencies shall expend and account for CCDF [Child Care and Development Fund] funds in accordance with their own laws and procedures for expending and accounting for their own funds.? Title 392 NAC 3-005.01C states, ?A family whose income exceeds the maximum for LF [Low Income Family] but is equal to or less than 130 percent of the Federal Poverty Level (FPL) is eligible as LC [Low Income Sliding Fee Schedule]. To participate in LC, a family must pay the fee as shown in the fee schedule.? Title 392 NAC 3-005.01D1 states, ?A family that is receiving TCC [Transitional Child Care] may be required to pay a fee.? Title 392 NAC 3-001.02 states, ?If parents are separated, divorced, or unmarried but have shared custody of a child, both parents may be eligible for Child Care Subsidy. Eligibility is based on the income of the parent with whom the child is residing at the time and any child support or other financial assistance from the other parent.? Title 392 NAC 3-005.04 states, ?The client must provide verification of earned income, with a copy of check stubs . . . .? Good internal controls require such amounts verified to be used in the calculation for income eligibility. Title 392 NAC 4-003.01A states, ?The Department pays by attendance, not enrollment. Payment is not made for time when the child is not receiving care; this includes when the provider is on vacation, is ill, or is not providing care for some other reason.? Title 392 NAC 4-001 states, ?The worker notifies the provider and the client of the client?s eligibility and the amount of the client?s fee on an authorization notice.? Title 392 NAC 4-003.02 states, in relevant part, ?Care for 6 or more hours must be billed by the day.? Title 392 NAC 4-002.01 requires the client to ?contact the worker within ten days when: 1. The client?s situation has changed (e.g., address, income, family composition, need for child care, child care schedule)[.]? Title 392 NAC 5-001.01 states, in relevant part, ?Before furnishing any service, each provider must sign Form CC-9B agreeing: . . . 7. To retain authorizations, billing documents, and attendance records for four years to support and document all claims[.]? The Child Care Provider Handbook (Handbook) dated January 2008, states, in relevant part, ?You must complete the Attendance Calendar to accurately reflect the dates on which child care services were provided as well as the exact number of hours of service provided. For each day, partial hours of service provided should be rounded up to the next quarter hour . . . .? Additionally, the Handbook states, ?You and the client/parent/caretaker must sign the calendar at the end of the billing period.? Good internal control requires procedures to ensure payments are in accordance with Federal and State requirements. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: Child care payments did not comply with Federal and State requirements. A similar finding has been noted in our previous audit reports since 2007. The Summary Schedule of Prior Audit Findings states the status is complete. Repeat Finding: 2018-035 Questioned Costs: $1,201 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: We tested 25 child care claims and noted 11 with errors. Some payments had more than one type of error. ? For three claims tested, the attendance calendar was signed; however, the parent?s signature did not match the signature on the application. Therefore, it appears the attendance calendar was not signed by the parent, as required. For one of these claims, moreover, the parent claimed the provider denied care for the child during the period tested. ? For one claim tested, the child?s custodial parent was changed on June 1, 2018; however, the provider continued to bill for care through April 2019 for time associated with the now non-custodial parent. For October 16, 2018, through October 31, 2018, the provider billed for 120 hours of care; however, the court order only authorized the non-custodial parent to have custody every other weekend, during which time the provider was closed. ? For one claim tested, child care was billed over the authorized amount. Authorization for the child tested was for care up to 49 hours. The provider billed and was paid for 50.25 hours. ? For one claim tested, unearned income for child support was not included in the income calculation. As the client was eligible under the Transitional Child Care program, this income exclusion resulted in the incorrect family fee being charged. For two additional claims, the family fee was incorrect. ? For one claim tested, the Agency understated earned income in the family?s budget, which caused the family fee to be calculated incorrectly. ? For one claim, the family fee was correctly calculated, but only half of the required family fee was paid. ? For one claim tested, the provider was unable to provide the attendance calendar; therefore, 10 days of child care billed could not be verified. ? For one claim tested, the payment did not agree to the attendance calendar. The provider billed for 14 days of care; however, the attendance calendar showed only 13 days of care provided. Federal payment errors noted for the sample tested were $1,007. The total Federal sample tested was $5,244 and total child care Federal assistance claims for the fiscal year were $43,078,601. Based on the sample tested, the case error rate was 44% (11/25). The dollar rate for the sample was 19.20% ($1,007/$5,244), which estimates the potential dollars at risk for fiscal year 2019 to be $8,271,091 (dollar rate multiplied by the population). In addition to the $1,007 Federal questioned costs noted on the sample items tested, we also noted $194 of Federal questioned costs on other line items of the claims reviewed, including improper rate, billed over authorized amount, and bill did not agree to attendance calendar. Cause: Ineffective review. The Agency does not have automated procedures to ensure attendance records agree to billing documents, service authorizations are not exceeded, and family fees are automatically deducted in applicable cases. Effect: Ineffective review of claims increases the risk for misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. We further recommend the Agency ensure billing documents agree with attendance sheets. We also recommend the Agency take the necessary action to recover the overpayments. Management Response: Agree

Program: CFDA 93.575 and 93.596 ? CCDF Cluster ? Allowability Grant Number & Year: All open, including #G1901NECCDF, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 98.67(c) (October 1, 2018) contains fiscal requirements applicable to Federal child care funds. That regulation states the following: Fiscal control and accounting procedures shall be sufficient to permit: . . . (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. 45 CFR ? 98.55(d) (October 1, 2018), Matching fund requirements, states, ?The same expenditure may not be used to meet the requirements under both paragraphs (b) [matching funds] and (c) [maintenance of effort] of this section in a fiscal year.? A good internal control plan requires procedures to ensure Federal claims are adequately identified, and the same individual claims are not identified as Federal funds more than once. Condition: The Agency did not adequately identify expenditures charged to the grant. The Agency performed journal entries throughout the fiscal year to charge Federal funds for child care claims but it did not identify which specific claims were Federal until we asked after the end of the fiscal year. Once the detail was provided, we noted that $2,297,890 of claims had already been identified as Federal funds in State fiscal year 2017. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: Child care claims are initially charged to State general funds and become part of a ?claims universe.? Then, the Agency performs periodic journal entries to move a portion of the costs to Federal funds. A total of $43,078,601 of these journal entries were performed during the fiscal year. The following issues were noted: ? The Agency did not identify which specific claims within the claims universe were to be charged to Federal funds at the time of each journal entry. Since the claim-level detail was not identified with the journal entries throughout the year, we requested the data from the Agency and the Agency subsequently determined which claims should be identified as Federal. ? One journal entry was for $2,913,461 to close out the 2016 grant. Since the underlying pay dates provided by the Agency were from October and November 2016, the auditor went back to the file from State fiscal year 2017 to verify the Agency did not include the same claims as Federal funds in both State fiscal year 2017 and State fiscal year 2019. Many claims were in fact duplicated, resulting in potential questioned costs of $2,297,890. There were additional claims in the claims universe that the Agency could replace these duplicate claims with, as the Agency pays for many more child care claims with State general funds. The Agency did not have procedures to ensure that it was selecting claims that had not already been charged to Federal funds. The Agency eventually provided us with unduplicated claims. Cause: Staff turnover. Effect: Noncompliance with Federal requirements and a possibility of significant questioned costs if not corrected. Recommendation: We recommend the Agency implement procedures to ensure Federal claims are adequately identified, and individual claims are not charged to Federal funds more than once. Management Response: Partially agrees - In the past, when journal entries were created, the individual claims were pulled and identified at that time to be eligible for claiming. We always had enough claims and had excess that could have been claimed if federal funding was available. We never put an identifying code of them at the time of the journal entry but used the proper rules to identify the claims eligible when the audit was asked to DHHS.

Program: CFDA 93.575 and 93.596 ? CCDF Cluster ? Special Tests and Provisions Grant Number & Year: Various, including #G1901NECCDF, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.41 (October 1, 2018), the State must have requirements to protect the health and safety of children, including the prevention and control of infectious diseases, building and physical premises safety, and health and safety training. Per 391 NAC 3-005.09A: The Department will make a fire inspection referral when: . . . 2. Every two years following the initial fire inspection[.]? Per 391 NAC 3-005.09B: The Department will make a sanitation inspection referral when: . . . 2. Every two years following the initial sanitation inspection . . . [.] A good internal control plan requires adequate documentation to be maintained to support compliance with health and safety requirements. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate procedures to ensure health and safety requirements were met for child care providers. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-038 Questioned Costs: None Statistical Sample: No Context: The Agency has two tiers of providers that are subject to health and safety requirements. These are child care centers and family child care homes. Each type of provider is subject to separate but similar State regulations. We tested 40 child care providers subject to health and safety requirements. We noted the following: ? For one child care center tested, the Agency could not provide any sanitation inspections that had been performed. This center was located in a school and has operated as a licensed school-age-only child care center since November 10, 2014. ? Four additional child care centers tested did not have a sanitation inspection performed within the last two years: ?See Schedule of Findings and Questioned Costs for chart/table? ? Two child care centers tested did not have a fire inspection performed within the last two years. Inspections were 8 to 12 months overdue. One center subsequently had an inspection after the fiscal year. The second center had not had an inspection since June 2016. ? For one compliance review tested, the Agency could not provide documentation containing the provider?s signature, certifying all information provided during the review was true and correct. Cause: Depending on the city or county, the Agency relies on local fire departments or the State Fire Marshal to conduct fire inspections for child care centers. The Agency makes a referral to the fire department when an inspection is due, but the Agency does not pay for these inspections and cannot control the timing of the inspections. Effect: Without adequate procedures to ensure health and safety requirements are met, there is an increased risk of noncompliance with Federal regulations and the possibility of children being cared for in unsafe facilities. Recommendation: We recommend the Agency implement procedures to ensure all health and safety requirements are met for child care providers. This should include establishing a documented review of sanitation requirements for school-age only child care centers as well as child care centers located in a school. Management Response: Partially agrees - DPH Response - It is agreed that some sanitation and fire inspections have not been conducted every 2 years. These inspections are conducted by entities external to DHHS. Resources are an issue for these entities, which contributes to not meeting the regulatory timeframes for DHHS Children?s Services Licensing. It is disagreed in part because DHHS has a policy and procedure for making referrals and following up with these entities; however, DHHS has no authority to require these entities to complete the inspections more promptly. It is also disagreed regarding the finding about a sanitation inspection not being performed in a school-age-only center located in a school. The Child Care Licensing Act was amended in 2018 to provide that school-age childcare programs operated in Nebraska Department of Education (NDE) approved or accredited schools shall be deemed to meet the standards of the State Department of Education for the care and protection of children. Neb. Rev. Stat. 71-1913 indicates that the requirements for DHHS to request the State Fire Marshal (SFM) or its delegated authority to perform fire or sanitation inspections no longer apply to school-age childcare programs. APA Response: Title 391 NAC 3-005.09A and NAC 4-005.09A require fire inspections every two years after the initial inspection. Likewise, 391 NAC 3-005.09B and NAC 4-005.09B require sanitation inspections every two years ?unless the center is located in a health care facility or school that receives more frequent sanitation inspections[.]? For these exceptions, the Agency still has the responsibility of ensuring that the health care facilities or schools in which they are located actually receive ?more frequent sanitation inspections.? DHHS should be able to document this, not simply pass it off to another agency and trust that someone else is taking care of the inspections; otherwise, there is no way of knowing whether ?more frequent inspections? have actually occurred. The Agency must either ensure that ?more frequent inspections? are taking place or perform biannual inspections itself. Those are the only options under the current rules. The Nebraska Supreme Court has said, ?Agency regulations that are properly adopted and filed with the Secretary of State of Nebraska have the effect of statutory law.? Smalley v. Neb. HHS, 283 Neb. 544, 557, 811 N.W.2d 246, 256 (2012). Consequently, the Agency must either adhere to these rules or amend them accordingly.

Program: CFDA 93.575 ? Child Care and Development Block Grant ? Allowability, Period of Performance & Subrecipient Monitoring Grant Number & Year: #G1601NECCDF, FFY 2016 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.352(d) (October 1, 2018) all pass-through entities must do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Per 45 CFR ? 75.352, ?All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information . . . : (1) Federal Award Identification. * * * * (iv) Federal Award Date . . . of award to the recipient by the HHS awarding agency; * * * * (xi) CFDA Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient?s records and financial statements as necessary for the pass-through entity to meet the requirements of this part . . . . 45 CFR ? 98.60(d) (October 1, 2017) states, in part, the following: The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. * * * * (8) Any funds not obligated during the obligation period specified in paragraph (d) of this section will revert to the Federal government. Any funds not liquidated by the end of the applicable liquidation period specified in paragraph (d) of this section will also revert to the Federal government. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure compliance with Federal and State requirements. Condition: During our testing of subrecipient payments, we noted that the Agency did not have adequate documentation on file to support that payments were allowable. In addition, subawards did not include required information. We further noted subawards signed after the required obligation date had passed. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-039 Questioned Costs: $127,368 known Statistical Sample: No Context: During the fiscal year, $3,118,408 was paid to subrecipients. The Agency paid $1,717,274 directly to subrecipients and paid $1,401,134 to the Nebraska Department of Education (NDE) related to subrecipient payments of NDE. We tested one subrecipient of the Agency and two NDE subrecipients. We noted the following: ? The Agency paid $1,146,735 during the fiscal year to the subrecipient, which in turn provided funds to school districts to promote ?high-quality early care and learning opportunities that help parents guide the healthy development of their infants and toddlers.? We tested one payment for $641,908. According to the subaward agreement, the Agency ?shall reimburse Subrecipient for its actual, allowable, reasonable, and allocable costs.? The Agency reviewed a sample of expenditures for two of seven of the subrecipient?s contracts. We noted several issues with the expenses sampled, including no personnel costs reviewed, and invoices or receipts were on file but there was not adequate documentation to support the costs were reasonable, necessary, and allowable for the grant. For example, receipts to restaurants for staff development did not have a listing of staff or an agenda for the training or staff development conducted; invoices for T-shirts used as promotional and incentive items lacked documentation of how the expenditure related to improving the quality of child care for infants and adults; and copies of cancelled checks were provided, but there was no detailed invoices or source documentation. However, as the subrecipient had a Single Audit for the period with the Child Care grant as a major program and no findings, we did not question any specific items. We also noted that the Agency did not provide the dollar amount made available under each Federal award and the CFDA number at time of disbursement as required. ? NDE enters into subaward agreements with various subrecipients, including Educational Service Units, and pays those subrecipients from NDE funds. Then, NDE requests reimbursement from the Agency. We tested two of nine NDE subrecipients, and the subawards did not include the Federal award date, the Federal awarding agency, the requirement that the auditor have access to records, and the dollar amount made available under the Federal award and CFDA at time of disbursement. We also reviewed one payment for each of the two subrecipients. NDE obtained general ledger accounting records for the expenditures but did not obtain or review any timesheets, invoices, or other source documentation. Therefore, documentation was inadequate to support that payments were allowable for the grant, and we question costs of $127,368. In addition, one of the subawards tested was awarded outside the period of performance. The FFY 2016 discretionary grant was required to be obligated by September 30, 2017, but the award was not signed until October 10, 2017. Cause: Inadequate monitoring procedures. Effect: The Agency did not comply with Federal requirements, and there is an increased risk for unallowable charges. Recommendation: We recommend the Agency implement procedures to improve subrecipient monitoring and ensure compliance with Federal requirements. Management Response: Partially agree - In regards to the NDE subaward that was signed outside of the period of performance, the payments related to that subaward were not allowed and were not paid using CCDF funding. NDE was required to remove the expenses related to the subaward from the request and a payment was made for the revised amount. In regards to the Federal Award and CFDA number, each subaward that CCDF implements lists the FAIN and CFDA number within the subaward. This subaward contains the information on page 1. NDE enters into contracts as well as grant awards with their recipients. The contracts and grant awards related to FY16 contained the required information when necessary. The contracts that NDE enters into are contracting with an individual to provide services to the general public for coaching requirements included when participating in Step Up to Quality. These contracts are not required to contain the Federal award date, awarding agency, auditor access and dollar amount available under the award and CFDA number. The grant awards that were issued as part of this subaward did contain the required information. APA Response: Regulations require the dollar amount to be made available under each Federal award and the CFDA number at the time of disbursement. Simply including this information on the subaward when it is granted is not sufficient. The subawards provided to us did not have all of the required information.

Program: CFDA 93.575 ? Child Care and Development Block Grant ? Earmarking & Period of Performance Grant Number & Year: #G1601NECCDF, FFY 2016 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 98.60(a) (October 1, 2017), ?The CCDF is available, subject to the availability of appropriations, in accordance with the apportionment of funds from the Office of Management and Budget . . .? The 2016 CCDF Targeted Funds Allocation (published March 14, 2016) per the Office of the Administration for Children and Families for Nebraska Infant and Toddler was $742,930. 45 CFR ? 98.60(d) states, in part, the following: The following obligation and liquidation provisions apply to States and Territories: (1) Discretionary Fund allotments shall be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. Per 45 CFR ? 75.2 (October 1, 2018): Obligations, when used in connection with a non-Federal entity?s utilization of funds under a Federal award, obligations means orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure compliance with Federal requirements. Condition: Expenditures were charged to the FFY 2016 grant after the period of performance. Also, earmarking requirements were not met for Infant and Toddler targeted funds. A similar finding was noted in the prior audit. The Summary Schedule of Prior Findings states the status is complete. Repeat Finding: 2018-040 Questioned Costs: $322,267 known Statistical Sample: No Context: We tested one journal entry that transferred $322,267 from the FFY 2017 grant to the FFY 2016 grant. The original transactions were for subrecipient payments; however, the subaward agreement was not signed until January 22, 2018, and therefore, was not obligated as of September 30, 2017. Payments to the subrecipient were made in May and August 2018. The FFY 2016 grant was required to be obligated by September 30, 2017. In addition, these expenditures were used to meet the Infant and Toddler targeted funds for the FFY 2016 grant. The Agency reported that $743,755 was spent on Infant and Toddler targeted funds, of which $322,267 was related to the journal entry noted. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures to ensure earmarking requirements are met and expenditures charged are within the allowed time period. Management Response: Agree

Program: CFDA 93.658 ? Foster Care Title IV-E ? Subrecipient Monitoring Grant Number & Year: All open, including #1901NEFOST, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352 (October 1, 2018) specifies pass-through entity responsibilities, including ensuring that subrecipients meet audit requirements. Per 45 CFR ? 75.352(a)(1)(xi), ?[T]he pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement[.]? 45 CFR ? 75.352(d) requires the pass-through entity to do, in part, the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition: The Agency did not notify subrecipients of the dollar amount made available under each Federal award and the CFDA number at the time of disbursement. A similar finding was noted in the prior audit. We also noted that, for one subrecipient tested, the Agency did not perform any financial monitoring during the fiscal year. Repeat Finding: 2018-042 Questioned Costs: Unknown Statistical Sample: No Context: The Auditor noted that, although the Agency did not notify subrecipients of the dollar amount made available under each Federal award and the CFDA number at time of disbursement, the Agency periodically provided the subrecipients the Federal dollars expended. However, for two of three subrecipients tested, the notifications were not adequate. ? One subrecipient tested with Federal expenditures, totaling $2,075,470, during the fiscal year was not notified of the dollar amount under each Federal award at the time of disbursement or periodically during the year. ? One subrecipient tested with Federal expenditures, totaling $330,073, during the fiscal year was notified periodically; however, the notifications were not sufficient for the subrecipient to prepare an accurate Schedule of Expenditures of Federal Awards. There was no notification of grant year 2018 disbursements, from August 2018 through November 2018, of $233,607. The notification in July 2019 indicated that it covered the period October 1, 2018, through May 31, 2019; however, the dollars were for March 2019 through July 2019 disbursements. In addition, the subrecipient?s fiscal year ended on December 31 each year; therefore, the notification would not have been sufficient for the subrecipient to present properly the Schedule of Expenditures of Federal Awards. We further noted that the Agency did not perform financial monitoring of this subrecipient during the fiscal year to ensure costs were allowable and complied with Federal regulations. Fiscal year ended June 30, 2019, expenditures to subrecipients totaled $3,568,805. Cause: Inadequate procedures. Effect: When subrecipients are not provided all required notifications, there is an increased risk for noncompliance with Federal requirements. If not made aware of the total Federal funds received, the subrecipient may fail to obtain a Single Audit or include all required major programs. Without financial monitoring of subrecipient expenditures, there is an increased risk for unallowable costs. Recommendation: We recommend the Agency notify subrecipients of all information required by Federal regulations. We further recommend the Agency perform financial monitoring of all subrecipients. Management Response: Agree

Program: CFDA 93.658 ? Foster Care Title IV-E ? Reporting Grant Number & Year: #1801NEFOST, FFY 2018; #1901NEFOST, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: A good internal control plan requires procedures to ensure reports are accurate and complete and reconcile to the accounting system. Good internal control also requires adjustments to be made in a timely manner. 45 CFR ? 75.302 (October 1, 2018) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also ?75.450. (b) The financial management system of each non-Federal entity must provide for . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . 45 CFR ? 75.303 (October 1, 2018) states, in part, the following: 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). Per GAO Standards for Internal Control in the Federal Government (Green Book) (OV3.06): A deficiency in operation exists when a properly designed control does not operate as designed, or when the person performing the control does not possess the necessary authority or competence to perform the control effectively. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate procedures to ensure Federal Financial Reports (FFRs) were accurate. We noted adjustments were not proper. A similar finding was noted in the prior audit. The Schedule of Prior Audit Findings states the status is complete. The Agency?s controls were not effective to ensure transactions were recorded properly. Repeat Finding: 2018-043 Questioned Costs: Unknown Statistical Sample: No Context: Our prior audit noted Maintenance Assistance on Part 3, Line 5a, of the June 2018 Federal report, which included other waiver services that were reported on Line 6a in the previous quarter. The total amount overstated was $1,608,079, and the Federal Share overstated was $845,045. The September 2017 Federal report was also in error, resulting in Part 3, Line 5a, being overstated by $2,111,964. The Federal share overstated was $1,095,053. The Agency attempted to correct the errors with an increasing adjustment on the September 2018 report, but it did not properly consider the amounts overstated. A decreasing adjustment for $3,720,043 ($1,940,098 Federal share) was not made. During review of the September 2018 report adjustments, we also noted an increasing adjustment of $725,415 (Federal share $381,306) for FFY18 Quarter 3, Other Waiver Services. However, it appears these claims were previously reported on the June 2018 report. The Agency did not have adequate support for the increasing adjustment. We tested the FFRs for the quarters ended December 2018 and March 2019 and noted that the Federal share of reported adjustments for other waiver claims did not agree to the accounting system. The total adjustment and Federal share of the adjustment were correctly reported; however, the journal entry to record the transaction on the accounting system incorrectly recorded the State share as Federal funds and the Federal Share as State funds. ?See Schedule of Findings and Questioned Costs for chart/table? The Agency has a segregation of duties in place to ensure each transaction has a separate preparer and approver. There is also a requester and On-Base approver, as well as an individual performing the pre-audit function. Each of these journal entries had at least five separate individuals involved in processing the transaction; yet, none of them noticed the Federal and State funding percentages were incorrectly applied. Cause: Employee turnover and worker error. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency implement procedures to ensure Federal reports are accurate, and adjustments are timely. We further recommend the Agency improve procedures to ensure transactions are recorded properly on the accounting system. Management Response: Agree

Program: CFDA 93.658 ? Foster Care Title IV-E ? Allowability Grant Number & Year: #1901NEFOST, FFY 2019; #1801NEFOST, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.302(b)(4) (October 1, 2018), ?The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes.? Per 45 CFR ? 75.403 (October 1, 2018), costs must be necessary, reasonable, and adequately documented. Per Nebraska Foster Care Waiver terms and conditions, the State may use Federal Foster Care grant funds to pay for the following: [A]n expanded array of evidence-based programs and services that promote family stability and preservation. This array may include, but is not limited to: * Parent Child Interaction Therapy (PCIT) * Positive Parenting Program (Triple P) * Wraparound Per Agency contracts with family support providers, mileage and travel time are to be submitted for payment on a Travel Log. Per the ?Established Rate? section of the Parenting Time/Supervised Visitation Service Attachment (effective July 1, 2018): * * * * 8. Travel Time and Distance shall be within 5 miles and 15 minutes per one-way trip of what is measured by MapQuest or Google Maps. One-Way trip shall be defined as the entire trip from initial starting address to the destination address where the Family Support Service starts, including all stops in between . . . . 9. DHHS shall pay the Contractor $18.00 per hour for time travelled to and from the location where the Parenting Time/Supervised Visitation Services are provided. The travel time shall be consistent with the length of time required to travel to deliver Parenting Time/Supervised Visitation Services in accordance with the DHHS Service Referral. Consistent shall be defined as being within fifteen (15) minutes of the time recorded by MapQuest or Google Maps. This 15 minutes will be considered a margin of error. If the length of time is more than fifteen minutes (15) over what is recorded on MapQuest or Google Maps, the Contractor shall note the reasons why on the travel log. If no explanation is provided on the Travel Log, DHHS will pay the Contractor for the length of time measured by MapQuest or Google Maps after rounding up to the nearest fifteen (15) minute increment as indicate increment table below. 10. The mileage and travel time shall be submitted for payment on a Travel Log developed and provided by DHHS. The Travel Logs shall be submitted at the end of each month for services provided during the previous month. Travel time shall be rounded up to the nearest fifteen (15) minute increment for each one-way trip rate recorded on the Travel Log . . . A good internal control plan requires procedures to ensure services billed are reasonable, and adequate supporting documentation is maintained for services provided. Condition: Seven of 25 waiver expenditures tested were not adequately documented or were not reasonable. Repeat Finding: No Questioned Costs: $143 known (#1801NEFOST, $18; #1901NEFOST, $125) Statistical Sample: No Context: In 2013, the Federal grantor approved a waiver for the State to operate a child welfare demonstration project. The waiver allows for additional services to be provided that are not normally covered under Title IV-E Foster Care, but the demonstration project must remain cost neutral to the Federal government. During the fiscal year, the Agency charged $2,547,414 in waiver-based expenditures to the Foster Care grant. These expenditures were for travel time and mileage costs paid to contractors related to family support and parenting time/supervised visitation services. We selected 25 claims and noted the following: ? For six claims tested, the travel time was not reasonable or was 15 minutes more than Google Maps without an explanation. The Federal share of questioned costs totaled $127. ? For one claim tested, the number of miles billed was not reasonable. The provider billed for mileage to FedEx, which appeared to be personal in nature. The Federal share of questioned costs totaled $16. Federal questioned costs for the sample tested totaled $143. The Federal sample tested totaled $3,280. Total Federal population was $2,547,414. Based on the sample tested, the case error rate was 28% (7/25). The dollar error rate for the sample tested was 4.36%, which estimates the potential dollars at risk for fiscal year 2019 to be $111,067 (dollar error rate multiplied by population). Cause: Clerical errors and inadequate review. Effect: Unallowable costs were charged to the grant. Recommendation: We recommend the Agency implement procedures to ensure payments are proper and in accordance with State and Federal regulations. Management Response: Agree

Program: CFDA 93.667 ? Social Services Block Grant ? Period of Performance Grant Number & Year: #G1701NESOSR, FFY 2017 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.14(a) (October 1, 2018) states, in relevant part, ?Amounts unobligated by the State at the end of the fiscal year in which they were first allotted shall remain available for obligation during the succeeding fiscal year . . . .? The Notice of Grant Award for the FFY 2017 grant states that the award is available for expenditures for the period October 1, 2016, through September 30, 2018. Good internal control requires procedures to ensure that charges are in accordance with Federal regulations and grant terms. Condition: Expenditures were charged to the FFY 2017 grant for services after the period available. Repeat Finding: No Questioned Costs: $338,188 known Statistical Sample: No Context: We tested one journal entry that moved payroll expenditures originally paid by the State General Fund and charged the FFY 2017 Social Services Block Grant. We noted that the charges included services, totaling $338,188, from October 24, 2018, through November 21, 2018, which is outside the allowable period for the grant. Cause: Ineffective control procedures. Effect: Noncompliance with Federal regulations. Recommendation: We recommend the Agency improve procedures for ensuring that charges to grants are within the allowed period. Management Response: Agree

Program: CFDA 93.667 ? Social Services Block Grant ? Allowability Grant Number & Year: #G1801NESOSR, FFY 2018; #G1901NESOSR, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 96.30(a) (October 1, 2018) provides, as is relevant, ?[A] State shall obligate and expend block grant funds in accordance with the laws and procedures applicable to the obligation and expenditures of its own funds.? Regarding Maximum Rates and Allowable Units, 473 NAC 5-001.06A provides, in relevant part, ?The Central Office establishes a statewide rate for chore services matching the federal minimum wage. See Appendix.? 473 NAC 5-001.06D adds, ?Local units shall submit requests to exceed policy maximums to Central Office for prior approval.? Per 473 NAC Appendix 473-000-201, ?Nebraska Social Services for Aged and Disabled Fee Schedule,? the rate for chore services is $9.00 per hour. 473 NAC 5-018.06B-1, regarding upper limits for common carriers, states, ?Neb. Rev. Stat. ? 75-303.02 limits the distance rates for common carriers at a rate no greater than three times the state employee mileage rate.? Per 473 NAC 5-010.03B, regarding Need for [Meal] Service, ?Eligible clients must - . . . 3. Not live in a congregate facility (e.g., board and room home or hotel) where meal service is the responsibility of the facility and the cost of the meals is included in the payment rate.? Per 473 NAC 5-002.06B, regarding Adult Day Care Frequency, ?A day is defined as six or more hours per day.? A good internal control plan requires procedures to ensure services were authorized, received, and performed in accordance with State and Federal requirements. This would include having clients sign documentation to verify that services were received; if the client does not approve the services, the Agency should have other procedures to ensure the services were actually provided. Condition: Social Services Block Grant (SSBG) assistance payments tested did not comply with State and Federal regulations. Repeat Finding: No Questioned Costs: $24 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: We tested 26 claims for SSBG services and noted 7 with errors. Some payments had more than one type of error. The claims were paid 90% with State funds and 10% with Federal SSBG funds. During testing, we noted the following: ? For three claims tested, the support provided did not contain a client signature or other documentation to verify that services were provided to the client. ? For one claim tested, the client was ?authorized for chore services as approved per the Service Needs Assessment (SNA) Plan, not to exceed 3 hours and 15 minutes per week. One occurrence of laundry (out of the home) per week is authorized.? The SNA allowed two hours per week for laundry and 75 minutes per week for cleaning. The timesheet listed jobs to be done as clean kitchen, bathroom, and vacuum; however, laundry was not included on the timesheet, but 3 hours and 15 minutes was billed for each week. ? For one claim tested, the rate of chore service provided exceeded the allowable rate per regulations. The Agency was unable to provide documentation to support the approval of the increased rate. ? For one claim tested, the rate of transportation provided exceeded the allowable rate per the Service Provider Agreement. ? For one claim tested, a meal was provided for a day in which the client no longer lived at home. ? For one claim tested, adult day care services were not provided at the minimum hours per day for six days billed. ? For one claim tested, the timesheet provided did not contain adequate information to verify the hours of service provided; therefore, the APA could not determine that six or more hours were provided each day as required. The total Federal sample tested was $364, and Federal errors for payments tested were $24. Total SSBG Federal assistance payments for fiscal year 2019 were $743,997. The dollar error rate for the sample was 6.59% ($24/$364), which estimates the potential dollars at risk for fiscal year 2019 to be $49,029 (dollar error rate multiplied by population). Cause: Ineffective review. Effect: Ineffective review of claims increases the risk for misuse of State and Federal funds. Recommendation: We recommend the Agency implement procedures to ensure payments are adequately supported and in accordance with State and Federal regulations. Management Response: Agree

Program: CFDA 93.778 ? Medical Assistance Program ? Reporting Grant Number & Year: #1905NE5MAP, #1905NE5ADM, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 45 CFR ? 75.302 (October 1, 2018) requires financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to a level of expenditures adequate to establish that the use of these funds were in accordance with applicable regulations. Title 42 CFR ? 433.10 (October 1, 2018) provides for payments to states based on a Federal Medical Assistance Percentage (FMAP). EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from EnterpriseOne. A good internal control plan requires procedures to reconcile submitted reports to the accounting system. A good internal control plan also requires adjustments and reconciling items to be resolved in a timely manner. Condition: Reconciliation procedures need improvement to ensure reports are accurate, and adjustments are made in a timely manner. A similar finding was noted in prior audits. Repeat Finding: 2018-046 Questioned Costs: $25,948 known Statistical Sample: No Context: Reconciliations of reports to the accounting system were not timely. On June 14, 2019, we requested the CMS 64 reconciliations for quarters ended during fiscal year 2019. The Agency responded that the September 30, 2018, reconciliation was complete, but December 31, 2018, and March 31, 2019, reconciliations were not yet completed. As of September 6, 2019, the reconciliations were still not complete. We tested two quarterly reports and noted that the Federal share of child support collections reported for the December quarter did not agree to the general ledger. The Federal share reported was $281,215, but the general ledger total was $255,267 ? a variance of $25,948. It appears that four documents were improperly credited to State funds rather than using the FMAP rate to credit the Federal share. As a result, we question $25,948. The Agency reported a total of $1,224,061,141 Federal expenditures for the Medical Assistance Program in fiscal year 2019. Cause: Reconciliations not completed and clerical errors. Effect: Without timely reconciliations, there is an increased risk for the misuse of funds and inaccurate reporting. Recommendation: We recommend the Agency improve procedures to ensure reports are accurate and reconciliations are timely. We further recommend all reconciling items and adjustments be resolved in a timely manner. Management Response: Agree.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability Grant Number & Year: #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2018), costs must be reasonable, necessary, and adequately documented. Title 471 NAC 15-003.02(1) states that personal assistance services not documented in the service plan are non-allowable services. Title 471 NAC 15-006 requires that the provider bill only for services actually provided and authorized, perform the personal assistance services noted on the service plan, and accurately document services provided on Form MC-37 ?Service Provider Timesheet.? Title 471 NAC 15-006.06C requires that, after receiving a provider?s timesheet and billing document, the beneficiary?s social service worker or designee must verify that ?the hours worked and services provided fall within the parameters of those authorized? by the service needs assessment. A good internal control plan requires procedures to ensure services provided agree to the service needs assessment. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: During testing of personal assistance service (PAS) claims, we noted that services provided did not agree to the service needs assessments. We also noted that the timing when services were provided did not appear reasonable. A similar finding was noted in prior audits. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-047 Questioned Costs: $133 known Statistical Sample: No Context: The Agency offers personal assistance services (assistance with hygiene, mobility, housekeeping, etc.) to Medicaid recipients with disabilities and chronic conditions. The services to be provided are based on individual needs and criteria that must be determined in a written service needs assessment (SNA). Providers complete timesheets indicating the services provided and the times of service. We noted issues with all five PAS claims tested, as follows: ? Services detailed on the ?Service Provider Time Sheet? did not agree to the authorized services on the SNA. Providers billed for services that were performed more than the allotted maximum minutes per week. For example, a provider billed for ?Transfer-Moderate Assistance? 49 times during the week; however, the SNA allowed only for 35 occurrences per week. Three of the five claims tested had services billed in excess of the maximum authorized. ? Units billed on the Service Provider Time Sheet did not agree to the minutes allotted by the SNA for services. The SNA details the tasks to be provided, the frequency allowed for each, and the number of minutes allotted for each task. One unit is 15 minutes. For example, on one day a provider worked four hours from 12:00 p.m. to 4:00 p.m. and claimed 16 units for the day, as follows: ?See Schedule of Findings and Questioned Costs for chart/table? In this example, 163 minutes or 11 units would be allotted for the tasks listed on the timesheet; however, the provider billed 16 units. Four of five claims tested had days that the tasks listed on the timesheet did not agree to the units claimed. ?See Schedule of Findings and Questioned Costs for chart/table? ? Services detailed on the ?Service Provider Time Sheet? agreed to the SNA, but the timing when the services were provided did not appear reasonable. Providers billed for services that were performed during unreasonable times during the time care was provided. o One provider worked from 6:00 a.m. to 10:00 a.m. and claimed feeding assistance 6 times, dressing assistance 3 times, and wheelchair assistance 14 times during the four hours. The provider also listed numerous other tasks for the day, including preparing meals, cleaning, laundry, and grocery shopping. It does not appear reasonable to assist with dressing 3 times, feeding 6 times, or wheelchair assistance 14 times in four hours. o One provider worked from 12:00 p.m. to 4:00 p.m. on six days and from 12:45 p.m. to 5:30 p.m. another day. The provider claimed assistance dressing twice each day and assistance feeding three times each day, which does not appear reasonable for the hours worked. o Another provider worked from 6:00 p.m. to 10:00 p.m. on four days and eight hours on three days. However, the provider claimed several tasks were completed the same number of times each day. The following frequency of tasks claimed did not appear reasonable on days working four hours from 6:00 p.m. to 10:00 p.m. The number of units claimed and paid was 16 units each on four hour days and 32 units each on eight hour days. Therefore, it appears the timesheet record of services provided was not completed correctly. ?See Schedule of Findings and Questioned Costs for chart/table? Federal payment errors noted totaled $133. The total Federal payments tested was $1,001, and the total Federal share of PAS claims for the fiscal year was $7,325,148. Cause: Inadequate procedures to review PAS claims. Effect: An inadequate review of PAS claims increases the risk of services provided not being in accordance with the recipient?s needs, as well as the risk of services being billed but not provided. Recommendation: We recommend the Agency implement procedures to ensure payments are allowable, adequately supported, and in accordance with State and Federal regulations. Management Response: Agree. Ongoing issues occur with individual providers incorrectly interpreting the SNA and constant education needing to be provided regarding the client responsibility for ensuring blank timesheets are signed. Constant turnover of staff/providers have created repeat errors for PAS services.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability Grant Number & Year: #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR ? 431.53 (October 1, 2018), ?A State plan must ? (a) Specify that the Medicaid agency will ensure necessary transportation for beneficiaries to and from providers . . . .? Per Title 471 NAC 27-001, ?Non-Emergency Transportation (NET) Services are a ride, or mileage reimbursement for a ride, and escort/attendant services provided so that a Medicaid eligible client with no other transportation resources can receive Medicaid coverable services.? The Agency?s contract with the NET broker contains the following: The contractor shall develop and maintain a process to be approved by the Department for no less than ten (10%) percent random audits monthly of NET provider supporting documentation per trip to validate a completed service and that submitted charges are correct in accordance to Department regulations. Title 45 CFR ? 75.403(g) (October 1, 2018), requires costs to be adequately documented. Per 45 CFR ? 75.303(a) (October 1, 2018), an Agency must establish and maintain effective internal control to ensure compliance with Federal requirements. A good internal control plan requires policies and procedures to ensure NET claims are reviewed to confirm that medical services actually occurred, and Federal and State requirements are followed. Condition: The Agency did not adequately monitor the NET broker. We tested five NET claims. For three of five payments tested, there were no medical claims on the Medicaid Management Information System (MMIS), and verification with the medical provider did not support that the trip was proper. Additionally, for two payments, the NET broker authorized a trip to a location that could not be verified as a Medicaid provider. A similar finding was noted in the prior audit. Repeat Finding: 2018-049 Questioned Costs: $53 known Statistical Sample: No Context: A broker provided NET services for the Medicaid program through June 30, 2019. A Medicaid-eligible recipient who needed a ride to a Medicaid-eligible provider called the broker, and the broker set up an NET provider to provide the requested transportation. The broker was paid $4.74 per one-way trip for managing the service, and the NET providers were paid based on various rate schedules. The Agency?s monitoring of the contract was not adequate during the fiscal year. The contract required the broker to audit NET providers? supporting documentation per trip to validate a completed service and to verify that submitted charges were correct. We requested the monthly audit completed by the broker for March 2019. The monthly audit provided listed 60 trips from July 18, 2018, to September 4, 2018, of which eight trips identified services in which no medical appointment was attended per the medical provider, and one other trip was identified as ?No Answer.? Results of the monthly reviews are submitted to Program Integrity for review and follow-up action. Although Program Integrity received the monthly audits completed by the broker, these monthly audits included only 60 trips, and the error rate for the March 2019 audit was 15%. Additionally, verification of the broker?s audits was not completed. Therefore, it does not appear procedures were adequate to ensure charges were allowable. During our testing of five broker claims and the associated provider claims, we noted a lack of verification that a service was performed for three payments. This resulted in Federal questioned costs of $20 paid to the broker and $33 paid to the provider. For two of these payments, verification could not be made that the address to which travel was requested belonged to a Medicaid provider. The broker was paid $890,831 in Federal Medicaid funds during the fiscal year. The Federal claims tested for the broker totaled $28, and $20 in errors was noted. We tested $70 in Federal payments to NET providers and noted $33 in questioned costs. Per the Agency, the Federal share of payments to NET providers for the fiscal year was $5,144,198. Beginning July 1, 2019, the NET services were included in the managed care Heritage Health benefit package. Heritage Health plans have contracted with a transportation broker and will administer the NET service for their members. Nebraska Medicaid will administer the NET services for fee-for-service members. Cause: Inadequate monitoring by the Agency. The broker did not have to verify with the medical provider that a service was scheduled. The broker was only required to verify the Medicaid eligibility of the recipient and that the address to which travel was requested belonged to a Medicaid provider. Effect: Failure to review claims and providers adequately increases the risk for loss or misuse of Federal funds. Recommendation: We recommend the Agency complete their final review of the broker?s monthly audits and request refunds from the broker for any payments that were not in compliance with State or Federal regulations. We further recommend the Agency determine if procedures are necessary to review additional claims to ensure compliance with Federal regulations. Management Response: Partially Agrees. The transportation brokers audit was reviewed and a collection of administration fees for the remaining claims that were found to be paid for trips to non-covered Medicaid payable services were submitted for collection. The transportation broker did agree to complete a post pay review. The broker has completed the reviews and refunded the administrative payments for rides that did not appear to have a corresponding medical service. The activities of the transportation broker were listed in the contract and did not include verification of a Medicaid covered service prior to authorization of the transportation. Their task was to arrange for transportation with an enrolled transportation provider when the client was Medicaid eligible and did not have other means of transportation. Also, because the client has a right to privacy in reference to their medical care, it is not appropriate to mandate that the transportation broker or the transportation provider receive specific knowledge of the nature of a medical appointment. Further, a claim to Nebraska Medicaid or one of the managed care entities is not the only way to determine if a medical appointment happened. The medical care may be reimbursed by private insurance or Medicare - in this situation, the transportation would still be covered by Nebraska Medicaid. The care may be reimbursed as a global rate where there is not a claim for each specific service, but one claim paid at the beginning or end of a service. For example, maternity care is paid as a global rate, but the pregnant individual will have multiple appointments prior to delivery. Finally, not all Medicaid covered services occur at a ?medical office? or location. Mental health and substance abuse providers often hold sessions in the community to work on coping skills and managing behavior in the community. Some medical providers have been unwilling to share information about client appointment with the transportation broker and the Department has no means to mandate that they respond to inquiries.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability and Eligibility Grant Number & Year: #1905NE5MAP, FFY 2019; #1805NE5MAP, FFY 2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.303 (October 1, 2018): 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. Per 45 CFR ? 75.302(a), ?Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds.? 45 CFR ? 75.403(g) requires costs to be adequately documented. Per 477 NAC 23-001.01: The total equity value of available non-excluded resources of the client . . . is determined and compared with the established maximum for available resources that the client may own and still be considered eligible. If the total equity value of available non-excluded resources exceeds the established maximum, the client is ineligible. According to NAC Appendix 477-000-012, the Medicaid resource limit for a household size of one is $4,000. Per 477 NAC 23-001.05B1, ?in computing the amount of a unit?s total available resources, the potential sales value of all real property, other than the allowed exemption for the home, must be determined and used.? Per 477 NAC 23-001.05B3e, if an applicant moves away from the home and is unable to return to the home, the home becomes an available resource. Per 477 NAC 23-001.05B5: One (1) motor vehicle regardless of its value, as long as it is necessary for an applicant/client or a member of his/her household for employment or medical treatment, shall be disregarded. If an applicant/client has more than one (1) motor vehicle, the vehicle with the greatest equity must be excluded. Any other motor vehicles are treated as non-liquid resources and the equity is counted toward the resource limit. Per 477 NAC 23-001.05B5a, ?The disregard of any motor vehicle is not allowed when it has been determined that a client residing in a nursing home or an assisted living facility and receiving services through HCBS or PACE does not intend, or will not be able to return home if medical transportation is included in the payment to the facility[.]? According to NAC Appendix 477-000-012, the ?standard of need? (meaning the income required) for someone residing in a nursing facility is $60. Any other income received must be paid to the nursing facility as a share of cost. Title 45 CFR ? 75.511(a) (October 1, 2018) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure that income, resources, and living arrangements are updated timely for changes and are adequately documented and verified. Condition: The Agency did not adequately verify the income and resources of individuals residing in nursing facilities to ensure limits were not exceeded, and the individuals were eligible. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states that the corrective action is complete. Repeat Finding: 2018-051 Questioned Costs: $5,994 known ($5,158 #1905NE5MAP; $836 #1805NE5MAP) Statistical Sample: No Context: We tested 25 nursing facility payments and noted the following issues: ? One recipient never sold her $78,980 home after moving into a nursing facility. The Agency should have required the recipient to sell her home and use the proceeds for medical care, but the Agency failed to do so. The entire claim is considered questioned costs, with a Federal share of $3,797. Also for this case, the Agency was unable to provide any supporting documentation for a burial trust valued at $3,800. ? One recipient notified the Agency that he had two vehicles valued at $3,200 and $550, but the Agency did not include them as available resources. We also discovered that the recipient owned property valued at $1,550 that was not declared by him or discovered by the Agency. The ownership records for the property were readily available on a public county assessor website. If these resources were included in the budget, the recipient would have been over the resource limit for Medicaid. Therefore, the entire claim is considered questioned costs, with a Federal share of $1,361. ? One recipient moved from an assisted living facility to a nursing facility in the middle of the month. The Agency paid both the assisted living claim, which the provider erroneously submitted for the entire month, and the nursing facility claim. Questioned costs outside of the sample of $836 were noted. MMIS did not have an edit check in place to ensure duplicate claims were not paid. ? One recipient had title to a 2003 Chevrolet Impala with a value of $1,988, a 1967 Chevrolet Camaro, and a 1971 Dodge Pickup. None of these vehicles were included as resources, but they should have been. If the Camaro were in good condition, the recipient would have been over the resource limit and ineligible for Medicaid. Federal payment errors noted were $5,158 in the sample and $836 outside of the sample. The total Federal sample tested was $55,708, and the total Federal nursing facility expenditures during the fiscal year were $189,029,242. Based on the sample tested, the case error rate was 16% (4/25). The dollar error rate was 9.26% ($5,158/$55,708), which estimates the potential dollars at risk for fiscal year 2019 to be $17,504,108 (dollar error rate multiplied by population). Cause: Worker error and inadequate review. The Agency did not appear to review thoroughly cases where the recipient?s living arrangement changed. Effect: If income, resources, and living arrangements are not adequately verified, there is an increased risk recipients will be inappropriately determined eligible for Medicaid or determined eligible with an incorrect share of cost. Recommendation: We recommend the Agency implement procedures to ensure that income, resources, and living arrangements for recipients are updated timely for changes and are adequately documented and verified. The Agency should review closely cases where recipients move from living at home to residing in a nursing facility because, at that point, the recipient?s home and vehicle can no longer be excluded as resources. Management Response: Agree.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 447.253(b)(1)(i) (October 1, 2018) provides the following: The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. According to 42 CFR ? 447.253(g) (October 1, 2018), ?The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.? The Nebraska Medicaid State Plan, Attachment 4.19-D, 12-011.11 (Audits), says the following: The Department will perform at least one initial desk audit and may perform subsequent desk audits and/or a periodic field audit of each cost report. Selection of subsequent desk audits and field audits will be made as determined necessary by the Department to maintain the integrity of the Nebraska Medical Assistance Program. The Department may retain an outside independent public accounting firm, licensed to do business in Nebraska or the state where the financial records are maintained, to perform the audits. Audit reports must be completed on all field audits and desk audits. AICPA Professional Standards AU-C Section 500.A32 states the following: Audit evidence obtained directly by the auditor (for example, observation of the application of a control) is more reliable than audit evidence obtained indirectly or by inference (for example, inquiry about the application of a control) . . . . Audit evidence provided by original documents is more reliable than audit evidence provided by photocopies, facsimiles, or documents that have been filmed, digitized, or otherwise transformed into electronic form, the reliability of which may depend on the controls over their preparation and maintenance. Title 45 CFR ? 75.511(a) (October 1, 2018) requires the auditee to prepare a summary schedule of prior audit findings. Per subsection (b)(2) of that same regulation, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? A good internal control plan requires procedures to ensure a risk assessment is performed on long-term care facilities, and those considered high risk are field audited in order to maintain the integrity of the Medical Assistance Program. Condition: We noted the Agency did not perform field audits on any long-term care facilities identified as high risk. A similar finding was noted in prior audits. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-052 Questioned Costs: Unknown Statistical Sample: No Context: The Agency performs risk assessments of the facilities each year and identifies high-risk facilities. In prior audits, we noted that, during fiscal year 2016, the Agency identified nine high-risk facilities for the period ended June 30, 2015; only three had field audits performed. The Agency did not document why field audits were unnecessary for the others. We also noted one high-risk facility identified in fiscal year 2017 had not yet had a field audit. During fiscal year 2018, the Agency identified 23 high-risk facilities for the period ended June 30, 2017. During fiscal year 2019, the Agency identified 21 high-risk facilities for the period ended June 30, 2018. The Agency claims they intend to contract for field audits for the facilities, but they had not done so as of June 30, 2019. The Federal share of Medicaid payments to long-term care facilities in State fiscal year 2019 was $189,029,242. Cause: The Agency did not dedicate adequate resources to the task of field audits. Effect: When facilities do not have periodic field audits, there is an increased risk for submitted cost reports to contain errors or fraud. Recommendation: We recommend the Agency devote adequate resources to field audits of long-term care facilities. Management Response: Does Not Agree. In accordance with 471 NAC 12-011.1, NE SPA Attachment 4.19D Page 26, and our Standard Operating Procedure (SOP) manual, the statute of limitations for conducting onsite field audit for nursing facilities deemed high risk through the final administrative determination is five (5) years, from the end of the cost report period. The facilities identified in this finding were either within the five (5) year timeframe, and/or were subsequently deemed low risk through the final administrative determination: 1 high-risk facility for report period ended June 30, 2016: Douglas County Health Center ? report period available for field audit until June 30, 2021. Identified as high-risk on desk audit by a now-retired Auditor Supervisor. The increased costs were initially identified as an area of concern, and the facility was listed as ?high-risk? on the Audit Program and the Audit Log. Upon further review, the now retired supervisor discovered most of the cost increase was attributable to payroll, which would not be a high risk area. He changed the high-risk designation on the Audit Program to low risk, but forgot to change the designation on the Audit Log. Documentation of the removal of this facility from the high-risk list is contained in the ?High Risk Changes? folder on the J: drive, per our ?Identification of High Risk Providers? procedure. 23 high-risk facilities for report period ended June 30, 2017: Wilber ? report period available for field audit until June 30, 2022. 22 Skyline facilities ? These facilities, along with other Skyline facilities in other states, are currently under investigation by federal authorities, and will not be audited further by DHHS Medicaid without specific direction by the feds. 21 high-risk facilities for report period ended June 30, 2018: All of these were operated by the Klaasmeyer Receivership and were designated high-risk as they had accrued, but unpaid, building lease costs at the time of the desk audits. Per Medicare regulations, providers must liquidate short-term liabilities within one year from the end of the cost report period. It has recently been determined the accrued lease costs have been liquidated, thus removing the high-risk designation. Documentation to support this change is located in the ?High Risk Changes? folder on our J: drive, per our ?Identification of High Risk Providers? procedure. APA Response: Although the State Plan allows the Agency to initiate an audit within five years, it does not seem reasonable for the Agency to delay initiation of an audit of a provider identified as high risk. High-risk providers should be audited as soon as possible to ensure issues are resolved timely and to reduce the risk for errors or abuse to occur.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability Grant Number & Year: #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 45 CFR ? 75.403 (October 1, 2018) requires costs to be necessary, reasonable, and adequately documented. Title 45 CFR ? 75.302 (October 1, 2018) requires financial management systems of the State sufficient to permit preparation of required reports and permit the tracing of funds to a level of expenditures adequate to establish the use of these funds were in accordance with applicable regulations. Title 45 CFR ? 75.302 also requires each state to expend and account for Federal awards in accordance with state laws and procedures. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from EnterpriseOne. Per 45 CFR ? 75.303 (October 1, 2018), an Agency must establish and maintain effective internal control to ensure compliance with Federal requirements. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: Depreciation amounts included in the provider rate for the Beatrice State Development Center (BSDC) were not adequately supported. BSDC is a State facility of the Agency. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-053 Questioned Costs: $47,837 known Statistical Sample: No Context: BSDC is a State intermediate care facility for individuals with developmental disabilities. Medicaid reimburses the State for the cost of care of Medicaid-eligible individuals. The Agency prepares a cost report to determine the cost per day to be reimbursed. In addition to depreciation from the EnterpriseOne system, the Agency also used a depreciation schedule from an unknown source that was not adequately supported. The information from this schedule was used in the calculation of the Medicaid cost per day for BSDC. The depreciation appears to be from building improvements from 1994 to 2003 before the State implemented the EnterpriseOne system. However, there is not adequate documentation to ensure the amounts are correct or that the amounts were not duplicated in the conversion to EnterpriseOne. We also noted depreciation related to three buildings not belonging to BSDC was included. The buildings were not used for BSDC clients. The Federal share of questioned costs related to these costs totaled $47,837. Cause: Unknown Effect: If inaccurate or unsupported information is used to calculate the Medicaid cost per day, there is an increased risk of the rate being inaccurate and the State overcharging Medicaid for services. Recommendation: We recommend the Agency ensure that all costs are adequately documented and in accordance with Federal requirements. Management Response: Agree

Program: CFDA 93.778 ? Medical Assistance Program ? Subrecipient Monitoring Grant Number & Year: #1805NE5MAP, FFY 2018; #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.352 (October 1, 2018) states, in part, the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal Award Identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier; (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); * * * * (iv) Federal Award Date (see ?75.2 Federal award date) of award to the recipient by the HHS awarding agency; (v) Subaward Period of Performance Start and End Date; . . . * * * * (xi) CFDA Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement; . . . Per 45 CFR 75.351(a) (October 1, 2018): Characteristics which support the classification of the non-Federal entity as a subrecipient include when the non-Federal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. Per 45 CFR 75.351(c) (October 1, 2018), ?In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement.? Good internal control requires procedures to ensure Federal award information is communicated clearly to subrecipients. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not notify subrecipients of all required Federal award information. The Agency did not notify subrecipients of the dollar amount made available under each Federal award and the CFDA number at the time of disbursement. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states the status is complete. Repeat Finding: 2018-055 Questioned Costs: None Statistical Sample: No Context: During the fiscal year, the Agency passed through Federal Medicaid dollars to Area Agencies on Aging (AAA). We reviewed one AAA subaward agreement and noted the AAA subawards did not have the correct FAIN. In addition, the Agency did not identify the dollar amount made available under each Federal award and the CFDA number at time of disbursement. The Federal share of Medicaid subrecipient payments to AAAs for the fiscal year totaled $4,717,125. Cause: Agency staff were not familiar with Federal requirements. Effect: When subrecipients are not provided all required notifications, there is an increased risk for noncompliance with Federal requirements. If not made aware of the total Federal funds received, the subrecipient may fail to obtain a Single Audit or include all required major programs. Recommendation: We recommend the Agency notify subrecipients of all information required by Federal regulations. Management Response: Agree. Agency staff turnover led to a gap in education regarding the Federal requirements. A process for documenting notification to the subrecipients of all reward information. Education has been provided to staff regarding the current Federal reporting requirements and a standard operating procedure has been implemented. At the time of disbursement, the subrecipients are notified of the CFDA number, Federal award number, and the dollar amount available under each Federal award. Additionally, an e-mail is sent to subrecipients summarizing the amount of Federal funds received in every month?s reimbursement. The Agency is now notifying subrecipients of all required Federal award information and CFDA number at the time of disbursement.

Program: CFDA 93.778 ? Medical Assistance Program ? Allowability & Eligibility Grant Number & Year: #1905NE5MAP, FFY2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR 75.403(g) (October 1, 2018), costs must be adequately documented. 42 CFR ? 431.17(b) (October 1, 2018) requires the following: A State plan must provide that the Medicaid agency will maintain or supervise the maintenance of the records necessary for the proper and efficient operation of the plan. The records must include - (1) Individual records on each applicant and beneficiary that contain information on - * * * * (iii) Facts essential to determination of initial and continuing eligibility; * * * * (vi) The disposition of income and eligibility verification information received under ??435.940 through 435.960 of this subchapter . . . . 42 CFR ? 435.945(c) (October 1, 2018), states, in relevant part, the following: The agency must furnish, in a timely manner, income and eligibility information, subject to regulations at part 431 subpart F of this chapter, needed for verifying eligibility to the following programs: (1) To other agencies in the State and other States and to the Federal programs both listed in ?435.948(a) of this subpart and identified in section 1137(b) of the Act; Condition: For 1 of 40 managed care claims tested, the auditor was unable to verify the income used to determine whether eligibility was correct. Per the case file narratives, the Agency verified income using the Federal hub; however, the Agency was unable to provide documentation to support that the income used was correct. Repeat Finding: No Questioned Costs: $88 known Statistical Sample: No Context: Eligibility for Medicaid is generally based on financial and non-financial criteria. Income eligibility is based on a percent of the Federal Poverty Level, which is based on national demographic data and updated on an annual basis. The State is to use data accessed through the Federal Data Services Hub (Hub) to make eligibility determinations; however, per the Computer Matching and Privacy Protection Act Agreement (CMPPA), the Agency may not disclose matching data received from the Hub to any entity or individual. We selected 40 managed care claims for testing. In most instances, we were able to redetermine that the individual was eligible using the State wage information interface or other income verification support imaged in the individual?s case file. However, for one claim tested, the Agency used the Hub to determine income, and there was no documentation the Agency could provide to support that the income used was correct. As a result, we question the Federal share of the payment of $88. Federal payment errors noted totaled $88. The total Federal payments tested was $6,439, and the total Federal share of managed care claims for the fiscal year was $648,225,863. Cause: The Agency utilizes an interface with the Hub to obtain income information used in determining Medicaid eligibility. The CMPPA between the Agency and the Federal government specifies that the Agency may not use or disclose matching data received from the Hub to any entity or individual. Effect: Without documentation to support that the income used was correct, we could not determine whether the individual was eligible for Medicaid. Recommendation: We recommend the Agency work with the Federal government to allow auditors to review income information on the Hub used to determine Medicaid eligibility. Management Response: Does Not Agree. As noted by the auditor the Department is not allowed to release the electronic interface information used to verify income per federal guidance. The Department does not believe there were any errors as the income was verified.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: According to 42 CFR ? 447.253(g) (October 1, 2018), ?The Medicaid agency must provide for periodic audits of the financial and statistical records of participating providers.? Per 42 CFR ? 447.253(b)(1)(i): The Medicaid agency pays for inpatient hospital services and long-term care facility services through the use of rates that are reasonable and adequate to meet the costs that must be incurred by efficiently and economically operated providers to provide services in conformity with applicable State and Federal laws, regulations, and quality and safety standards. The Nebraska Medicaid State Plan, Attachment 4.19-A, ? 10-010.03B8a, provides the following: Facilities will be subject to a preliminary and a final reconciliation of Medicaid payments to allowable Medicaid costs. A preliminary reconciliation will be made within six months following receipt by the Department of the facility?s cost report. A reconciliation will be made within 6 months following receipt by the Department of the facility?s settled cost report. A good internal control plan requires procedures to ensure reconciliations of hospital cost reports are completed timely. Condition: No critical access hospital cost report reconciliations were completed during the fiscal year. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: Critical access hospitals are approved rural hospitals. Audited cost reports are used to make final adjustment payments to critical access hospitals. The Federal government contracts with independent auditors to perform cost report audits on all facilities that have Medicare beds. All Nebraska Medicaid hospitals have Medicare beds ? so, when obtained, the Agency relies on these audits for all the Medicaid hospitals. Final audited cost reports can generally be obtained from the independent auditor 18 months after the hospital?s year-end. The Agency had not performed any hospital cost report reconciliations for the 2016 cost reports received during fiscal year 2019. Of the 64 critical access hospitals in 2016, the Agency received 59 audited cost reports on September 13, 2018. Per regulations, the reconciliations should have been completed by the six-month deadline of March 2019; however, they were not complete as of the June 30, 2019 fiscal year end. The Federal share of critical access hospital payments for the fiscal year totaled $7,946,895. Cause: The Agency did not devote adequate resources to ensure cost reports were reconciled in a timely manner. Effect: Increased risk for errors and unallowable costs. Recommendation: We recommend the Agency implement procedures to ensure hospital cost reports are reconciled within six months of the receipt of the facility?s settled cost reports. Management Response: Agree. Due to staff turnover, previous cost-report-reconciliation timelines were missed. With new staff working on the reconciliations and new procedures in place to ensure cost reports being completed in a timely manner, DHHS does not anticipate this finding to reoccur in the current model.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 42 CFR ? 455.104(b) (October 1, 2018), the State Medicaid Agency must obtain the following disclosures from the disclosing entity: (1)(i) The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. * * * * (4) The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). Person with an ownership or control interest is defined, in part, in 42 CFR ? 455.101(c) (October 1, 2018) as a person or corporation that: Has an ownership interest totaling 5 percent or more in a disclosing entity; Has an indirect ownership interest equal to 5 percent or more in a disclosing entity; Additionally, under 42 CFR ? 455.101(e), an ?other disclosing entity? includes ?an officer or director of a disclosing entity that is organized as a corporation[.]? Per 42 CFR ? 455.436 (October 1, 2018), the State Medicaid Agency must do the following: (a) Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. (b) Check the Social Security Administration?s Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. (c)(1) Consult appropriate databases to confirm identity upon enrollment and reenrollment . . . . Per 42 CFR ? 455.412 (October 1, 2018), the State Medicaid Agency must: (a) Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State. (b) Confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. Good internal control requires procedures to ensure all required disclosures are provided. Condition: Medicaid providers were not properly screened or disclosures were not obtained for managing employees or persons with ownership or controlling interest. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: We tested screening and enrollment for 25 Medicaid providers (18 Long-Term Care facilities, 6 Hospitals, and 1 Intermediate Care Facility for Intellectually Disabled). We noted the following: ? Five providers did not have adequate ownership screening or disclosures. The providers failed to disclose any managing employees or persons with ownership or controlling interest; as a result, only the organization was screened and disclosed. The Agency did not have procedures to reject or follow-up on disclosure forms that were clearly incomplete. ? One provider did not have a license verification performed when the provider was revalidated in January 2019. Cause: The Agency relies on the provider?s disclosure to be complete, true, and accurate. Effect: Without adequate procedures to ensure providers are screened and disclosures are complete, there is an increased risk of provider ineligibility, which could result in unallowable costs or potential harm to patients. Recommendation: We recommend the Agency obtain disclosures and screen providers as required by Federal regulations. We also recommend the Agency implement procedures to ensure license verifications are performed. Management Response: Partially Agrees. The Agency expects the provider?s disclosure to be complete, true, and accurate. The Department uses all screening tools and resources as required in the Code of Federal Regulations (CFR) The Department includes the CFR disclosure definitions found at 42 455.101-455.102 with the provider agreement. If an improper or questionable disclosure is discovered through the screening process or at any other time throughout the provider?s enrollment, appropriate action is taken with the provider to assure a proper disclosure is provided. Additionally, providers may be subject to sanction for improper disclosure. The Department agrees that one provider did not have a license verification performed when the provider was revalidated in January 2019. APA Response: 45 CFR ? 75.303 requires the Agency to ?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.? It is not sufficient for the Agency to rely on the provider?s disclosures. Obvious errors and omissions should be reviewed to ensure compliance with Federal regulations.

Program: CFDA 93.778 ? Medical Assistance Program ? Special Tests and Provisions Grant Number & Year: All open, including #1905NE5MAP, FFY 2019 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Title 42 CFR ? 455.1 (October 1, 2018) sets forth the requirements for a State fraud detection and investigation program, including a method to identify whether services reimbursed by Medicaid were actually furnished to beneficiaries. The Agency?s Program Integrity and Special Investigations Units (SIU) perform these functions. Per 42 CFR ? 455.14 (October 1, 2018), ?If the agency receives a complaint of Medicaid fraud or abuse from any source or identifies any questionable practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a full investigation.? Per Title 480 NAC 5-006: No provider approval will be issued or remain in effect if there is a conviction for, admission of, or substantial evidence of crimes against a child or vulnerable adult, crimes involving intentional bodily harm, crimes involving the illegal use of a controlled substance, or crimes involving moral turpitude on the part of the provider or any other household members. Condition: Five of 25 Medicaid cases tested did not comply with Federal requirements. Repeat Finding: 2018-037 Questioned Costs: Unknown Statistical Sample: No Context: We noted the following issues: Three Program Integrity cases were not properly reviewed. ? One provider was referred due to billing excessive hours, including potentially billing for times when the child was in school and the parent was not working. The case was closed after requested school records were not received even though the provider had previous questionable billings. No attempt was made to obtain any work or medical appointment records to ensure the provider was not billing for unauthorized times. ? One case identified a provider who had a household member with a criminal history that would preclude the provider from providing Medicaid services in the provider?s home. The provider was allowed to continue services in the home as the Agency determined there was no safety issue. This was not in compliance with regulations. ? For another case, a referral was made regarding a provider who had a history of hiring individuals with criminal backgrounds. The case was closed as unsubstantiated even though there was evidence of billings submitted with overlapping services, and complaints were made against the provider for not providing services to clients and having a client sign blank billing documents. Additionally, there was not sufficient documentation to support criminal background results were obtained for all employees of the provider?s organization. One SIU case was not properly reviewed. ? A client was referred in April 2019 after failing to report a checking account that caused the client to be over resources and not qualify for Medicaid. The case was closed in June 2019 due to insufficient evidence; however, the case was reopened in July 2019 after we requested the case file. During testing, we also noted that a case was referred to Program Integrity after a managed care company questioned payments made on behalf of a deceased client. The client died on July 2, 2016, and the Medicaid case was not closed until June 1, 2018, almost two years later. The Agency approved Medicaid and several other programs even though correspondence sent to the client was returned and no phone calls or messages were answered. A total of $37,951 in benefits were paid after the client?s death, of which $35,483 was Medicaid and $2,468 was other programs. As of September 23, 2019, $30,243 has been recovered from two managed care companies; however, overpayments totaling $5,240 have not been properly established for two additional managed care companies. Additionally, since Program Integrity only reviews Medicaid programs, no attempts have been made to recover the payments from the other programs. Cause: The Agency did not devote adequate resources, including adequate staff, to ensure Medicaid fraud cases were properly worked. Effect: When potential fraud cases are not adequately pursued, this results in noncompliance with Federal requirements. When repayment is not adequately pursued, this results in a loss of Federal funds. Recommendation: We recommend the Agency implement procedures to ensure cases referred to Program Integrity and the SIU are properly reviewed, and appropriate dispositions are made. Management Response: Does Not Agree. Allegation of provider billing excessive hours - The investigator was unable to substantiate the allegations, as educational privacy laws do not allow schools to release attendance information without parental permission. Wage information from the Department of Labor is only informative when the client is an employee, it does not include information for contracted workers. The allegation could not be substantiated. Household Member with Criminal History - The provider, client, and the household member with a criminal history are all family members. Whether or not the provider is a provider, the client will continue to live in this household. The waiver eligibility determinations assess whether or not the client has a safe living environment. This client?s living arrangement was determined to be safe. Disenrollment of providers in similar situations has led to administrative appeals by the provider and client. The Department lost these appeals. The investigator reviewed the available information about the criminal background and the history of living arrangement for the client, provider, and household member. It was found that there was no health and safety issue because of the household member?s criminal history. Provider alleged to be hiring individuals with criminal backgrounds - The provider was educated about their responsibilities for completing screening and background checks of employees. The allegations could not be substantiated. SIU Case - The investigator closed the case after his initial review of the information. He deemed it insufficient evidence. After closure and prior to the supervisor reviewing his decision, the case was selected in the audit. Subsequently the supervisor completed the review, determined there was a possible deprivation of resources to become eligible, and decided to reopen the case. Deceased Client - Investigation was opened on 11/19/2018 concerning capitation payments paid after the client?s death (date of death 7/2/2016). Refunds were requested from all of the appropriate managed care entities. As of 11/13/2019, all Medicaid refunds have been collected. In the future, Program Integrity may review client participation in other programs so that other programs can assess the need for refunds. APA Response: As noted above, Title 480 NAC 5-006 provides the following: No provider approval will be issued or remain in effect if there is a conviction for, admission of, or substantial evidence of crimes against a child or vulnerable adult, crimes involving intentional bodily harm, crimes involving the illegal use of a controlled substance, or crimes involving moral turpitude on the part of the provider or any other household members.

Program: CFDA 93.898 ? Cancer Prevention & Control Programs for State, Territorial & Tribal Organizations ? Allowability & Subrecipient Monitoring Grant Number & Year: #NU58DP006278 period end 6/29/19 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.303 (October 1, 2018) requires the Agency to ?[e]stablish and maintain effective internal control over the Federal award . . . .? Good internal control requires procedures to ensure costs are reasonable and adequately documented. Per 45 CFR ? 75.403 costs must be reasonable, necessary, and adequately documented. Per 45 CFR ? 75.404, ?A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.? 45 CFR ? 75.353 (October 1, 2018) provides the following: With prior written approval from the HHS awarding agency, a pass-through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in ?75.201. 45 CFR ? 75.201(b) (October 1, 2018) states, in part, the following: [P]ass-through entities as permitted in ?75.353, may use fixed amount awards (see ?75.2 Fixed amount awards) to which the following conditions apply: (1) The Federal award amount is negotiated using the cost principles (or other pricing information) as a guide. The HHS awarding agency or pass-through entity may use fixed amount awards if the project scope is specific and if adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The transactions were paid as fixed amount subawards, but there was not adequate documentation to support that the awards were based on a reasonable estimate of actual costs. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states that the status is complete. Repeat Finding: 2018-029 Questioned Costs: $35,000 known Statistical Sample: No Context: Documentation was not adequate to support that fixed amount subawards were based on a reasonable estimate of actual cost. We tested two payments and noted the following: ? For one subrecipient, the payment was $5,000 for data extraction for screening rates. There was no documentation to support the reasonableness of the payment. ? For the second subrecipient, the payment was $30,000 for completion of the Quality Plan and Clinic Assessment and reporting of National Quality Forum quality measures. There was no documentation to support that the rate was a reasonable estimate of actual costs. Total Federal questioned costs noted were $35,000. Subrecipient payments for the fiscal year totaled $887,036. Cause: The Agency did have Federal grantor approval for fixed amounts subawards; however, supporting documentation provided to the auditors was not adequate to determine the amounts were reasonable. Effect: When amounts paid are not adequately documented, there is an increased risk that charges will be excessive. Recommendation: We recommend the Agency maintain adequate documentation to support that fixed amount subawards are based on a reasonable estimate of actual cost. Management Response: Does not agree. Program funder approved not only fixed cost subawards, but also reviewed the payment structure for all deliverables. Program payment structure was compared to other breast and cervical screening programs across the nation and was determined to be reasonable. The program is currently engaged in a ?study? with CDC evaluating effectiveness of Nebraska?s current payment structure. APA Response: Per 45 CFR ? 75.201(b)(1), fixed amount subawards are allowable if ?adequate cost, historical, or unit pricing data is available to establish a fixed amount award based on a reasonable estimate of actual cost.? Documentation was not adequate to support that the fixed amounts were a reasonable estimate of actual costs.

Program: CFDA 93.917 ? HIV Care Formula Grants ? Allowability, Cash Management, Eligibility & Subrecipient Monitoring Grant Number & Year: 17X08HA29238, Period End 9/29/2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR ? 75.403 (October 1, 2018) requires costs charged to Federal programs to be reasonable, necessary, and adequately documented. 45 CFR ? 75.352 (October 1, 2018) states, in relevant part, the following: All pass-through entities must: * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward[.] 42 USC 300ff-26(b) (2018) states the following: To be eligible to receive assistance from a State under this section an individual shall ? (1) have a medical diagnosis of HIV/AIDS; and (2) be a low-income individual, as defined by the State. State ADAP Client Eligibility Policy (Revised 01/2017) states, in relevant part, the following: 2. Client must meet current income eligibility guidelines requiring that a client?s household earned income must fall below 300% of the Federal Poverty Guidelines . . . . * * * * 6. Client must permanently reside in Nebraska and must have a valid physical street/home address and must be physically living there . . . . Good internal control requires procedures to ensure: 1) all costs are allowable per the grant; 2) all clients are eligible; 3) documentation is maintained to support amounts claimed by and paid to subrecipients; and 4) rebate funds are expended before Federal funds. Per 45 CFR ??75.305(b)(5) (October 1, 2018): To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate subrecipient monitoring procedures to ensure expenditures were allowable and in accordance with Federal requirements. The Agency did not have adequate procedures to ensure individuals receiving services met State and Federal eligibility requirements. The Agency did not have documentation to support it monitored eligibility determinations by subrecipients. We also noted that the Agency did not have procedures to ensure rebates were spent before requesting Federal grant funds. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings states that the status is complete. Repeat Finding: 2018-056, 2018-057 Questioned Costs: $556,854 known Statistical Sample: No Context: The Agency paid $565,032 in Federal program funds to subrecipients during the fiscal year ended June 30, 2019. We tested $556,854 in subrecipient payments and noted that one payment for $307,408 included an invoice and a general ledger printout but no source documentation such as invoices, timesheets, etc. The second payment for $249,446 had only an invoice and no supporting documentation. The auditor asked the Agency to provide support for any subrecipient monitoring performed, and the Agency verified that no financial monitoring was performed for the subrecipient for fiscal year 2019. The Agency also verified that no monitoring of eligibility was performed. We also noted that Federal funds were spent when Rebate funds were available. The average month-end Rebate fund balance was over $2 million during the fiscal year, and the Rebate fund balance at June 30, 2019, was $2,961,528; however, the Agency spent $580,989 in Federal funds during fiscal year 2019. Cause: Inadequate procedures and inadequate oversight. Effect: Inadequate subrecipient monitoring could result in loss or misuse of Federal funds. Failing to spend rebates first could result in questioned costs or sanctions, as Federal funds are being expended when rebates are available. Recommendation: We recommend the Agency ensure that adequate supporting documentation is on file for all expenditures to ensure they are allowable and in compliance with Federal regulations. We also recommend the Agency ensure clients served meet eligibility requirements. We further recommend rebates be expended before Federal funds. Management Response: Partially agrees. The Agency had procedures in place; program staff did not follow them. As a result, during State fiscal year 2019, the Agency performed its own review of program procedures and protocols. That review resulted in numerous major program changes that were just beginning at the end of the state fiscal year. Changes include: ? Subrecipients provide G/L and other supporting documentation that is then reviewed by program staff for allowability, allocability, and reasonableness. ? In order to more adequately track the funds allocated to the cost and service categories, subsidiary codes have been developed for all service categories and are applied to all payments. ? All subrecipient budgets require a budget justification specifying the service and cost category and are closely reviewed by program staff for allowability and allocability. ? Rebate funds are being utilized prior to the drawdown of any federal funds. The procedure put in place in 2018 is being followed to the letter. ? Program staff monitors expenses on a monthly basis to determine the balance of rebate cash account and to ensure that no expenses have been mistakenly applied to federal funding sources. ? The Agency identified a client-level data system that will assist in monitoring and tracking consumer eligibility and enrollment. The data system provider is knowledgeable of Federal requirements including eligibility and reporting specific to the Ryan White HIV/AIDS Program, as it currently works with and is the top-recommended data system by other RWHAPs across the nation.

Program: CFDA 93.917 ? HIV Care Formula Grants ? Reporting Grant Number & Year: 17X07HA00042, Period end 3/31/2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: 45 CFR? 75.302 (October 1, 2018) states, in part, the following: (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non- Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also ?75.450. (b) The financial management system of each non-Federal entity must provide for . . .(2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements . . . . Per Policy Clarification Notice (PCN) #15-04 (Revised 01/11/2019), ?In the `Ryan White Rebate Funding? section, report . . . the expended rebate amount[.]? Good internal control requires procedures to ensure that all reports have a documented review by a knowledgeable individual prior to submission. Good internal control also requires procedures to ensure reports are accurate. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not report drug rebates properly. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-058 Questioned Costs: None Statistical Sample: No Context: We tested the report for grant 17X07HA00042, submitted March 2019. The Agency reported Total Rebates Available as $5,634,328, which were the rebates received during the grant period, but did not include the $603,600 beginning balance. Therefore, Total Rebates Available and Unexpended Rebates reported were understated by $603,600. Cause: Clerical error. Effect: Inaccurate reporting could lead to Federal sanctions. Recommendation: We recommend the Agency ensure reports contain accurate information. Management Response: Agree

Program: CFDA 93.945 ? Assistance Programs for Chronic Disease Prevention and Control ? Allowability & Subrecipient Monitoring Grant Number & Year: 5 NU58DP004819-05-00, budget period ended 6/29/2018 Federal Grantor Agency: U.S. Department of Health and Human Services Criteria: Per 45 CFR ? 75.403 (October 1, 2018), allowable costs must be necessary, reasonable, and adequately documented. 45 CFR ? 75.352(d) (October 1, 2018) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 45 CFR ? 75.430(i)(1) (October 1, 2018) states, as is relevant, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . . * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award . . . . 45 CFR ? 75.430(i)(3) (October 1, 2018) states, in relevant part, the following: [C]harges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. Good internal control requires procedures to ensure payments to subrecipients are in accordance with Federal requirements. According to 45 CFR ? 75.511(a) (October 1, 2018), ?The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings.? Per 45 CFR ? 75.511(b), ?The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs.? 45 CFR ? 75.511(b)(1) adds, ?When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken.? Finally, 45 CFR ? 75.511(b)(2) provides, ?When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken.? Condition: The Agency did not have adequate subrecipient monitoring procedures. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2018-060 Questioned Costs: $50,479 known Statistical Sample: No Context: Subrecipient payments totaled $163,856 for the fiscal year ended June 30, 2019. We tested the largest subrecipient payment for $50,479. There was an invoice from the subrecipient for the total due, but no detail of expenses or supporting documentation such as invoices and timesheets. According to Agency staff, monitoring had been performed on the subaward during the prior fiscal year. However, the documentation provided was not adequate. The subrecipient was reimbursed for one employee for 6 hours at $62.50, which agreed to her hourly salary rate paid; however, she was also reimbursed 79.82 hours at $200 per hour. The subrecipient was reimbursed for another employee for 10 hours at $200 per hour, which was in excess of her actual wages of $27.50 per hour. In addition, no documentation, such as a timesheet, was obtained to support the 100% of the employees? activity or distribution of wages among different activities; nor was there documentation of the total number of hours worked each day. A similar finding was noted in the prior audit. Cause: Inadequate monitoring procedures. Effect: The Agency did not comply with Federal requirements. In addition, without adequate supporting documentation, there is an increased risk for the misuse of Federal funds and noncompliance with Federal regulations. Recommendation: We recommend the Agency improve monitoring procedures to ensure subrecipient payments are for actual and allowable costs in accordance with Federal requirements. Management Response: Partially agrees. The Unit does have subrecipient monitoring procedures in place, and staff follow the procedures. The Unit guideline is that an entire invoice is tested annually for each subawardee. Program staff followed the guideline and even tested two invoices during the award period. Program acknowledges that the structure of the award did not enable staff to verify actual costs for salaries/wages. As a result of this and similar prior findings for this award, we no longer utilize this type of subaward. Awards of this nature are now structured as fixed amount awards, and we receive prior federal approval for such awards. While the award structure created financial monitoring challenges, the subreceipient did perform all required work and provided detailed information on the progress of the work completed during the award period. The work conducted was in alignment with the federal award expectations, allowable, and positively contributed to the implementation of the federal award. The audit finding indicated that ?no detail of expenses? was available for the questioned costs. This is inaccurate; the subrecipient provided an expense report with each invoice. The finding also stated, ?documentation provided was not adequate.? We feel this implies that all documentation received and tested was inadequate. We acknowledge that documentation for salaries/wages was not adequate for determine actual costs; however, sufficient documentation was provided for the other budget categories and enabled staff to determine actual costs. APA Response: No detail of expenses was provided to the auditor for the $50,479 invoice. As acknowledged by the Agency, documentation for salaries was not adequate.

Program: CFDA 16.575 ? Crime Victim Assistance ? Allowability & Subrecipient Monitoring Grant Number & Year: 2015-VA-GX-0010, FFY 2015; 2016-VA-GX-0067, FFY 2016; 2017-VA-GX-0010; FFY 2017 Federal Grantor Agency: U.S. Department of Justice Criteria: 2 CFR ? 200.331(d) (January 1, 2019) requires a pass-through entity to monitor the activities of the subrecipient to ensure that Federal awards are used in compliance with Federal statutes, regulations, and the terms and conditions of the subaward, and performance goals are achieved. 2 CFR ? 200.302(a) (January 1, 2019) requires the State to have financial management systems sufficient to allow for ?the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.? 2 CFR ? 200.403 (January 1, 2019) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to ensure subrecipients comply with applicable cost principles. Per 2 CFR ? 200.405(a) (January 1, 2019), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? 2 CFR ? 200.430(i)(1) (January 1, 2019) states, as is relevant, the following: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities . . . ; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award . . . . Condition: The Agency did not have adequate subrecipient monitoring procedures. Documentation was inadequate to support that the amounts paid were allowable and in accordance with Federal requirements. A similar finding was noted in the prior audit. Repeat Finding: 2018-062 Questioned Costs: $12,376 known ?See Schedule of Findings and Questioned Costs for chart/table? Statistical Sample: No Context: During the fiscal year, the Agency received reimbursement requests from subrecipients, including supporting documentation such as timesheets and invoices. However, we noted that the Agency did not always obtain adequate support for all amounts reimbursed. We noted that 6 of 25 aid payments tested did not have sufficient documentation to ensure all amounts were allowable and in accordance with Federal cost principles. The following issues were noted: ? Adequate time records were not on file to support the distribution of employee compensation. ? There was a lack of support for allocations used to charge operating expenses. ? Expenses were based on budgets rather than actual amounts. ? There was a lack of invoices. ? Support was inadequate to determine if charges were for grant activities. Federal questioned costs for the payments tested totaled $12,376. The total sample tested was $259,342, and the total of aid payments for the fiscal year was $12,189,098. Based on the sample tested, the dollar error rate was 4.77%, which estimates the potential dollars at risk for fiscal year 2019 to be $581,420 (dollar error rate multiplied by population). Cause: Inadequate monitoring procedures. Effect: Without adequate supporting documentation, there is an increased risk for loss or misuse of funds. Recommendation: We recommend the Agency improve procedures to ensure payments are allowable and in accordance with Federal requirements. Management Response: Nebraska Crime Commission monitors subrecipients based on risk per 2 CFR 200.331(a)(6b-e). The outcome of the risk assessment determines what monitoring level is applied to the subrecipient organization. It is not reasonable nor feasible for Nebraska Crime Commission to review 100% supporting documentation for all subrecipients. That would be a substantial burden on our agency as well as funded programs. The monitoring procedures we have in place are adequate and actually have resulted in less questioned cost findings than previous audits or monitors when 100% documentation was reviewed. In response to the issues regarding lack of support for allocations used to charge operating expenses, we have reached out to OVC for clarification on what the prorating requirements are for operating expenses as the VOCA Rule does not specify how the costs must be prorated. Also in 2 CFR 200.413 Direct costs paragraph (d) does not specify the manner in which costs must be prorated other than there must be a basis of allocation for the benefit provided to the Federal award. VOCA is for the purposes of direct services to victims of crime, it would be reasonable to justify allocation of such costs based on the direct services portion of the program. The majority of the VOCA funded programs are 100% victim service programs, it is our position that for those programs 100% of the operating costs would be allowable even if a lesser justification rate was used in the budget. For programs that do not provide 100% victim services beginning in February 2020 we implemented a pro-rating spreadsheet that is to be submitted with each billing of operating expenses to validate the allowable actual proration of that cost. The Federal Grants and Programs did modify previous monitoring language to essentially mirror Federal requirements per the request of Department of Justice.

Program: CFDA 16.575 ? Crime Victim Assistance ? Cash Management Grant Number & Year: 2017-VA-GX-0010, FFY 2017; 2016-VA-GX-0067, FFY 2016; 2015-VA-GX-0010, FFY 2015 Federal Grantor Agency: U.S. Department of Justice Criteria: 31 CFR ? 205.33(a) (July 1, 2018) states, in relevant part, the following: A State must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. A Federal Program Agency must limit a funds transfer to a State to the minimum amounts needed by the State and must time the disbursement to be in accord with the actual, immediate cash requirements of the State in carrying out a Federal assistance program or project. Section 3.1 Payments (pg. 30) of the ?DOJ Grants Financial Guide? (December 2017), issued by the U.S. Department of Justice, contains the following: Drawdown requests should be timed to ensure that Federal cash on hand is the minimum needed for disbursements/reimbursements to be made immediately or within 10 days. If not spent or disbursed within 10 days, funds must be returned to the awarding agency. (https://www.ojp.gov/financialguide/doj/pdfs/DOJ_FinancialGuide.pdf). A good internal control plan requires procedures to ensure that drawdowns are spent according to Federal guidelines. Condition: Three of seven draws tested were not spent within 10 days. A similar finding was noted in the prior audit. Repeat Finding: 2018-065 Questioned Costs: None Statistical Sample: No Context: There were 54 receipt drawdowns, totaling $13,318,309, during the fiscal year. We tested seven receipts and noted the following: ?See Schedule of Findings and Questioned Costs for chart/table? Cause: Lack of adequate procedures and oversight. Effect: Noncompliance with Federal regulations, which could result in sanctions. Recommendation: We recommend the Agency implement specific procedures to ensure drawdowns are fully expended in a timely manner. Management Response: In response to U.S. Department of Justice and the issued Management letter for the same finding in the SFY 2018 audit procedures have been recently implemented to resolve the excess cash on hand findings. Effective February 5, 2020 the Financial Point of Contact designation has been changed to Kellie Rabenhorst, Director of Federal Grants and Programs. The procedures for drawdowns was revised and made effective February 7, 2020. The procedure outlines the manner in which payments are reviewed and entered that then triggers the drawdown process. We are currently in the process of transitioning all federal grants to State Accounting to complete the drawdowns through the Delay of Draw System utilizing the Average Clearance Pattern Structure. For grants that have been moved to the drawdown process with State Accounting the Director of Federal Grants and Programs will review the drawdowns every Friday to ensure there is no excess cash on hand and that the drawdown balances to the payments approved. Grants that have not yet transitioned to the State Accounting drawdown process require the Director of Federal Grants and Programs to review the drawdown prior to submission to ensure it is accurate and that there is support for the amount requested. The Director of Federal Grants and Programs will then review the completed drawdown within 10 days after submission to confirm there is no excess cash-on-hand. If there is excess cash-on-hand the Director of Federal Grants and Programs will notify the Budget and Accounting Division and ensure that the funds are returned to the awarding agency in accordance with federal regulations and the terms and conditions of the award.

Program: CFDA 16.575 ? Crime Victim Assistance ? Reporting Grant Number & Year: 2016-VA-GX-0067, FFY 2016; 2017-VA-GX-0010, FFY 2017 Federal Grantor Agency: U.S. Department of Justice Criteria: 2 CFR ? 200.302(a) (January 1, 2019) requires the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award . . . . Per 2 CFR ? 200.71 (January 1, 2019), ?obligations? are defined as follows: When used in connection with a non-Federal entity?s utilization of funds under a Federal award, obligations means orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period. Good internal control requires procedures to ensure that Federal reports are accurate and include all applicable accounts and expenditures. 2 CFR ? 200.511(b) (January 1, 2019) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: Federal financial reports (FFRs) were inaccurate. A similar finding was noted in the prior audit. According to the Summary Schedule of Prior Audit Findings, the issue has been resolved. Repeat Finding: 2018-066 Questioned Costs: None Statistical Sample: No Context: The Agency submitted nine quarterly FFRs during the fiscal year. We tested two of those reports and found that the Agency did not properly report the amount of subawards, which are obligations when awarded and should be reported as ?Federal share of unliquidated obligations.? Both FFRs tested were incorrect as follows: ?See Schedule of Findings and Questioned Costs for chart/table? Cause: Inadequate oversight. Effect: Noncompliance with Federal requirements, which could result in sanctions. Recommendation: We recommend the Agency implement procedures to ensure that reports are accurate. Management Response: In response to U.S. Department of Justice and the issued Management letter for the same finding in the SFY 2018 audit procedures have been recently implemented to resolve untimely or inaccurate Federal Financial Reporting. Effective February 5, 2020 the Financial Point of Contact designation has been changed to Kellie Rabenhorst, Director of Federal Grants and Programs. The procedures for federal financial reporting was revised and made effective February 6, 2020. The Federal Financial Reporting will now be completed by the Federal Grants and Programs Division. The Director of Federal Grants and Programs has created a schedule of reporting on all federal grants received by the Nebraska Crime Commission. The Internal Compliance Manager within the division will complete the reports as indicated by the schedule after compiling all necessary information to include the amount obligated at the time of reporting. The Director of Federal Grants and Programs will review all Federal Financial Reports for accuracy and ensure the report is completed prior to the deadline.

Program: CFDA 12.401 ? National Guard Military Operations and Maintenance (O&M) Projects ? Cash Management Grant Number & Year: Appendices ? W91243-17-2-1001, FFY17; W91243-18-2-1001, FFY18; W91243-19-2-1005, W91243-19-2-1021, and W91243-19-2-1024, FFY19 Federal Grantor Agency: U.S. Department of Defense Criteria: Title 2 CFR ? 200.305(a) (January 1, 2019) states, in part, ?For states, payments are governed by Treasury-State CMIA agreements and default procedures codified at 31 CFR Part 205 . . . .? Title 31 CFR Part 205 (July 1, 2018) implements the Cash Management Improvement Act (CMIA) and requires State recipients to enter into agreements that document accepted funding techniques for Federal assistance programs. The CMIA Agreement between the State of Nebraska, Secretary of the Treasury, and U.S. Department of the Treasury, for the period July 1, 2018, through June 30, 2019, requires the program to request Federal funds in accordance with the pre-issuance funding technique by which funds are to be requested and deposited in a State account not more than three business days prior to the disbursement of funds. Master Cooperative Agreement (October 2015), Article V ? Payment, Section 503, Payment by Advance Method, states, ?The advance payment method shall be according to procedures established in, NGR 5-1, Chapter 11, and 2 CFR ?200.305.? National Guard Regulation (NGR) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states, ?[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).? A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements are minimized and in compliance with State of Nebraska CMIA Agreement and National Guard Regulations. Condition: The Agency was not in compliance with the Federal cash management requirements during the fiscal year. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: We noted the timing of two of eight drawdowns tested was not in compliance with NGR 5-1. Funds were expended 49 and 63 days after the drawdown of Federal funds, which exceeded the 45-day maximum per NGR 5-1. We also noted that seven of eight drawdowns tested were not in compliance with the applicable funding technique outlined in the CMIA Agreement. Funds were expended from 8 to 43 business days after the drawdown of Federal funds, which exceeded the three business day maximum, as outlined in the CMIA Agreement. Cause: Funds were drawn down in order to have adequate money available at the end of the State and Federal fiscal years. The Agency?s policy was to follow the NGR requirements of 45 days rather than the CMIA Agreement requirement of three business days. Effect: The Agency is not in compliance with Federal cash management requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with the State of Nebraska CMIA Agreement and National Guard Regulations. Management Response: The Nebraska Military Department reaffirms the overall goal of efficient cash management. Federal program agencies and States should limit funds transfers to the minimum amounts necessary to meet program goals.

Program: CFDA 20.205 ? Highway Planning and Construction ? Reporting Grant Number & Year: All open Federal Grantor Agency: U.S. Department of Transportation Criteria: 2 CFR ? 200.302(a) (January 1, 2019) provides the following: Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state?s own funds. In addition, the state?s and the other non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR ? 200.302(b)(1) requires financial management systems to identify all Federal awards received and expended and the Federal programs under which they were received. 2 CFR ? 200.302(b)(3) requires the following: Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. A good internal control plan requires the auditee to reconcile the Schedule of Expenditures of Federal Awards (SEFA) to the financial statements to ensure the schedule is complete and accurate. Good internal control also requires management to design the information system to achieve objectives, including compliance with Federal requirements. Condition: The Agency lacked adequate procedures for reconciling SEFA expenditures to EnterpriseOne in a timely and complete fashion. As noted in Finding 2019-016, the funding source for expenditures is not recorded or maintained on EnterpriseOne. Repeat Finding: No Questioned Costs: Unknown Statistical Sample: No Context: The Agency does not enter CFDA information in EnterpriseOne. Vendor payments are recorded into the Agency?s Payment System (RPS), which then interfaces with the State?s Accounting System to record the transactions and create payments to those vendors. When the Agency records vendor payments for construction projects, those cost records are sent to the Agency?s Project Finance System (PFS), which is used to track road construction projects. PFS then allocates the project costs to the different funding sources (e.g., State funds, local funds, Federal funds). The Agency?s accounting systems are not set up to provide a full general ledger to be easily run by Federal program. In order to provide a detailed listing of expenditures by Federal program, the Agency would need to run a separate detailed listing of expenditures for each project?s Control Number and manually identify the Federal expenditures, as the Control Number would include both Federal and non-Federal expenditures. We requested the Agency perform this manual reconciliation for CFDA 20.205, which is comprised of 507 control numbers, totaling $305,627,962. The process was time-consuming, so the Agency focused primarily on higher-dollar control numbers. Eventually, the Agency was able to identify the majority of the expenditures to transaction-level detail. However, 94 control numbers, totaling $2,232,341, were left unreconciled. Cause: The Agency?s accounting systems are not set up to provide for a full general ledger to be easily run by Federal program, and the Agency does not enter CFDA information into EnterpriseOne. Effect: Without a full general ledger, it is impossible to review all transactions to ensure they are allowable in accordance with Federal regulations, increasing the risk for misuse of funds and inaccurate reporting. Recommendation: We recommend the Agency implement procedures to ensure all expenditures reported on the SEFA can be traced to EnterpriseOne transaction-level detail. We further recommend the Agency establish an adequate interface between the RPS system and the State?s Accounting System to ensure the funding is properly recorded. Management Response: NDOT?s recording of federal reimbursement as a revenue in the State?s Accounting System to a cash fund following the expenditure of state funds is a long-standing practice done with the knowledge of DAS State Accounting. Specific, unique revenue object codes have been created in EnterpriseOne and are used to separately account for federal reimbursement. Since these are state expenses at the time of payment and state cash funds are used, there is not a need to record federal information to the expenditure. After the state expenses are identified in NDOT?s Project Finance System for potential federal reimbursement, the federal information is recorded there. This practice was established long ago as a reflection of the fact that the federal reimbursement could take place months and even years following the initial state expense. With respect to the Auditor?s request during the audit to be provided a detailed listing of federal reimbursement under CFDA 20.205, NDOT reconciled 99% of the total $305,627,962 of federal reimbursement and those payments could be traced back to a payment in EnterpriseOne. With more time, NDOT could have reconciled the remaining 1% equal to $2,232,341, but it was our impression no more time was available. NDOT recently conferred with Federal Highway Administration (FHWA) Nebraska Division financial staff regarding the Auditor?s comments and recommendation and received assurances from them that they are confident that NDOT can provide expenditure summaries from NDOT?s systems by CFDA number that agrees to FHWA records. Further, an assurance was received that NDOT has proper accounting controls in place from their federal perspective. They?ve advised NDOT is able to provide information that enables FHWA to reconcile from total project costs of the project to federal reimbursed costs and verify that the reimbursement was done at the appropriate federal participation percentage.

Program: CFDA 20.505 ? Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research ? Allowability & Subrecipient Monitoring Grant Number & Year: All open, including NE-2019-012-00, FFY 2016 Federal Grantor Agency: U.S. Department of Transportation Criteria: 2 CFR ? 200.331(d) (January 1, 2019) requires pass-through entities to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward . . . . Title 2 CFR ? 200.403 (January 1, 2019) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal requirements. 2 CFR ? 200.511(b) (January 1, 2019) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: The Agency did not have adequate documentation on file to support that payments were for allowable activities and in accordance with allowable cost principles. The Agency also did not perform adequate subrecipient monitoring. A similar comment was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2018-067 Questioned Costs: $144,664 known Statistical Sample: No Context: A Metropolitan Planning Organization (MPO) is a forum for cooperative transportation decision-making for metropolitan planning areas. The Agency did not perform adequate monitoring of the two MPOs tested. The Agency reimbursed MPOs for costs reported on quarterly invoices. However, the Agency did not obtain support for the amounts reported. We tested two payments, totaling $173,331, of which $144,664 did not have source documentation, such as timesheets or invoices, on file. Subrecipient payments for fiscal year 2019 totaled $543,892. Cause: The Agency did not have adequate procedures to monitor whether subrecipients complied with Federal requirements. Effect: Increased risk for misuse of funds. Recommendation: We recommend the Agency implement procedures to monitor subrecipients. Additionally, we recommend the Agency obtain and maintain adequate documentation to support that costs are allowable and in accordance with Federal requirements. Management Response: NDOT does not concur with the questioned costs. NDOT Transit reviews each invoice for allowable costs and contacts the MPO for additional information as needed. APA Response: The Agency only had documentation on file to support that $28,667 of the $173,331 tested was in accordance with Federal cost principles.

Program: CFDA 20.509 ? Formula Grants for Rural Areas ? Allowability & Subrecipient Monitoring Grant Number & Year: NE-2017-013-00, FFY 2015; NE-2018-015-00, FFY 2016 Federal Grantor Agency: U.S. Department of Transportation Criteria: Title 2 CFR ? 200.403 (January 1, 2019) requires costs to be reasonable, necessary, and adequately documented. A good internal control plan requires procedures to be in place to ensure compliance with Federal and State requirements. Title 2 CFR ? 200.331 (January 1, 2019) requires the pass-through entity to do, among other things, the following: (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved . . . . * * * * (f) Verify that every subrecipient is audited as required by Subpart F?Audit Requirements of this part when it is expected that the subrecipient?s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ?200.501 Audit requirements. Title 2 CFR ? 200.430(i)(1) (January 1, 2019) states the following, in relevant part: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards . . . . Per 2 CFR ? 200.405(a) (January 1, 2019), ?A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.? Per 2 CFR 200.501(b) (January 1, 2019), any non-Federal entity that expends $750,000 or more in Federal money per year is required to obtain a single audit. 2 CFR ? 200.511(b) (January 1, 2019) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit?s schedule of findings and questioned costs . . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding?s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency?s or pass-through entity?s management decision, the summary schedule must provide an explanation. Condition: The Agency did not have adequate subrecipient monitoring procedures. The Agency did not have adequate support that payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2018-068 Questioned Costs: $387,563 known (NE-2017-013-00, $213,692; NE-2018-015-00, $173,871) Statistical Sample: No Context: During the fiscal year, the Agency paid $8,094,124 to 61 subrecipients. Subrecipients receive assistance to provide transportation services to rural areas, based on their operating deficit and their non-operating costs. To receive reimbursement, the subrecipient provides a report of its operating revenue, operating costs, and non-operating costs. The subrecipient receives Federal reimbursement for 50% of its operating deficit (operating costs less operating revenues) and 80% of its non-operating costs. We tested 25 payments, 21 of which were payments to 16 subrecipients. Documentation on file for the payments included worksheets prepared by the subrecipient. The Agency did perform financial desk reviews for subrecipients; however, the reviews tested were not adequate. Questioned costs of $383,483 were noted for the following reasons: ? For 12 subrecipients tested, documentation was not adequate to support personnel charges were allowable and in accordance with Federal cost principles. The Agency did not have timesheets, time certifications, or other payroll documentation on file for all reimbursement requests. In some cases, payroll documentation was on file, but there was not adequate support to verify that the correct amount was charged to the program, as there was no documentation to support the employees? full salary or the benefits received, such as workers? compensation and health insurance premiums. ? For four subrecipients tested, fuel costs were not adequately supported. The Agency did not obtain documentation to support payment was made by the subrecipient. ? For 11 subrecipients tested, maintenance and/or capital costs were not adequately supported. The Agency did not obtain invoices for expenses such as rent, insurance, and transportation costs. Furthermore, allocations used by the subrecipients were not always supported to ensure costs charged to the program were proper. o One subrecipient was sometimes unable to meet transportation demands with its own buses and drivers, so it purchased cab tickets and sold the tickets back to the public for less than the purchase price. Because the cab ticket purchase is classified as a non-operating expense and the subsequent sale is classified as operating revenue, the Federal and State reimbursement rates are different for each side of the transaction. As a result, the subrecipient makes a profit every time it buys and sells a cab ticket, instead of providing service through its normal operations. For four months tested, the subrecipient earned $2,890 through this method, which does not appear proper. ? The Agency did not review fare revenue, which could include receiving supporting documentation, performing analytical review, or any other procedures. Fares reduce the Federal reimbursement; therefore, if not properly reported, Federal reimbursements could be excessive. ? For one vendor tested, the Agency did not review adequate documentation to support expenditures made. The Agency obtained a report from the vendor?s accounting system, but no further support, such as invoices or receipts, were obtained. We also noted the following during testing: ? The Agency did not perform subrecipient monitoring for two intercity bus service subrecipients. During fiscal year 2019, these two subrecipients were reimbursed a total of $578,916. ? The Agency did not adequately monitor subrecipients to ensure required single audits were obtained and management decisions issued when necessary. The list used by the Agency to determine whether a subrecipient was required to submit a single audit was outdated and did not appropriately track the Federal dollars paid to the subrecipients. We noted 11 subrecipients that were not on the list. For one subrecipient tested, the Agency noted a single audit was not on file with the Federal Audit Clearinghouse; however, per our review, an audit was on file and should have been reviewed. ? On October 16, 2019, the APA issued a letter to the Fullerton Area Senior Center (Center) regarding concerns related to its financial situation. The Center?s operation of transportation services, called Nance Trans, received funding from the Agency. The APA?s review of the Center?s accounting records for the fiscal year found: 1) the Center Director and Nance Trans Manager received vacation, sick, and holiday pay for ineligible hours, totaling $2,478; 2) pay rates charged for three employees tested lacked documentation; and 3) several timesheets lacked a supervisory approval, and hours paid did not agree to timesheets. We reviewed the Agency?s monitoring and determined there was a lack of adequate support for the reimbursements made to the subrecipient with questioned costs of $4,080. The review included operating expenses, such as phone and utilities costs, fuel reimbursements, and payroll expenditures, all of which lacked adequate support for invoices, timesheets, and monitoring of revenues. The Agency paid Nance Trans approximately $58,000 during the fiscal year. Federal payment errors noted were $307,832 in the sample and $79,731 outside of the sample. The total Federal sample tested was $758,772, and the total Federal expenditures during the fiscal year were $9,772,389. Based on the sample tested, the dollar error rate was 40.57% ($307,832/$758,772), which estimates the potential dollars at risk for fiscal year 2019 to be $3,964,658 (dollar error rate multiplied by population). Cause: Inadequate procedures, documentation, and oversight. Reviews were not adequate to ensure subrecipient costs were in accordance with Federal requirements. Effect: Without adequate subrecipient monitoring, there is an increased risk that costs will not be allowable, reasonable, or necessary. Recommendation: We recommend the Agency improve procedures to ensure subrecipient expenditures are allowable and in accordance with Federal regulations. Management Response: NDOT Transit does not concur with the questioned costs. NDOT Transit conducts in depth reviews of subrecipients during the fiscal year. A notation is made on each worksheet of every monthly reimbursement invoice that includes information regarding questionable costs requiring follow up and justification to determine if the expense is allowable. NDOT Transit will continue to conduct in depth reviews of monthly invoices per the established criteria. Intercity bus invoices are currently reviewed and supporting documentation requested as needed. The Federal Transit Administration (FTA) requested and was subsequently provided additional information for similar findings in FY14 and FY18. No further follow up was needed or concerns were expressed. NDOT Audit Section has determined that the inclusion of only the dollar amount that NDOT passed through to a subrecipient is not an adequate indication of whether or not the need for a single audit exists. Consequently, NDOT Audit Section has implemented procedures as noted in the corrective action plan. APA Response: Subrecipients tested did not have adequate documentation to support the expenditures were in accordance with Federal cost principles. Review of revenues is important to ensure subrecipients are not increasing the Federal reimbursement by under-reporting revenues.

Program: CFDA 20.600 ? State and Community Highway Safety ? Allowability & Subrecipient Monitoring Grant Number & Year: All open, including #69A37518300004020NE0, FFY 2018 Federal Grantor Agency: U.S. Department of Transportation Criteria: A good internal control plan requires procedures to ensure subrecipients utilize Federal funds for authorized purposes and in compliance with all applicable regulations. Title 2 CFR ? 200.403 (January 1, 2019) requires costs to be reasonable, necessary, and adequately documented. Title 2 CFR ? 200.331(d) (January 1, 2019) requires all pass-through entities to do the following: Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Title 2 CFR ? 200.405(a) (January 1, 2019) states the following, in relevant part: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: * * * * (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods . . . . Title 2 CFR ? 200.430(i)(1) (January 1, 2019) requires that records for salaries and wages to do, among other things, the following: (iii) Reasonably reflect the total activity for which the employee is compensated . . . ; * * * * (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award . . . . Condition: The Agency did not have adequate documentation on file to support that subrecipient payments were for allowable activities and in accordance with allowable cost principles. A similar finding was noted in the prior audit. Repeat Finding: 2018-070 Questioned Costs: $30,918 known (#69A37518300004020NE0, FFY 2018) Statistical Sample: No Context: We tested five grant expenditures from the Highway Safety Cluster and noted the following: ? One subrecipient tested requested reimbursement for payroll, rent, and other operating expenses. However, adequate supporting documentation was not on file, as follows: o The time reports were not in accordance with Federal requirements. The time reports were either not on file or did not indicate the number of hours attributable to the grant versus other activities worked. o Rent and electricity expenses were allocated to the grant at 80% and 43%, respectively. There was no support for the allocation percentage used to determine if the amounts claimed were reasonable. o Indirect costs, charged to the grant at the de minimus rate of 10%, were based on payroll records that were not adequately supported; therefore, the related indirect costs claimed were not reasonable. ? One subrecipient requested reimbursement for administrative fees for two employees who worked 70% and 66%, respectively, on the grant; however, the fees were charged at 100%. We tested $206,635 expenditures and question costs of $30,918. The Agency paid subrecipients a total of $3,947,825 from the Highway Safety Cluster during the fiscal year. Cause: Inadequate review and documentation. Effect: Increased risk for unallowable costs charged to Federal grant. Recommendation: We recommend the Agency improve procedures to ensure subrecipient expenditures are allowable and in accordance with Federal regulations. Management Response: The Nebraska Department of Transportation Highway Safety Office (HSO) implemented improved procedures to ensure that all subrecipient expenditures are for allowable activities after the previous audit that was finalized in August of 2019. The expenses noted above were from March to June of 2019, and were not changed prior to the previous audit.

Program: CFDA 20.600 ? State and Community Highway Safety ? Earmarking Grant Number & Year: #69A37518300004020NE0, FFY 2018 Federal Grantor Agency: U.S. Department of Transportation Criteria: Title 23 U.S.C. 402(b)(1)(C) (2018) requires at least 40% of Federal funds apportioned to the State to be expended by political subdivisions of the State. Appendix E to 23 CFR Part 1200(a) (April 1, 2019) provides the following: To ensure compliance with the provisions of 23 U.S.C. 402(b)(1)(C) and 23 U.S.C. 402(h)(2), which require that at least 40 percent or 95 percent of all Federal funds apportioned under Section 402 to the State or the Secretary of Interior, respectively, will be expended by political subdivisions of the State, including Indian tribal governments, in carrying out local highway safety programs, the NHTSA Approving Official will determine if the political subdivisions had an active voice in the initiation, development and implementation of the programs for which funds apportioned under 23 U.S.C. 402 are expended. Appendix E to 23 CFR Part 1200(c) states, in part, the following: (2) When Federal funds apportioned under 23 U.S.C. 402 are expended by a political subdivision, such expenditures are clearly part of the local share . . . . (3) When Federal funds apportioned under 23 U.S.C. 402 are expended by a State agency for the benefit of a political subdivision, such funds may be considered as part of the local share, provided that the political subdivision has had an active voice in the initiation, development, and implementation of the programs for which such funds are expended. A State may not arbitrarily ascribe State agency expenditures as `benefitting local government.? . . . Evidence of consent and acceptance of the work, goods or services on behalf of the local government must be established and maintained on file by the State until all funds authorized for a specific year are expended and audits completed. A good internal control plan requires procedures to ensure the local percentage is met, and evidence is maintained to support that political subdivisions had an active voice in the expenditure of funds. Condition: The Agency did not have documentation on file to support that political subdivisions had active voices in expenditures by the State that were for the benefit of local agencies. A similar finding was noted in the prior audit. Repeat Finding: 2018-071 Questioned Costs: None Statistical Sample: No Context: We tested five payments identified as expenditures for political subdivisions. Four of the payments tested were not made directly to the local agency but were paid by the State on behalf of the local agency. For those four payments, the Agency did not have documentation to support that the political subdivision had an active voice in the expenditure of funds. Cause: Inadequate procedures. Effect: Noncompliance with Federal regulations, which could result in sanctions. Recommendation: We recommend the Agency implement procedures to ensure evidence is maintained to support that political subdivisions have active voices in expenditures by the State for their benefit. Management Response: The NDOT-HSO has discussed this procedure with our Regional NHTSA Administrator for a complete definition of a local political subdivision and an active voice.

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION

GSA_MIGRATION