State of North CarolinaState Government

Student Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the College disbursed approximately $7.4 million in federal financial assistance funding to 1,582 students subject to this reporting requirement. Auditors tested a sample of 60 enrollment status changes that occurred during the audit period and found that seven (12%) of these changes were not reported to NSLDS with the correct status. The U.S. Department of Education relies on enrollment status data to monitor compliance with federal financial assistance programs. When enrollment status changes are not reported accurately, financial assistance eligibility could be miscalculated and the College’s eligibility to participate in federal financial assistance programs could be at risk. According to College management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The College did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate reporting. Federal regulations require the College to report student enrollment status changes to the NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P242552 (July 1, 2024 - June 30, 2025). Recommendation: College management should develop and implement formal internal controls to ensure accurate reporting of enrollment status changes to the NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy of data reported by third-party service providers. •Developing written procedures that explain how enrollment status changes are identified and submitted. Views of Responsible Officials of the Auditee: Caldwell Community College and Technical Institute agrees with the auditor's findings for the award period July 1, 2024 through June 30, 2025 and recommendations to strengthen internal controls over the accuracy of reporting student enrollment status changes to the National Student Loan Data System.

No Internal Controls Over Student Enrollment Status Reporting The College did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS).4 During the audit period, the College disbursed approximately $21.3 million in federal financial assistance to 3,947 students subject to this reporting requirement. The U.S. Department of Education, lenders, and loan servicers rely on enrollment status data to monitor compliance with federal financial assistance programs and to manage student loan deferments, grace periods, and repayment schedules. Although the College reported enrollment status changes accurately and timely to NSLDS during the audit period, it did not have formal internal controls in place, such as written policies, assigned responsibilities, or verification procedures. Without these controls, there is an increased risk of errors in future reporting. If enrollment status changes are not reported accurately and timely, students may enter repayment too early or stay in deferment too long, financial assistance eligibility could be miscalculated, and the College’s eligibility to participate in federal financial assistance programs could be at risk. According to College management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The College did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate and timely reporting. Federal regulations require the College to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the College is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P242646 and P268K252646 (July 1, 2024 – June 30, 2025). Recommendation: College management should develop and implement formal internal controls to ensure accurate and timely reporting of enrollment status changes to NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy and timeliness of data reported by third-party service providers. •Developing written procedures that outline how enrollment status changes are identified and submitted. Views of Responsible Officials of the Auditee: Cape Fear Community College (CFCC) agrees with the finding. To address this finding, CFCC will implement corrective actions effective immediately to establish, document, and maintain effective internal controls over student enrollment status reporting to the NSLDS. CFCC is committed to maintaining strong internal controls and ensuring accurate and timely reporting of student enrollment status in compliance with all applicable federal requirements.

Student Enrollment Status Reporting Errors The College did not accurately report student enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the College disbursed approximately $6.0 million in federal financial assistance funding to 1,363 students subject to this reporting requirement. Auditors tested a sample of 60 enrollment status changes that occurred during the audit period and found that seven (12%) of these changes were reported with an incorrect status. The U.S. Department of Education relies on enrollment status data to monitor compliance with federal financial assistance programs. When enrollment status changes are not reported accurately, financial assistance eligibility could be miscalculated and the College’s eligibility to participate in federal financial assistance programs could be at risk. According to College management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The College did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate reporting. Federal regulations require the College to report student enrollment status changes to the NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P242856 (July 1, 2024 – June 30, 2025). Recommendation: College management should develop and implement formal internal controls to ensure accurate reporting of enrollment status changes to the NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy of data reported by third-party service providers. •Developing written procedures that explain how enrollment status changes are identified and submitted. Views of Responsible Officials of the Auditee: Craven Community College agrees with the audit finding. We were initially made aware of this issue in July 2025. The College's Registrar, Executive Director of Financial Aid, Associate Vice President for Students, and Vice President for Development met with Bryan McCullough, Business Systems Analyst at the NC Community College System Office on Monday, August 11, 2025. We received guidance on improving the accuracy and timeliness of enrollment reports by updating parameters in Colleague. Among the recommendations subsequently implemented was to change the enrollment report submission date to capture student status changes in a more timely fashion. In addition, the first and final submission for each term has been scheduled later to capture changes around the census period and graduation status at the end of the term. Next, the Executive Director of Financial Aid will develop an Internal Control Process (ICP) that outlines the steps to be taken to conduct a self-audit each semester. The ICP will be located on the college's shared drive that is accessible to all employees. The ICP will outline the steps the Executive Director of Financial Aid and Director of Admission and Student Records will perform to conduct the self-audit of student records from the report sent to the National Student Loan Data System. The ICP will be available by March 1, 2026. The self-audit will be conducted twice per semester, at the midpoint and at end-of-term. The Executive Director of Financial Aid and Director of Admission and Student Records will review a total of 50 files per audit. A record of each audited file will be stored on the secured shared directory. This shared drive directory can only be accessed by staff within Student Services. The first self-audit will occur during March 2026.

Financial Assistance Disbursed Without Evaluating Satisfactory Academic Performance The College did not evaluate satisfactory academic progress (SAP) for all students before disbursing federal financial assistance. During the audit period, the College disbursed approximately $13.7 million in federal financial assistance to 2,729 students. Auditors tested a sample of 60 students who received $273 thousand in federal financial assistance during the audit period and found 11 students (18%) did not have a required SAP evaluation documented at the time the funds were disbursed. After reviewing the students’ SAP, auditors found that three of the 11 students did not meet the College’s SAP standards and were therefore ineligible to receive their federal financial assistance totaling $5,259. As a result, the $5,259 is considered questioned costs and the College may be required to pay back the federal government. By not evaluating SAP before disbursing funds, the College increases the risk of awarding federal funds to more ineligible students in the future. This exposes the College to continued noncompliance findings and repayment of federal funds, while also jeopardizing the College’s eligibility to participate in federal financial assistance programs. According to College management, the SAP evaluation process is automated through the accounting system based on certain rules and parameters. However, the College did not have policies in place to ensure this automated process was properly configured, which resulted in the exclusion of certain students from the SAP evaluation process (e.g., students with gap semesters). Federal regulations require the College to ensure students maintain SAP before disbursing the funds. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Number(s) (award period): P063P242680 and P268K252680 (July 1, 2024 – June 30, 2025). Recommendation: College management should develop and implement written procedures, such as a documented review and testing plan, to ensure system configurations correctly include all students in the required SAP evaluations. Views of Responsible Officials of the Auditee: Durham Technical Community College (DTCC) concurs with this finding and has taken the necessary action to resolve the deficiency related to this finding. Once the new Financial Aid Director became aware of this Satisfactory Academic Progress (SAP) issue, he reached out to the System Office for assistance. In July 2025, Financial Aid Staff met with System Office Staff to review the SAP deficiency. System Office Staff recommended that DTCC strengthen the SAP rules in Colleague by adding additional criteria to capture all financial aid students for SAP evaluation. In August 2025, the College corrected/updated the SAP rules in Colleague to evaluate SAP on all financial aid students. In addition, the College developed an SAP report to identify the SAP status of all financial aid students with an award including any students not evaluated. When the College tested the new SAP report for accuracy, the report identified 22 students with no SAP status. However, when we reviewed the 22 students, those students either didn't complete a FAFSA and/or only received private scholarships.

Student Enrollment Status Reporting Errors The College did not accurately or timely report student enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the College disbursed approximately $13.7 million in federal financial assistance to 2,729 students subject to this reporting requirement. Auditors tested a sample of 60 enrollment status changes that occurred during the audit period and found that 30 (50%) of these changes were not reported to NSLDS. Six of the errors related to students that received Federal Direct Loans and the College also failed to meet the federal timeliness requirements for reporting status changes. The U.S. Department of Education, lenders, and loan servicers rely on enrollment status data to monitor compliance with federal financial assistance programs and to manage student loan deferments, grace periods, and repayment schedules. When enrollment status changes are not reported accurately and timely, students may enter repayment too early or stay in deferment too long, financial assistance eligibility could be miscalculated, and the College’s eligibility to participate in federal financial assistance programs could be at risk. According to College management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The College did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate and timely reporting. Federal regulations require the College to accurately and timely report student enrollment status changes to the NSLDS. For students that received Federal Direct Loan funds, the College is required to notify NSLDS within 75 days of a change in student status. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate and timely reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P242680 (July 1, 2024 – June 30, 2025) and P268K252680 (July 1, 2024 – June 30, 2025). Recommendation: College management should develop and implement formal internal controls to ensure accurate and timely reporting of enrollment status changes to the NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy and timeliness of data reported by third-party service providers. •Developing written procedures that explain how enrollment status changes are identified and submitted. Views of Responsible Officials of the Auditee: Durham Technical Community College (DTCC) concurs with this finding and has identified the corrective action necessary to resolve the deficiencies related to this finding. The Registrar and Assistant Registrar have reviewed the 30 impacted student records to identify the specific cause for the errors. DTCC’s Office of Admissions, Registration and Records began to report National Student Clearinghouse (NSCH) enrollment data in 2022. At the time, neither the training received, nor the system office documentation referenced the NSLDS. The Registrar received initial access to NSLDS during the time of this audit to support data request efforts. Prior to this time, enrollment changes were verified in NSCH, which transmit enrollment data to NSLDS. In reviewing the 30 impacted student records, we identified that the enrollment status changes are reported by and verified within NSCH and not NSLDS. Further, we identified that a setting needs to be updated within Colleague that will report active courses at the time of census, and not all registered courses. This setting impacts reporting of Term B courses. Currently as set, Term B courses are reported with all subsequent enrollment submissions, rather than reporting a status change when Term B courses begin. For example, if a student is enrolled in six credit hours in Term A (half-time) and six credit hours in Term B, a status change from half time to full time should be reported. Based on the current setting to report all courses regardless of start date, the Colleague setting led to the error of enrollment changes not being reported to NSCH, and consequently not reported to NSLDS. In April 2025, the Registrar requested NSCH to purge the subsequent semester transmissions due to an error in the reporting of the census dates. Census dates refer to the time in which the NSCH data is reported, not the census date of the semester. The subsequent census dates were not updated to reflect the accurate time in the semester, resulting in enrollment changes potentially not reported. Once the records were purged in May of 2025, the subsequent reports were re-transmitted, resulting in late reporting of the second and third scheduled transmission.

No Internal Controls Over Student Enrollment Status Reporting The University did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $168.9 million in federal financial assistance to 14,335 students subject to this reporting requirement. The U.S. Department of Education, lenders, and loan servicers rely on enrollment status data to monitor compliance with federal financial assistance programs and to manage student loan deferments, grace periods, and repayment schedules. Although the University reported enrollment status changes accurately and timely to NSLDS during the audit period, it did not have formal internal controls in place, such as written policies, assigned responsibilities, or verification procedures. Without these controls, there is an increased risk of errors in future reporting. If enrollment status changes are not reported accurately and timely, students may enter repayment too early or stay in deferment too long, financial assistance eligibility could be miscalculated, and the University’s eligibility to participate in federal financial assistance programs could be at risk. According to University management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The University did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate and timely reporting. Federal regulations require the University to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the University is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P241927 and P268K251927 (July 1, 2024 – June 30, 2025). Recommendation: University management should develop and implement formal internal controls to ensure accurate and timely reporting of enrollment status changes to NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy and timeliness of data reported by third-party service providers. •Developing written procedures that outline how enrollment status changes are identified and submitted. Views of Responsible Officials of the Auditee: East Carolina University agrees with the finding and we value the recommendations made to strengthen internal controls related to federal student aid. Our Director of Student Financial Aid has already implemented the auditor’s recommendations and our office of Internal Audit has reviewed evidence to confirm that the corrective actions outlined are in place.

No Internal Controls Over Student Enrollment Status Reporting The University did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $16.6 million in federal financial assistance to 1,763 students subject to this reporting requirement. The U.S. Department of Education, lenders, and loan servicers rely on enrollment status data to monitor compliance with federal financial assistance programs and to manage student loan deferments, grace periods, and repayment schedules. Although the University reported enrollment status changes accurately and timely to NSLDS during the audit period, it did not have formal internal controls in place, such as written policies, assigned responsibilities, or verification procedures. Without these controls, there is an increased risk of errors in future reporting. If enrollment status changes are not reported accurately and timely, students may enter repayment too early or stay in deferment too long, financial assistance eligibility could be miscalculated, and the University’s eligibility to participate in federal financial assistance programs could be at risk.According to University management, they relied on National Student Clearinghouse, a third-party servicer, to report the enrollment data to NSLDS. The University did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate and timely reporting. Federal regulations require the University to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the University is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P240318 and P268K250318 (July 1, 2024 – June 30, 2025). Recommendation: University management should develop and implement formal internal controls to ensure accurate and timely reporting of enrollment status changes to NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy and timeliness of data reported by third-party service providers. •Developing written procedures that outline how enrollment status changes are identified and submitted. View of Responsible Officials of the Auditee: The University concurs with the recommendation to formalize internal controls, and notes that our existing operational practices resulted in accurate and timely reporting during the audit period, as noted by auditors. We rely on the National Student Clearinghouse and monitor their error reports regularly; no reporting errors were identified. However, to ensure alignment with 2 CFR 200.303 regarding documented internal controls, we have implemented a formal quality control check. This involves pulling a random sample from NSLDS to validate Clearinghouse data. Initial testing of this new control confirmed that our reporting remains accurate. We are currently documenting this process in our official policy manual.

Student Enrollment Status Reporting Errors The University did not accurately or timely report student enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $126.3 million in federal financial assistance funding to 12,267 students subject to this reporting requirement. Auditors tested a sample of 60 enrollment status changes that occurred during the audit period and found that 14 (23%) of these changes were not reported to NSLDS. Two of the errors related to students that received Federal Direct Loans and the University also failed to meet the federal timeliness requirements for reporting status changes. The U.S. Department of Education, lenders, and loan servicers rely on enrollment status data to monitor compliance with federal financial assistance programs and to manage student loan deferments, grace periods, and repayment schedules. When enrollment status changes are not reported accurately and timely, students may enter repayment too early or stay in deferment too long, financial assistance eligibility could be miscalculated, and the University’s eligibility to participate in federal financial assistance programs could be at risk. According to University management, they relied on National Student Clearinghouse, a third-party service provider, to report the enrollment data to NSLDS. The University did not develop internal procedures over the data reported to NSLDS by the third-party service provider to ensure accurate and timely reporting. Federal regulations require the University to accurately and timely report student enrollment status changes to the NSLDS. For students that receive Federal Direct Loan funds, the University is required to notify NSLDS within 75 days of a change in student status. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for accurate and timely reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P241962 and P268K251962 (July 1, 2024 - June 30, 2025). Recommendation: University management should develop and implement formal internal controls to ensure accurate and timely reporting of enrollment status changes to the NSLDS, such as: •Assigning clear responsibility to designated personnel for overseeing the reporting process. •Establishing a process for monitoring and verifying the accuracy and timeliness of data reported by third-party service providers. •Developing written procedures that explain how enrollment status changes are identified and submitted. View of Responsible Officials of the Auditee: The University of North Carolina at Greensboro (University) concurs with the finding and recommendation. The delivered Student Information System (SIS) process used to report enrollment and enrollment changes to the National Student Loan Data System via the National Student Clearinghouse (NSC) does not accurately report all enrollment changes as required by the U.S. Department of Education. The University Registrar's Office (URO) and Office of Financial Aid and Scholarships (OFAS) are engaged in a project with Information Technology Services (ITS) to customize a process that will report the required enrollment changes along with the appropriate enrollment status date when a student adds, drops, or withdraws from one or more courses (not involving a full-term withdrawal). Specifications have been developed and agreed upon after a significant amount of research and discussion with the SIS vendor. Development of the required coding has begun with an anticipated delivery date of March 10, 2026 and an expected project closure date of April 3, 2026. Written procedures will be developed based on the final delivered product to include details on automated processing, manual tasks associated with clearing errors and establishing roles, and responsibilities for different aspects of enrollment reporting. The Enrollment Support Analyst in the URO will be responsible for managing the automated processing and clearing error reports resulting from automated reporting. Both the Enrollment Support Analyst in the URO and the Associate Director for Student Services in the OFAS will have a role in regularly testing enrollment and enrollment change reporting to ensure that the process is working as intended, and that data is correct on both NSC and NSLDS on a timely basis. Additionally, we are working on continuity operation plans to ensure that staffing changes do not have a negative impact on critical operations. The URO and OFAS are also responsible for collaborating with ITS to ensure any issues related to the process are resolved in a timely manner.

No Internal Controls Over Student Enrollment Status Reporting The College did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS). During the audit period, the College disbursed approximately $21.3 million in federal financial assistance to 3,947 students subject to this reporting requirement. See Finding 2025-003 for a description.

Financial Assistance Disbursed Without Evaluating Satisfactory Academic Progress The College did not evaluate satisfactory academic progress (SAP) for all students before disbursing federal financial assistance. During the audit period, the College disbursed approximately $13.7 million in federal financial assistance to 2,729 students. See finding number 2025-005 for a description.

Student Enrollment Status Reporting Errors The College did not accurately or timely report student enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the College disbursed approximately $13.7 million in federal financial assistance to 2,729 students subject to this reporting requirement. See finding number 2025-006 for a description.

Financial Assistance Disbursed in Excess of Student Eligibility The University disbursed $998 in federal financial assistance that exceeded the student’s eligibility. During the audit period, the University disbursed approximately $168.9 million in federal financial assistance to 14,335 students. Auditors tested the award calculations for a sample of 60 students who received $610,055 in federal financial assistance and found one student (1.67%) received $998 in subsidized Direct Loan funds above the eligible aggregate lifetime borrowing limit. As a result, the $998 is considered questioned costs and the University may be required to pay back the federal government. Over-awarding federal financial assistance may also jeopardize the University’s eligibility to participate in federal financial assistance programs. According to University management, the over-award occurred because staff did not consistently review students’ aggregate lifetime loan usage in the National Student Loan Data System (NSLDS) prior to disbursing the subsidized Direct Loan funds. Federal regulations require the University to ensure loan amounts do not exceed the students’ maximum eligibility under the federal borrowing limits. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.268 (Federal Direct Student Loans); Federal Award Identification Number (award period): P268K251927 (July 1, 2024 - June 30, 2025). Recommendation: University management should strengthen internal control procedures to ensure that staff consistently review students’ aggregate lifetime loan usage in NSLDS before disbursing Direct Loan funds, such as: •Documenting verification steps for each student’s loan history. •Integrating system prompts or checklists into the loan disbursement process. •Implementing a monitoring process to confirm completion of required NSLDS reviews. View of Responsible Officials of the Auditee: East Carolina University agrees with the finding and we value the recommendations made to strengthen internal controls related to federal student aid. Our Director of Student Financial Aid has already implemented the auditor’s recommendations and our Office of Internal Audit has reviewed evidence to confirm that the corrective actions outlined are in place.

No Internal Controls Over Student Enrollment Status Reporting The University did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $168.9 million in federal financial assistance to 14,335 students subject to this reporting requirement. See finding number 2025-007 for a description.

No Internal Controls Over Student Enrollment Status Reporting The University did not have internal controls in place to ensure changes in student enrollment status were reported accurately and timely to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $16.6 million in federal financial assistance to 1,763 students subject to this reporting requirement. See finding number 2025-008 for a description.

Financial Assistance Disbursed in Excess of Student Eligibility The University disbursed $19,430 in federal financial assistance that exceeded students' eligibility. During the audit period, the University disbursed approximately $126.3 million in federal financial assistance to 12,267 students. Auditors tested the award calculations for a sample of 60 students who received $664,754 in federal financial assistance and found one student (1.67%) received $3,902 in unsubsidized Direct Loan funds above the eligible aggregate lifetime borrowing limit. In addition, while verifying the errors with University management, four more students were identified who received $15,528 in unsubsidized Direct Loan funds above the eligible aggregate lifetime borrowing limit. As a result, a total of $19,430 is considered questioned costs and the University may be required to pay back the federal government. Over-awarding federal financial assistance may also jeopardize the University’s eligibility to participate in federal financial assistance programs. According to University management, the over-awards related to students submitting incorrect dependency statuses which directly impacts their borrowing limits for federal loan programs. With recent staff turnover, there was no one responsible for reviewing and correcting the dependency statuses. Federal regulations require the University to ensure loan amounts do not exceed the students’ maximum eligibility under the federal borrowing limits. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.268 (Federal Direct Student Loans); Federal Award Identification Number (award period): P268K251962 (July 1, 2024 - June 30, 2025). Recommendation: University management should strengthen internal control procedures to ensure staff verify student dependency statuses before disbursing Direct Loan funds, such as: •Establishing a standardized process for the review and correction of dependency statuses. •Implementing a monitoring process to confirm that dependency statuses are reviewed and corrected as necessary. •Developing a contingency plan to ensure reviews are completed during periods of staff turnover. Views of Responsible Officials of the Auditee: The University of North Carolina at Greensboro (University) concurs with the finding and recommendation. The sample reviewed identified one student for whom $3,902 in Federal Direct Unsubsidized Loans was disbursed in error. Based on the student's initial Free Application for Federal Student Aid (FAFSA) submission, Federal Direct Loans were packaged at the independent student level. A subsequent Institutional Student Information Record (ISIR) correction changed the student's status to dependent; however, the loan amounts were not adjusted to reflect the dependent eligibility limits. Previously, a staff member in the functional IT area was solely responsible for reviewing incoming ISIR corrections and identified these discrepancies, but this responsibility was not reassigned to the loan area after the staff member left the University. Immediately upon identifying the issue during the audit, modifications were made to an existing report to identify students in this situation. The University properly tested the report and approved it for use on August 25, 2025. We ran the report for the 24-25 aid year and identified all students who fell into this category, which resulted in an additional four students needing loan adjustments. The funds for all five students were returned to the Common Origination and Disbursement by September 4, 2025. The Senior Financial Aid Counselor for Loans under the supervision of the Assistant Director for Loans in the Operations area of the Office of Financial Aid and Scholarships (OFAS) runs and reviews the report once per week effective August 25, 2025; during peak processing periods the report is reviewed twice per week. The task has been added to the Loan Operations calendar in Outlook as of December 10, 2025, shared between Loan processing staff to ensure tasks are covered in the absence of the Senior Financial Aid Counselor for Loans.

Student Enrollment Status Reporting Errors The University did not accurately or timely report student enrollment status changes to the National Student Loan Data System (NSLDS). During the audit period, the University disbursed approximately $126.3 million in federal financial assistance funding to 12,267 students subject to this reporting requirement. See finding number 2025-009 for a description.

Maintenance of Effort Report Certification Not Completed The Department of Health and Human Services (Department) did not certify and submit the annual Maintenance of Effort report for the Aging Cluster. This report shows the amount of state funding spent on Title III services and administrative activities that support older adults, such as nutrition programs, in-home services, and transportation. When required reports are not certified and submitted, the federal oversight agency cannot determine whether the Department met state funding requirements for programs that support older adults. This increases the risk that federal funding could be suspended, reduced, or withdrawn and may jeopardize the Department’s eligibility to participate in federal assistance programs. According to Department management, leadership changes and staff turnover resulted in new staff being unaware of all Title III reporting requirements. Federal regulations require the Department to annually certify the amount of state resources spent on services and administrative activities under Title III of the Older Americans Act. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Numbers (titles): 93.044 (Special Programs for the Aging – Title III, Part B – Grants for Supportive Services and Senior Centers) and 93.045 (Special Programs for the Aging, Title III, Part C, Nutrition Services); Federal Award Identification Numbers (award periods): 2301NCOASS (October 1, 2022 – September 30, 2024) and 2301NCOACM (October 1, 2022 – September 30, 2024). Recommendation: Department management should develop a contingency plan such as cross-training and documenting standard operating procedures to ensure required report certifications are completed and submitted during periods of turnover and throughout the onboarding and training of new staff. View of Responsible Officials of the Auditee: Management agrees with this finding. The Division of Aging acknowledges that the annual Maintenance of Effort (MOE) report for the Aging Cluster was not certified and submitted during the audit period. This occurred due to leadership transitions and staff turnover, which resulted in new staff not fully understanding Title III reporting requirements. The Division is committed to ensuring compliance with federal requirements and will be implementing controls to ensure reporting is completed in the future.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Aging Cluster. Auditors reviewed all six subawards to Area Agencies on Aging, totaling $8 million, that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, FFATA reporting was not completed due to significant turnover and new staff did not have a complete understanding of the FFATA Reporting responsibilities. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the subaward was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Numbers (titles): 93.044 (Special Programs for the Aging – Title III, Part B – Grants for Supportive Services and Senior Centers) and 93.045 (Special Programs for the Aging, Title III, Part C, Nutrition Services); Federal Award Identification Numbers (award periods): 2401NCOASS (October 1, 2023 – September 30, 2025), 2401NCOACM (October 1, 2023 – September 30, 2025), 2501NCOASS (October 1, 2024 – September 30, 2026), and 2501NCOACM (October 1, 2024 – September 30, 2026). Recommendation: Department management should develop a contingency plan such as cross-training and documenting standard operating procedures to ensure FFATA reporting continues smoothly during periods of staff turnover and throughout the onboarding and training of new staff. Views of Responsible Officials of the Auditee: Management agrees with this finding. The Division of Aging acknowledges that required FFATA reporting for all six subawards was not completed during the audit period. This occurred due to significant staff turnover and a misunderstanding of FFATA reporting responsibilities among new personnel. The Division has completed reporting for the audited period and will implement controls to ensure reporting continues in the future, even during staff turnover.

Maintenance of Effort Report Certification Not Completed The Department of Health and Human Services (Department) did not certify and submit the annual Maintenance of Effort report for the Aging Cluster. This report shows the amount of state funding spent on Title III services and administrative activities that support older adults, such as nutrition programs, in-home services, and transportation. See finding 2025-018 for a description.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Aging Cluster. See Finding 2025-019 for a description.

Deficiencies in the TANF Eligibility Determination Process The Department of Health and Human Services (Department) paid $778 in Temporary Assistance for Needy Families (TANF) benefits on behalf of an ineligible family based on inaccurate eligibility determinations. During the audit period, approximately 49,000 families received $117.7 million in TANF benefits. Eligibility determinations for the TANF program are delegated to county departments of social services (DSS). However, the Department retains responsibility for ensuring compliance with the eligibility requirements, establishing eligibility determination policies, maintaining NC FAST, and facilitating training to county DSS staff. Auditors redetermined eligibility for a sample of 40 families that received a total of $111,000 in TANF benefits paid to or on their behalf during the audit period. Auditors found one (2.5%) family that was ineligible for $778 in childcare assistance paid to a childcare provider on their behalf. As a result, the $778 is considered questioned costs and the Department may be required to pay back the federal government. Furthermore, these funds could have been used to provide benefits to eligible families. According to Department management, the error occurred due to inaccurate application of established eligibility policies by county DSS staff. Federal regulations require that TANF recipients meet the criteria of a financially needy family with children to be eligible for assistance. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Identification Number (award period): 2501NCTANF (October 1, 2024 – September 30, 2025). Recommendation: Department management should analyze the error and implement corrective actions, such as enhanced training for county DSS staff or additional guidance, to help ensure accurate eligibility determinations in the future. Views of Responsible Officials of the Auditee: Management agrees with this finding. The Division of Child Development and Early Education will analyze the error and implement an appropriate corrective action plan.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Social Services Block Grant (SSBG) and the Temporary Assistance for Needy Families (TANF) programs. Auditors reviewed all subawards that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. Specifically, •For SSBG, all 228 subawards to counties totaling $39.4 million were not reported. •For TANF, all 171 subawards to counties totaling $99.4 million were not reported. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, FFATA reporting was not completed during the audit period due to significant staff turnover and competing priorities that required immediate attention. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the subaward was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Identification Numbers (award periods): 2401NCTANF (October 1, 2023 – September 30, 2024) and 2501NCTANF (October 1, 2024 – September 30, 2025). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.667 (Social Services Block Grant); Federal Award Identification Numbers (award periods): 2301NCSOSR (October 1, 2022 – September 30, 2024) and 2401NCSOSR (October 1, 2024 – September 30, 2025). Recommendation: Department management should prioritize the development of a contingency plan such as hiring additional staff or training existing staff to ensure FFATA reporting is completed during periods of staff shortages or competing priorities. Views of Responsible Officials of the Auditee: Management agrees with this finding. The Federal Funding Accountability and Transparency Act (FFATA) reporting was not completed previously due to vacant budget positions. These positions were filled, and the Division of Social Services Budget Office has begun preparing the FFATA reporting. Reporting is in progress and will be completed as part of ongoing core operations. A process will be implemented to support continued reporting during periods of staff shortages or competing priorities.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Social Services Block Grant (SSBG) and the Temporary Assistance for Needy Families (TANF) programs. See finding number 2025-023 for a description.

Deficiencies in Medicaid Provider Payment Process The Department of Health and Human Services (Department) made an improper payment of $170,042 to a Medicaid provider. During the audit period, the Department processed more than 16 million fee-for-service claims totaling $7 billion in payments. Auditors reviewed a sample of 40 fee-for-service claims totaling $1.9 million paid to Medicaid providers during the audit period and found one (3%) payment that should not have been paid because the claim was submitted 29 months after the date of service. As a result, $170,042 (federal share $119,131) is considered questioned costs and the Department may be required to pay back the federal government. Furthermore, improper payments increase costs to the Medicaid Program and reduce funds available for eligible Medicaid services and beneficiaries. According to Department management, the claim was paid due to an error in the claims processing system’s automated controls that determine whether the timely filing requirement should be applied. As a result, the requirement was not enforced, and the claim was processed even though it was submitted more than 12 months after the date of service. Federal regulations require timely processing of claims, and the Department must ensure providers submit all claims no later than 12 months from the date of service. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Grants to States for Medicaid); Federal Award Identification Numbers (award periods): 2405NC5MAP (July 1, 2024 – September 30, 2024) and 2505NC5MAP (October 1, 2024 – June 30, 2025). Recommendation: Department management should correct and monitor the claims processing system’s automated controls to ensure the timely filing requirement is consistently enforced. In addition, Department management should evaluate whether other claims were affected by the error and take appropriate action to recover any identified improper payments. Views of Responsible Officials of the Auditee: The Department agrees with this finding. To support hospitals which process the bulk of Medicaid claims lines, the Department accepts inpatient claims adjustments beyond the 1-year timely filing standard if the original claim was submitted timely. The audit discovered a scenario where a hospital submitted an adjustment claim with an incorrect original identifier, resulting in a subsequent claim being allowed to pay when it should have been denied. The Department has taken action to enhance the system edits to identify this scenario going forward and is reviewing inpatient claims paid during the audit period to confirm no other such errors have occurred. Additionally, the Department has initiated recoupment of the overpayment.

HIV Funds Used for Improper Payment The Department of Health and Human Services (Department) made an improper payment of $113,115 using Human Immunodeficiency Virus (HIV) Formula Care grant funds. During the audit period, the Department spent $38.8 million in federal HIV funds to improve the quality, availability, and organization of healthcare and support services for low-income, uninsured, and underinsured people with HIV. The Department contracted with vendors to administer these funds. Auditors identified a duplicate vendor payment for a July 2024 invoice that was paid once in September 2024 and again in December 2024. After identifying the duplicate payment, auditors performed additional procedures to assess whether the issue was isolated by scanning accounting records for indicators of duplicate payments, such as identical invoice dates, amounts, and vendor names. Auditors also tested a random sample of program expenditures. No additional duplicate or improper payments were identified during the audit period. As a result, $113,115 is considered questioned costs and the Department may be required to pay the funds back to the federal government. In addition, the funds could have been used on activities that improved healthcare and support services for vulnerable individuals with HIV. The lack of effective controls increases the risk that duplicate payments could occur in the future, potentially resulting in further questioned costs and noncompliance with federal grant requirements. According to Department management, the improper payment occurred because the same vendor invoice was submitted twice and did not include an invoice number. The Department did not update its procedures after implementing the new statewide accounting system in the prior year, which relied on unique invoice numbers to prevent duplicate payments. As a result, the same invoice was recorded using different invoice numbers, allowing the duplicate payment to bypass automated controls. Federal regulations require HIV grant funds to be used by states for core medical services, support services, and certain administrative expenses. In addition, federal regulations require costs to be necessary and reasonable; authorized; adequately documented, and consistent with the program regulations that apply to the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.917 (HIV Formula Care Grants); Federal Award Identification Number (award periods): X0700051 (April 1, 2024 - March 31, 2025, and April 1, 2025 - March 31, 2026). Recommendation: Department management should update procedures to align with the new statewide accounting system, including assigning unique invoice numbers and ensuring staff are trained on these updates. In addition, management should perform periodic reconciliations of vendor payments to the related invoices to ensure payments are accurately recorded and potential duplicates are identified and investigated. Views of Responsible Officials of the Auditee: Management agrees with the finding. The Department is committed to using program funds to provide support services for the eligible population. As a result, the Department will enhance controls to ensure funds are spent in compliance with program requirements.

Overpayments to Subrecipients The Department of Health and Human Services (Department) overpaid subrecipients $7,089 from Block Grants for Community Mental Health Services (MHBG) funding. During the audit period, the Department provided $43.3 million in MHBG funds to subrecipients to support the treatment and recovery services with serious mental illness and children with serious emotional disturbances. Auditors reviewed the supporting documentation for a sample of 33 payments to subrecipients totaling $2,733,423 and found two payments (6%) where the amount paid exceeded the costs supported by invoices and other documentation submitted by the subrecipient. As a result, $7,089 is considered questioned costs and the Department may be required to pay back the federal government. These overpayments may also jeopardize the Department’s eligibility to participate in federal assistance programs. According to Department management, the overpayments occurred because existing review procedures did not consistently ensure that subrecipient payment requests were fully supported by required documentation prior to approval. Federal regulations require that costs are adequately documented to be allowable under a federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.958 (Block Grant for Community Mental Health Services); Federal Award Identification Number (award period): B09SM085375 (COVID-19) (September 1, 2021 – September 30, 2025). Recommendation: Department management should strengthen controls over subrecipient payment reviews by providing targeted training and implementing supervisory or quality assurance reviews to ensure amounts paid agree to supporting documentation. Views of Responsible Officials of the Auditee: Management agrees with the finding. The Division of Mental Health, Developmental Disabilities, and Substance Use Services is refining policies and procedures within the Contract & Grant Management team to strengthen verification that subrecipient payment requests are fully supported by required documentation prior to approval and payment. Updated procedures will incorporate additional review protocols, including quality assurance review steps, to promote consistency and accuracy. Targeted staff training will support proper implementation of these procedures. These actions are intended to strengthen internal controls and reduce the risk of unsupported or inaccurate payments.

Grant Funds Spent After Award Ended The Department of Health and Human Services (Department) incorrectly used $76,293 of Block Grant for Community Mental Health Services (MHBG) funds from an award that ended. During the audit period, the Department spent $49 million in MHBG funds to support the treatment and recovery services for adults with serious mental illness and children with serious emotional disturbances. The Department’s 2022 MHBG Bipartisan Safer Community Act (BSCA) award period ended on October 16, 2024 and the Department had 90 days after the award ended to pay for expenditures that were incurred during the award period. Auditors tested $186,000 in MHBG-BSCA expenditures that were paid after award period ended and found that expenditures totaling $76,293 (41%) were outside the period of performance. As a result, $76,293 is considered questioned costs and the Department may be required to pay back the federal government. Furthermore, expending grant funds outside the award period impedes the Department’s ability to effectively monitor and budget program activities, potentially jeopardizing future funding opportunities and increasing the risk of reverting funds back to the federal government. According to Department management, review procedures over grant expenditures incurred during the 90-day liquidation did not consistently identify expenditures incurred outside the award period. Federal regulations require the Department to charge the federal award for allowable costs incurred during the period of performance (award period). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.958 (Block Grant for Community Mental Health Services); Federal Award Identification Number (award period): B09SM087304 (October 17, 2022 – October 16, 2024). Recommendation: Department management should strengthen review procedures and provide targeted training to ensure grant expenditures are limited to costs incurred within the award period. Views of Responsible Officials of the Auditee: Management agrees with the finding. The Division of Mental Health, Developmental Disabilities, and Substance Use Services has implemented monthly cross-divisional coordination meetings to strengthen grant oversight and fiscal monitoring. The Division is refining policies and procedures to reinforce verification that expenditures are incurred within the approved grant period and are supported by appropriate documentation prior to approval and payment. Updated procedures clarify service period cutoff requirements and strengthen review protocols within the Contract & Grant Management team and the Division Business and Finance Office. Targeted staff training will support consistent application of these requirements. These actions are intended to strengthen internal controls and support compliance with applicable federal and State requirements.

Inaccurate Quarterly Reporting The Department of Public Safety (Department) did not accurately report Community Development Block Grant (CDBG) financial data to the U.S. Department of Housing and Urban Development (HUD). Auditors reviewed the cash receipts and disbursements reported in all 12 quarterly Federal Financial Reports and found that amounts reported did not agree to the Department’s accounting records. Specifically, auditors found differences in the following reported amounts: • For the four Hurricane Florence Disaster reports, total receipts agreed to accounting records; however, disbursements were underreported by $2.9 million. • For the four Hurricane Matthew Disaster reports, total receipts were underreported by $8.9 million, and disbursements were underreported by $13.4 million. • For the four Hurricane Matthew Mitigation reports, total receipts were overreported by $101.8 thousand, and disbursements were overreported by $5.9 million. Reporting inaccurate CDBG financial data prevents HUD from monitoring the federal funds used to help communities provide housing and expand economic opportunities for low-and moderate-income families. In addition, citizens do not have complete and accurate information to provide feedback on how funds are being used in their communities. According to Department management, the Federal Financial Report was prepared using amounts from the HUD’s Disaster Reporting Grant Reporting (DRGR) system, and the amounts were not reconciled to the Department’s accounting records to ensure accuracy due to a lack of understanding of the reporting requirements. Federal regulations require that the Department submit quarterly reports concerning the financial activity for CDBG funds, known as the SF-425 Federal Financial Report. This report is generated by the DRGR system and the Department is responsible for confirming the data is accurate and complete. Federal regulations also require the Department to establish and maintain effective internal control over federal awards that provide reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The federal regulations define internal control to include the processes for achieving reliable reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Housing and Urban Development; Assistance Listing Number (title): 14.228 (Community Development Block Grants/State’s Program and Non-Entitlement Grants In Hawaii); Federal Award Identification Numbers (award periods): B-19-DV-37-0001 (August 17, 2020 - August 17, 2026), B-19-DV-37-0002 (August 17, 2020 - August 17, 2026), B-16-DL-37-0001 (August 15, 2017 - August 15, 2025), and B-18-DP-37-0001 (June 3, 2020 - June 3, 2032). Recommendation: Department management should ensure that staff responsible for reporting understand the requirements, including reconciling the amounts for accuracy. Views of Responsible Officials of the Auditee: The Department of Public Safety (DPS) agrees with the finding and recommendation. The DPS Controller’s Office and North Carolina Office of Resiliency and Recovery were not aware of changes in reporting requirements for the SF-425 until the FY23-24 audit cycle. Management is currently seeking guidance from HUD to gain an understanding of the requirements and process for completing the reconciliation and reporting going forward. See Schedule of Findings and Questioned Costs for footnote.

Administration Funds Used for Unallowable Activities The Department of Commerce (Department) incorrectly used $8,476,188 of Unemployment Insurance (UI) administration award funds. During the audit period, the Department spent $91.4 million to administer the UI program. To administer the UI program, funds are allowed for both automation and nonautomation expenditures for the first 15 months of the award period and only automation expenditures for the remaining 21 months of the award period. The award period is extended by an additional 48 months if the automation expenditures are carried out through a consortium of states. Auditors tested 151 out of 1,294 UI administrative expenditures, totaling $17.5 million, and found 21 expenditures totaling $8,476,188 that were not allowed. Specifically: • Eight expenditures totaling $8,461,082, were charged to an award in the consortium-only automation period but were not consortium automation activities. • 13 expenditures totaling $15,106 were charged to an award before it started. As a result, the $8,476,188 is considered questioned costs and the Department may be required to pay the funds back to the federal government. Furthermore, the funds could have been used for consortium automation activities such as software improvements for the UI benefits system. According to Department management, employee turnover resulted in reduced knowledge of what each timeframe of the award period allows. Additionally, expenditure reviews lacked sufficient detail to ensure only allowable costs were charged to the award during each automation period. Federal regulations require costs to conform to limitations and exclusions that apply to the federal award which includes only charging costs during the allowable timeframe. Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; Assistance Listing Number (title): 17.225 (Unemployment Insurance); Federal Award Identification Numbers (award periods): UI-34076-20-55-A-37 (October 1, 2019 – December 31, 2022) and 24A55UI000022 (October 1, 2023 – December 31, 2026). Recommendation: Department management should provide clear guidance and training to employees on charging costs during the allowable timeframe. In addition, Department management should develop and implement detailed review procedures over expenditures to ensure compliance with federal award requirements. Views of Responsible Officials of the Auditee: The Department of Commerce, Division of Employment Security agrees with the auditors’ finding and recommendation. The Division of Employment Security’s Finance and Budget Unit experienced major staff turnover/shortages. It wasn’t until recently that three major Finance and Budget Senior Staff positions were filled. The DES Finance and Budget team is establishing a strong code of ethics and effectively implementing checks and balances to avoid misrepresentation of data. Going forward all managers are monitoring transactions daily to ensure costs are reasonable, allowable, and allocable. Accounting technicians are being retrained and cross-trained to help ensure this process is monitored. DES Leadership has instituted internal controls to review and ensure the proper grant year is coded for expenditures when invoices are paid. Staff responsible for paying invoices have been retrained on the importance of understanding the federal grant calendar year as part of their duties and assignments. Implemented Internal Controls include a review process for completed work by a peer, supervisor, manager and/or the Division Financial Officer. These controls include Budget formulation, approval, tracking, comparison, enforcing corrective actions as needed with supporting documentation. With the on-boarding of new personnel now including a focus on the importance of following federal grant award guidelines, and following established internal controls, we feel we can minimize the recurrence of this finding in the future. See Schedule of Findings and Questioned Costs for footnote.

Federal Unemployment Tax Act (FUTA) Certification Not Completed as Required The Department of Commerce (Department) submitted the Federal Unemployment Tax Act (FUTA) Certification to the Internal Revenue Service (IRS) 120 days late. In addition, the Department did not review the quality of the FUTA Certification data to ensure it was complete and reliable. Employers pay federal unemployment taxes to fund unemployment benefits for workers who lose their jobs. Employers who also pay state unemployment taxes can receive a federal tax credit reducing their effective federal unemployment tax. The IRS relies on the Department’s FUTA Certification to verify the employer’s federal tax credit matches what the employer paid in state unemployment tax. When the FUTA Certification is not completed as required, there is an increased risk: • Employers may pay reduced taxes for credits not earned or may not receive refunds for overpaid taxes. • IRS may incorrectly impose additional tax, penalties, or interest that the employer does not owe. • IRS may not collect additional taxes, penalties, or interest owed by employers due to expiring statute of limitations. Additionally, the U.S. Department of Labor can withhold funds for noncompliance with federal standards which may reduce federal funds available for administering the Unemployment Insurance program or other unemployment benefits funded by the federal government. According to Department management, the FUTA Certification was not completed as required because only one individual was responsible for the certification without a backup or review and approval process in place. Additionally, staff did not know how to perform the certification using the Department’s new tax system resulting in delays. Federal regulations and IRS Publication 4485 require the Department to annually review the quality of the FUTA Certification data and certify each employer's total state unemployment tax required and the actual state unemployment tax payments made by each employer. The Department is required to submit the annual FUTA Certification by January 31st. Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; Assistance Listing Number (title): 17.225 (Unemployment Insurance); Federal Award Identification Numbers (award periods): 24A55UI000022-01-00 (October 1, 2023 – December 31, 2026), UI393402355A37-01-00 (October 1, 2022 – December 31, 2025), and UI372412255A37 (October 1, 2021 – December 31, 2024). Recommendation: Department management should develop and implement a review and approval process to ensure the FUTA Certification is completed as required. In addition, Department management should provide clear guidance and training to employees on the certification procedures using the new tax system. Views of Responsible Officials of the Auditee: The Department of Commerce, Division of Employment Security agrees with the auditors’ finding and recommendation. To address the lack of a structured reminder system to track deadlines, the Division of Employment Security implemented/scheduled in Outlook dates to the tax staff informing and reminding them of key dates pertaining to the FUTA Certification process. Also, we set up a reminder for the Chief of Tax, Assistant Chief of Tax and the Tax Operations Manager notifying them five days in advance of the due dates. Calendar reminders were set up in Outlook on February 13, 2025 and currently extends out through the next 10 years. To address the single-person responsibility without a backup or verification checkpoint before IRS submission, The Division has implemented a minimum two-person task approach. One person ensures that all steps are presented on the Annual FUTA Certification Signoff Spreadsheet and ensures that it is maintained and that tasks are conducted properly by them both. Each staff member must enter the date, their name and check off the step once completed. To address the limited familiarity with the new tax system (NCSUITS) resulting in process delays, the primary and secondary responsible staff received training on the new Tax System on February 14, 2025. For the Annual FUTA Certification Procedure the NCSUITS Process instructions were revised to include the updated processes. Pertinent steps are included on the Signoff Sheet with a link to the instructions. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Commerce (Department) did not adequately monitor $55 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. Auditors reviewed the monitoring procedures over all 20 subrecipients that received Workforce Innovation and Opportunity Act (WIOA) Cluster funds during the audit period. The Department’s monitoring procedures required annual, onsite financial and programmatic monitoring for all subrecipients. However, auditors found no evidence that monitoring was completed as required for 15 subrecipients (75%). Additionally, auditors reviewed the monitoring procedures for all 20 subrecipients that were required to have an audit in accordance with Uniform Guidance and found that the Department did not obtain or review the audit reports for 2 subrecipients (10%). Inadequate monitoring increases the risk that federal funds may not be used in accordance with federal requirements, which may reduce funding available to provide services to individuals seeking employment and training assistance. According to Department management, employee turnover in recent years prevented the completion of monitoring. Federal regulations require the Department to: • Perform annual onsite monitoring of all subrecipients 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. • Verify that every subrecipient is audited as required. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-004. Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; Assistance Listing Numbers (titles): 17.258 (WIOA Adult Program), 17.259 (WIOA Youth Activities), 17.278 (WIOA Dislocated Worker Formula Grants); Federal Award Identification Numbers (award periods): 23A55AT000013 (July 1, 2023 – June 30, 2026), 23A55AW00016 (July 1, 2023 – June 30, 2026), 23A55AY000007 (April 1, 2023 – June 30, 2026), AA-38547-22-55-A-37 (April 1, 2022 – June 30, 2025), AA-36337-21-55-A-37 (April 1, 2021 – June 30, 2024), and AA-34786-20-55-A-37 (April 1, 2020 – June 30, 2023). Recommendation: Department management should prioritize developing and implementing a contingency plan to ensure annual monitoring is completed when employee turnover occurs. In addition, Department management should continue to monitor the corrective action plan to ensure it is effective and sustainable. Views of Responsible Officials of the Auditee: The Department of Commerce, Division of Workforce Solutions (DWS) understands its responsibility to monitor subrecipients annually in a timely manner and acknowledges that it is catching up on monitoring local workforce development boards after significant delays for previous years due to a variety of reasons. The Division’s goal was to have all monitoring activities completed by December 31, 2024 and this additional finding was expected due to the number of years that required monitoring. In the last year, DWS programmatic and financial monitors have conducted concurrent onsite reviews of three program years, substantially catching up on monitoring activities. During this period, two Financial Monitors resigned in June 2024. Their positions were filled by early September but this did delay the monitoring progress. Currently, prior year monitoring is needed for five boards. The monitoring activities for SFY 2024 will be completed by March 31, 2025. The monitoring reviews for SFY 2025 are occurring simultaneously and DWS will be current on all monitoring activities at the end of the fiscal/program year. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Commerce (Department) did not adequately monitor $55 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. See finding 2024-004 for a description. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-005.

Inadequate Subrecipient Monitoring The Department of Commerce (Department) did not adequately monitor $55 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. See finding 2024-004 for a description. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-006.

Higher Education Program Equipment Not Maintained The University did not maintain accurate records for equipment purchased with Higher Education Institutional Aid (Higher Education) program funds. As of June 30, 2024, the University reported 220 equipment assets with a total cost of $3.9 million that were purchased through this program. Auditors conducted a physical inspection for a sample of 48 equipment assets totaling $1.6 million. Auditors found that the University could not locate 5 (10%) of these assets totaling $44,716 nor provide records supporting their location, sale, or disposal. As a result, there is an increased risk that equipment purchased with federal funds could be lost, stolen, or otherwise used for activities not allowed under the Higher Education program. The University’s internal controls over the physical inventory process were ineffective because there was no one responsible for ensuring the inventory counts were complete and accurate. Federal regulations require that the University maintain adequate records for equipment, including the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The University is also responsible for maintaining and updating records when there is a change in the status of the equipment. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.031 (Higher Education Institutional Aid); Federal Award Identification Numbers (award periods): P031B220022 (October 1, 2022 – September 30, 2027) and P031E200028 (October 1, 2020 – September 30, 2025). Recommendation: University management should strengthen their internal controls over the physical inventory process to ensure individuals are assigned to review inventory counts for completeness and accuracy. Views of Responsible Officials to the Auditee: Elizabeth City State University concurs with the Auditor’s findings and recommendation. We strive to comply with the guidelines under Higher Education Institutional Aid. The University is dedicated to adopting best practices for the effective management of higher education equipment. A corrective action plan has been implemented, incorporating a comprehensive inventory of all higher education assets. To strengthen accountability and efficiency, custodial departments will receive annual training on inventory procedures, covering best practices for asset management, surplus processing, and proper disposal methods. Additionally, the University will enhance its existing process by providing clear, standardized inventory guidelines to custodial departments. To further improve oversight and accountability, the Controller's Office will collaborate with the Information Technology team to implement the KACE system as an advanced tracking and reporting tool for fixed assets. The full implementation of the KACE system for fixed asset inventory is targeted for completion by June 30, 2025. These initiatives will support the long-term sustainability of equipment management and ensure alignment with university standards. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Internal Controls Over Higher Education Program Expenditures The University did not have adequate internal controls over Higher Education Institutional Aid (Higher Education) program expenditures to ensure compliance with federal requirements. During the period, the University disbursed $12.06 million in expenditures under this program which is intended to strengthen the academic quality of institutions. Auditors reviewed a sample of 40 operating expenditures totaling $356,641 that were paid during the audit period and found 10 (25%) expenditures totaling $12,830 that were not reviewed for compliance prior to disbursement. As a result, there is an increased risk that federal funds may not be used in accordance with federal requirements, which may reduce funding otherwise available for use under the program. The University’s internal controls over federal compliance were ineffective due to a change in the electronic approval process during the period that inadvertently removed staff responsible for compliance from the list of required approvals. Federal regulations require the University to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the University is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.031 (Higher Education Institutional Aid); Federal Award Identification Numbers (award periods): P031E200008 (October 1, 2020 - September 30, 2025), P031B220004 (October 1, 2022 - September 30, 2027), and P031K190002 (October 1, 2019 - September 30, 2024). Recommendation: University management should ensure that electronic approval processes are periodically reviewed and verified by the staff responsible for compliance with federal requirements. Views of Responsible Officials of the Auditee: North Carolina Central University agrees with the audit finding regarding the inadequacy of internal controls over our higher education program expenditures. To address this finding, we are implementing the following corrective action: We will review and update our existing procedures related to program expenditures electronic approval processes to align with best practices and regulatory requirements. The Comptroller will be responsible for the corrective action. Corrective action has an anticipated date of May 2025.

Higher Education Program Equipment Not Maintained The University did not maintain accurate records for equipment purchased with Higher Education Institutional Aid (Higher Education) program funds. As of June 30, 2024, the University reported 232 equipment assets with a total cost of $3.8 million that were purchased through this program. Auditors conducted a physical inspection for a sample of 47 equipment assets totaling $697,882 and found the following errors: • Nine (19%) assets totaling $99,131 could not be located and the University could not provide records supporting their location, sale, or disposal. • Four (9%) assets totaling $59,446 were disposed of in prior years but were not removed from the University’s equipment records. As a result, there is an increased risk that equipment purchased with federal funds could be lost, stolen, or otherwise used for activities not allowed under the Higher Education program. The University’s internal controls over the physical inventory process were ineffective because they did not identify the specific personnel responsible for reconciling the inventory results to equipment records and following up on any differences. Federal regulations require that the University maintain adequate records for equipment, including the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The University is also responsible for maintaining and updating records when there is a change in the status of the equipment. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.031 (Higher Education Institutional Aid); Federal Award Identification Numbers (award periods): P031B090212 (October 1, 2009 - September 30, 2014), P031B070036 (October 1, 2010 - September 30, 2012), P031B120558 (October 1, 2013 – September 30, 2017), and P031K190002 (October 1, 2019 - September 30, 2024). Recommendation: University management should strengthen their internal controls over the physical inventory process by ensuring that related policies identify the specific personnel responsible for reconciling inventory results to equipment records and following up on any differences. Views of Responsible Officials of the Auditee: North Carolina Central University agrees with the audit finding regarding the accurate records of higher education program equipment purchases. To address this finding, we are implementing the following corrective action: We will evaluate our inventory management system, complete a secondary departmental physical check of all equipment, update records as necessary and schedule regular observations to assess the effectiveness of our inventory practices. The Comptroller will be responsible for the corrective action. Corrective action has an anticipated date of May 2025. We are committed to strengthening our internal controls over higher education program expenditures. These corrective actions will help mitigate risks, ensure compliance, and enhance the overall financial management of our programs. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Internal Controls Over Higher Education Program Expenditures The University did not have adequate internal controls over Higher Education Institutional Aid (Higher Education) program expenditures to ensure compliance with federal requirements. During the period, the University disbursed $9.67 million in expenditures under this program which is intended to strengthen the academic quality of institutions. Auditors reviewed Higher Education program expenditures paid during the audit period and found expenditures that were not reviewed for compliance prior to disbursement. Specifically, • In a sample of 40 payroll expenditures totaling $372,901, auditors found three (7.5%) expenditures totaling $20,672 that were not reviewed. • In a sample of 40 operating expenditures totaling $20,927, auditors found 10 (25%) expenditures totaling $6,507 that were not reviewed. • In a test of 16 capital expenditures totaling $961,462, auditors found 15 (94%) expenditures totaling $743,463 that were not reviewed. As a result, there is an increased risk that federal funds may not be used in accordance with federal requirements, which may reduce funding otherwise available for use under the program. The University’s internal controls over federal compliance were ineffective due to a change in the electronic approval process during the period that inadvertently removed staff responsible for compliance from the list of required approvals. Federal regulations require the University to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the University is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.031 (Higher Education Institutional Aid); Federal Award Identification Numbers (award periods): P031B220049 (October 1, 2022 – September 30, 2027), P031E200045 (October 1, 2020 – September 30, 2025), and P031B170037 (October 1, 2017 – September 30, 2023). Recommendation: University management should ensure that electronic approval processes are periodically reviewed and verified by the staff responsible for compliance with federal requirements. Views of Responsible Officials to the Auditee: Winston-Salem State University concurs with the findings and the recommendations provided by the State Auditor’s Office. Payments related to Title III expenditures have been processed without the required approval of the Title III administrator, leading to a lack of proper oversight and non-compliance with established internal controls. To strengthen internal controls and ensure all Title III expenditures receive proper approval before payment processing. We have taken the following steps to ensure corrective actions. We have strengthened the Approval Workflow by implementing system controls in People Admin, PAF, Works, and Chrome River to prevent payments from being processed without Title III administrator approval and ensuring all capital improvement invoices are routed through Adobe Sign for documented approval. We will provide training for all relevant staff on Title III expenditure approval procedures and distribute a formal communication from Finance and Administration reinforcing the requirement for Title III administrator approval before payment processing. Additionally, employees responsible for payment processing will be required to complete training acknowledging their understanding of the approval requirements. Contracts and Grants will establish a process to perform quarterly audits to review transactions for compliance with approval workflows. This corrective action plan aims to eliminate unauthorized payments and ensure full compliance with Title III expenditure approval protocols. The Associate Vice Chancellor for Financial Services is responsible for execution and monitoring of corrective actions. The Director of Title III and the Director of Contracts and Grants are responsible for ensuring adherence to approval procedures. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Eligibility Determination Process The Department of Health and Human Services (Department) made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 3 million beneficiaries received $22.2 billion in Medicaid benefits. The task of determining eligibility for the Medicaid program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 113 beneficiaries that had benefits totaling $34.9 million paid on their behalf during the audit period. Auditors found eight (7%) beneficiaries that were ineligible due to inaccurate and/or outdated income information used in the eligibility determination. Payments totaling $28,838 (federal share $21,144) were paid on behalf of these beneficiaries. In addition to the eligibility errors noted above, auditors also identified 18 beneficiaries whose case files were either missing required eligibility documentation, such as self-employment verification, or inaccurate calculations and household composition were used. However, when auditors redetermined eligibility using the correct information, the beneficiaries were found to be eligible. As a result, the $28,838 (federal share $21,144) is considered questioned costs and the Department may be required to pay back the federal share. In addition, there is an increased cost to the Medicaid Program for both the state and federal government, as the program is jointly financed by these two governments and is administered by the state. According to Department management, the errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff utilize NC FAST to input data and make eligibility determinations; however, the Department is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training. Federal regulations require that the Department, or its designee, determine eligibility for all individuals applying for or receiving benefits in accordance with eligibility requirements defined in the approved state plan. Further, federal regulations require that documentation be obtained as needed to determine if a beneficiary meets specific income standards and documentation must be maintained to support eligibility determinations. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-016. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 2305NC5MAP (October 1, 2022 – September 30, 2023) and 2405NC5MAP (October 1, 2023 – September 30, 2024). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring. Views of Responsible Officials of the Auditee: The Department agrees with this finding. As required by the North Carolina Legislature, the Department has delegated the administration of Medicaid eligibility determinations to the 100 local county offices of the Division of Social Services (DSS). The Department provides the North Carolina Families Accessing Services Through Technology (NC FAST) system, issues eligibility policies, facilitates training and provides technical support to the county DSS offices to enable their administration of eligibility determinations. The Department reviewed the errors and will update, post, and track completion of mandated training for county DSS staff to ensure their correct understanding of the related eligibility policy so they correctly determine eligibility. The Department will enhance its review of the Recipient Eligibility Determination Audit results as well as second-party corrective action plans to monitor, evaluate, and analyze the counties’ understanding of policy to identify any additional training needs, policy updates, and/or system fixes. The Department will take appropriate steps to correct the specific improper eligibility determination errors identified in the audit. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Division of Mental Health, Developmental Disabilities and Substance Use Services (Division) did not adequately monitor $106.5 million in federal funds passed to subrecipients for providing substance abuse prevention, treatment, and recovery services and addressing the opioid abuse crisis. The Division’s monitoring plan required specific monitoring activities based on the two types of subrecipients: Local Management Entity/Managed Care Organization (LME/MCO) and Financial Assistance Contract (FAC) entities. Auditors reviewed the monitoring plan for all six LME/MCO subrecipients which required monthly fiscal monitoring, quarterly programmatic monitoring, and one annual on-site visit. However, the Division did not provide evidence to support that any of these monitoring activities were completed for all six of the LME/MCOs that received $40.4 million in substance abuse funds and $37.5 million in opioid abuse funds. Auditors then reviewed the monitoring plan for all FAC subrecipients which required annual monitoring activities based on risk assessments and found the following errors: • For all 35 FACs that received $27.2 million in substance abuse funds, only five (14%) had a risk assessment to determine the frequency and method of monitoring required. Furthermore, auditors found that even the minimum level of monitoring required was not completed for 34 (97%) FACs that received $26.1 million in substance abuse funds. • For all three FACs that received $1.4 million in opioid abuse funds, only one (33%) had a risk assessment to determine the frequency and method of monitoring required. Furthermore, auditors found that even the minimum level of monitoring required was not completed for two (97%) FACs that received $1.2 million in opioid abuse funds. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for providing substance abuse prevention, treatment, and recovery services and addressing the opioid crisis. According to Division management, the LME/MCO and FAC fiscal and programmatic monitoring plan was not implemented due to competing priorities and changes to monitoring procedures that were not reflected in the monitoring plan. Federal regulations require the Division 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. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-018. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.788 (Opioid STR); Federal Award Identification Numbers (award periods): H79TI085757 (September 30, 2022 – September 29, 2023) and H79TI083312 (September 30, 2021 – September 29, 2024). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for the Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI084663 (October 1, 2021 – September 30, 2023), B08TI085825 (October 1, 2022 – September 30, 2024), B08TI083540 (March 15, 2021 – March 14, 2025), B08TI083959 (September 1, 2021 – September 30, 2025), B08TI084599 (September 1, 2021 – September 30, 2025), and B08TI087057 (October 1, 2023 – September 30, 2025). Recommendation: Division management should dedicate resources to ensure the fiscal and programmatic monitoring activities are completed in accordance with the approved grant monitoring plan. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The Division experienced increased resource constraints during this time period, due to numerous critical and time sensitive priorities, such as Tailored Plan implementation, two large LME/MCO health plan consolidations, and Medicaid expansion (which also included an unprecedented influx of service-related dollars). In spite of these challenges, monitoring occurred for the Local Management Entities/Managed Care Organizations (LMEs/MCOs); however, the monitoring was not completed in accordance with the plan and was not timely documented in the Prepaid Health Plan Contract Data Utility (PCDU) system. In addition, as part of the implementation of Tailored Plans, it was determined that changes to monitoring were warranted. Annual on-site visits were eliminated and other informal changes to monitoring were made; however, the Monitoring Plan was not updated to reflect the changes. Regarding monitoring of Financial Assistance Contracts (FAC), the Division identified a need to dedicate staff resources (and update post-COVID operating procedures) around the administration, management, and monitoring of FAC contracts, and subsequently has stood up a Contracts and Grants team with dedicated staff resources in these areas, and we expect to see significant improvements in the next year as we clarify staff roles, refine our processes, and train newly hired Contract Administrators. The Division also identified a need for better documentation of the FAC monitoring that is happening. Finally, the Division is also partnering with Risk Management, Compliance and Consulting to provide additional training. The Division is dedicated to improving subrecipient monitoring. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Division of Mental Health, Developmental Disabilities and Substance Use Services (Division) did not adequately monitor $106.5 million in federal funds passed to subrecipients for providing substance abuse prevention, treatment, and recovery services and addressing the opioid abuse crisis. See Finding 2024-012 for a description. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-020.

Errors in FFATA Reporting The Division of Mental Health, Developmental Disabilities and Substance Use Services (Division) did not submit complete, accurate, and timely subaward information for subrecipients of the Block Grants for Prevention and Treatment of Substance Abuse to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 82 subawards totaling $56.8 million that were required to be reported to the FSRS during the audit period and found the following errors: • 14 subawards totaling $15.0 million were not reported at all. • 12 subawards totaling $6.0 million were reported inaccurately. • 15 subawards totaling $13.0 million were reported 14 to 284 days late. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Division management, the FFATA reports were prepared using subaward tracking spreadsheets that were being developed during the period and were not reviewed for completeness and accuracy. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. This finding was previously reported in the 2023 Statewide Single Audit as finding number 2023-019. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for the Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI084663 (October 1, 2021 – September 30, 2023), B08TI085825 (October 1, 2022 – September 30, 2024), B08TI083540 (March 15, 2021 – March 14, 2025), B08TI083959 (September 1, 2021 – September 30, 2025), B08TI084599 (September 1, 2021 – September 30, 2025), and B08TI087057 (October 1, 2023 – September 30, 2025). Recommendation: Division management should implement review procedures over the subaward tracking spreadsheets to ensure FFATA reporting is accurate and completed as required. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The Division encountered reporting inaccuracies due to a misunderstanding of the dates in the contract system and errors in the tracking logs. The Division has received clarification on the correct execution date to use during reporting for FFATA. Regarding the tracking log errors, the Division’s FFATA policy will be updated to reflect an additional review of the monthly FFATA entries once they are entered into the reporting system. This review will require supervisory review of the completed FFATA report for each Grant award, FFATA tracking log and contracts/allocation letters to ensure all three items reconcile for the reporting month. SFY 25 FFATA reporting is up to date. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Monitoring of Subaward Expenditures The Department of Commerce (Department) did not adequately monitor $19.6 million in federal funds used to support community development activities. Specifically, the Department did not: • Perform risk assessments. • Complete monitoring activities. • Adequately review reimbursement requests. Auditors reviewed the Department’s monitoring plan over subaward expenditures. The Department’s monitoring plan required risk assessments over all subawards when funding is initially provided and then again after 20 months to determine which subawards to monitor. However, auditors reviewed the 50 subawards that required a risk assessment during the audit and found that none of the risk assessments were performed. In addition, auditors reviewed the monitoring activities over all subawards open during the audit period. The Department’s monitoring plan included various monitoring activities, such as on-site monitoring or desk reviews. Auditors reviewed the monitoring activities over all 152 open subawards and found that 148 (97%) subawards did not have monitoring activities completed during the year. Lastly, auditors reviewed a sample of 60 reimbursement requests, totaling $5.1 million, that were paid during the audit period and found eight (13%) requests totaling $426,260 that were paid outside the subaward period. As a result, the Department may be required to pay $426,260 back to the federal government. Furthermore, inadequate monitoring increases the risk that federal funds may not be used in accordance with federal requirements, which may reduce funding available to communities for providing housing and expanding economic opportunities for low- and moderate-income families. According to the Department management, reviews of the reimbursement requests were not detailed enough to ensure that payments were within the subaward period. In addition, staff turnover resulted in incomplete monitoring procedures. Federal regulations require the Department to: • Establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. • Evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward to determine the appropriate subrecipient monitoring. • 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. Federal Award Information: Federal Awarding Agency: U. S. Department of Housing and Urban Development; Assistance Listing Number (title): 14.228 (Community Development Block Grants/State’s Program and Non-Entitlement Grants In Hawaii); Federal Award Identification Numbers (award periods): B-15-DC-37-0001 (August 20, 2015 – September 1, 2022), B-16-DC-37-0001 (July 22, 2016 – September 1, 2023), B-17-DC-37-0001 (September 22, 2017 – September 1, 2024), B-18-DC-37-0001 (December 20, 2018 – September 1, 2025), B-19-DC-37-0001 (August 27, 2019 – September 1, 2026), B-20-DC-37-0001 (September 2, 2020 – September 1, 2027), B-20-DW-37-0001 (July 8, 2020 – July 8, 2026), B-21-DC-37-0001 (January 1, 2021 – September 1, 2028). Recommendation: Department management should develop and implement detailed review procedures over expenditures to ensure they are within the subaward period. In addition, Department management should establish contingency plans to ensure monitoring procedures are completed during times of employee turnover. Views of Responsible Officials of the Auditee: The Department of Commerce, Rural Economic Development Division (REDD) recognizes its responsibility to adequately monitor subrecipient expenditures. Also, REDD Community Development Block Grant (CDBG) staff consistently strives to adhere to federal requirements and ensure funding is available to communities to provide housing and expand economic opportunities for low- and moderate-income families. Performance of Risk Assessments The audit finding notes that REDD’s CDBG staff did not perform risk assessments. REDD CDBG staff assesses risk and performs monitoring at multiple points. To determine risk, an assessment is included at three critical points: (1) in the project selection process, (2) prior to the release of programmatic funds, and (3) the ongoing weekly monitoring of expenditure rates to address slow drawdown of funds. REDD CDBG staff acknowledges and agrees that the finding notes the omission of the formal risk assessment at the second and third points noted above. The risk assessment is an ongoing process throughout the grant life and steps were modified to expedite funding during the public health emergency due to COVID-19. The monitoring plan, however, due to this unprecedented time was not updated to reflect the changes. Monitoring of Sub-Awardee Activities The audit finding states that 148 of 152 sub-awardees were not monitored for allowable costs during Fiscal Year 2023. REDD CDBG agrees with the finding. REDD CDBG current policy permits grantees to submit requisitions for payment without supporting documentation in most instances. The staff reviews allowable expenditures during desk reviews and on-site monitoring. When concerns arise, staff also request documentation to determine whether expenditures are appropriate. Review of Sub-Awardee Requisition Requests Auditors reviewed a sample of 60 reimbursement requests, totaling $5.1 million, that were paid during the audit period and found eight (13%) requests totaling $426,260 that were paid outside the subaward period. The REDD CDBG staff acknowledges and agrees with the finding. The identified subawards will be reviewed and actions will be taken to extend the grant period to ensure program compliance or recapture the funds for non-compliance from sub-awardees. Should the Department have to repay funds, the federal government will require a repayment using State funds. REDD CDBG staff will make every effort to prevent this situation. See Schedule of Findings and Questioned Costs for footnote.

Inaccurate Annual Reporting The Department of Commerce (Department) did not accurately report Community Development Block Grant (CDBG) program data to the U.S. Department of Housing and Urban Development. Auditors reviewed the obligation, expenditure, and program performance data reported in the annual Financial Summary Report and found that amounts reported did not agree to the Department’s accounting records. Specifically, auditors found differences in the following reported amounts: • Obligated amounts ranged from an underreported amount of $4.2 million to an overreported amount of $7.5 million. • Expenditure amounts ranged from an underreported amount of $8.3 million to an overreported amount of $6.1 million. • Program performance data ranged from an underreported amount of $8.6 million to an overreported amount of $13.1 million. Inaccurate reporting of CDBG program data prevents the U.S. Department of Housing and Urban Development from monitoring the state’s progress in helping communities provide housing and expand economic opportunities for low and moderate-income families. In addition, citizens do not have complete and accurate information to provide feedback on how funds are being used in their communities. According to Department management, the Financial Summary Report was prepared using amounts from the U.S. Department of Housing and Urban Development’s reporting system, and the amounts were not reconciled to the Department’s records to ensure accuracy. Federal regulations require that the Department submit an annual report concerning the use of CDBG funds, known as the Consolidated Annual Performance and Evaluation Report (CAPER). The Financial Summary Report is a supplement to the CAPER. Federal regulations also require the Department to establish and maintain effective internal control over federal awards that provide reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The federal regulations define internal control to include the processes for achieving reliable reporting. Federal Award Information: Federal Awarding Agency: U. S. Department of Housing and Urban Development; Assistance Listing Number (title): 14.228 (Community Development Block Grants/State’s Program and Non-Entitlement Grants In Hawaii); Federal Award Identification Numbers (award periods): B-15-DC-37-0001 (August 20, 2015 – September 1, 2022), B-16-DC-37-0001 (July 22, 2016 – September 1, 2023), B-17-DC-37-0001 (September 22, 2017 – September 1, 2024), B-18-DC-37-0001 (December 20, 2018 – September 1, 2025), B-19-DC-37-0001 (August 27, 2019 – September 1, 2026), B-20-DC-37-0001 (September 2, 2020 – September 1, 2027), B-21-DC-37-0001 (January 1, 2021 – September 1, 2028). Recommendation: Department management should develop and implement detailed reconciliation and review procedures over the annual Financial Summary Report to ensure accuracy. Views of Responsible Officials of the Auditee: The Department of Commerce, Rural Economic Development Division (REDD) acknowledges that there is currently not a process in place that reconciles the data in Commerce’s Grants Management System (GMS) to the data in the federal Integrated Disbursement and Information System (IDIS). REDD acknowledges its responsibility to provide accurate and timely reconciled data for the annual financial reports required by the US Department of Housing and Urban Development (HUD). Due to outdated functionality of the aged (over 25 years old) internal database (GMS) CDBG staff has a tremendous challenge to reconcile the data to the federal system, IDIS. GMS has very limited configurability to conduct adequate automated financial reconciliation processes and perform grant deliverables throughout the grant lifecycle for annual federal funding allocations. REDD CDBG staff acknowledges and agrees with the audit finding. In February of 2021, the REDD CDBG leadership team was notified that a U.S. Treasury bulletin whose requirements had not been enforced previously, would be beginning with the 2014 allocation. At the recommendation of HUD Small Cities Office, staff utilized a methodology of de-obligating newer grant awards and substituting these for older funds in our line of credit. These changes were tracked manually using Excel workbooks and reconciled monthly. This information was not attached to the PR28 report but has been maintained by REDD CDBG. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Commerce (Department) did not submit complete, accurate, and timely subaward information for subrecipients of the Community Development Block Grant (CDBG) program to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 39 subawards totaling $50.4 million that were required to be reported to the FSRS during the audit period and found the following errors: • 34 subawards totaling $49.1 million were reported 29 to 180 days late. In addition, one subaward totaling $5.0 million was reported with the incorrect subaward number. • Four subawards totaling $1.3 million were not reported at all. • One subaward totaling $950,000 was reported although the subaward was canceled prior to report submission. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the required FFATA reporting for the CDBG program was not completed because staff responsible for FFATA reporting misunderstood the applicability of the requirement to CDBG subaward allocations. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. Federal Award Information: Federal Awarding Agency: U. S. Department of Housing and Urban Development; Assistance Listing Number (title): 14.228 (Community Development Block Grants/State’s Program and Non-Entitlement Grants In Hawaii); Federal Award Identification Numbers (award periods): B-15-DC-37-0001 (August 20, 2015 – September 1, 2022), B-18-DC-37-0001 (December 20, 2018 – September 1, 2025), B-21-DC-37-0001 (January 1, 2021 – September 1, 2028), B-22-DC-37-0001 (January 1, 2022 – September 1, 2029). Recommendation: Department management should ensure that the staff responsible for FFATA reporting have a clear understanding of the reporting requirements applicable to the CDBG program. Views of Responsible Officials of the Auditee: The Department of Commerce, Rural Economic Development Division (REDD) recognizes its responsibility to comply with the Federal Funding Accountability and Transparency Act (FFATA) requirements. Pursuant to the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, all required Community Development Block Grant subawards have been put into the Federal Subaward Reporting System (FSRS). Based on the reporting requirements outlined in the “Transparency Act”, all future awards will be put into FSRS by the end of the month following the month of the fully executed subaward agreement. To ensure data entry accuracy, all subaward information put into FSRS will have two review and concurrence cycles before final submission. To provide timely and accurate information within the system, if a sub-awardee de-obligates or receives additional grant funds, updates to the information previously entered in the system will be updated to reflect any increase or decrease in the subaward. If a new subaward is made from de-obligated funding, the report will be updated with the information of the sub-awardee within the allotted timeframe specified in the reporting requirements. Prior to submission, these changes will also be required to have two review and concurrence cycles before final submission. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Commerce (Department) did not adequately monitor $58 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. Auditors reviewed the monitoring procedures over all 22 subrecipients that received Workforce Innovation and Opportunity Act (WIOA) Cluster funds during the audit period. The Department’s monitoring procedures required annual, onsite financial and programmatic monitoring for all subrecipients. However, auditors found no evidence that monitoring was completed as required. Additionally, auditors reviewed the monitoring procedures for all 22 subrecipients that were required to have an audit in accordance with Uniform Guidance and found that the Department did not obtain or review the audit reports for 17 subrecipients (77%). Inadequate monitoring increases the risk that federal funds may not be used in accordance with federal requirements, which may reduce funding available to provide services to individuals seeking employment and training assistance. According to Department management, employee turnover in positions responsible for overseeing the monitoring process prevented the completion of monitoring during the year. Federal regulations require the Department to: • Perform annual onsite monitoring of all subrecipients 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. • Verify that every subrecipient is audited as required. Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; Assistance Listing Numbers (titles): 17.258 (WIOA Adult Program), 17.259 (WIOA Youth Activities), 17.278 (WIOA Dislocated Worker Formula Grants); Federal Award Identification Numbers (award periods): AA-38547-22-55-A-37 (April 1, 2022 – June 30, 2025), AA-36337-21-55-A-37 (April 1, 2021 – June 30, 2024), AA-34786-20-55-A-37 (April 1, 2020 – June 30, 2023), AA-33241-19-55-A-37 (April 1, 2019 – June 30, 2022). Recommendation: The Department should prioritize the development of a contingency plan to ensure annual monitoring is completed when employee turnover occurs. Views of Responsible Officials of the Auditee: The Department of Commerce, Division of Workforce Solutions (DWS) understands its responsibility to monitor subrecipients annually in a timely manner and acknowledges that it is catching up on monitoring local workforce development boards after being delayed due to a combination of the operational disruptions of the COVID-19 pandemic, restructuring of the monitoring unit due to staff vacancies, and an identified need to create new internal training and updated procedures before resuming monitoring. DWS has historically completed monitoring timely, prior to March 2020, the start of the COVID-19 pandemic. Since the end of the audit period, DWS has issued 13 programmatic or financial monitoring reports for the period of the audit – State Fiscal Year (SFY) 2023 that corresponds to WIOA Program Year (PY) 2022 (July 1, 2022 – June 30, 2023). In the last year, DWS programmatic and financial monitors have conducted concurrent onsite reviews of three program years, substantially catching up on monitoring activities and has a plan in place to complete the period of the audit and the subsequent SFY 2024/WIOA PY 2023 monitoring activities by December 31, 2024. See Schedule of Findings and Questioned Costs for footnote.

The Department of Commerce (Department) did not adequately monitor $58 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. See Finding 2023-004 for a description.

Inadequate Subrecipient Monitoring The Department of Commerce (Department) did not adequately monitor $58 million in federal funds passed to subrecipients to provide employment and training programs for adults, dislocated workers, and youth who face barriers to employment. See Finding 2023-004 for a description.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary School Emergency Relief (ESSER), Supporting Effective Instruction (SEI), and Title I Grants to Local Educational Agencies (Title I) programs. Auditors reviewed all the subawards for the ESSER and SEI programs that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. Specifically: • 394 ESSER subawards totaling $85.8 million were not reported. • 140 SEI subawards totaling $63.0 million were not reported. During the audit period, the Department made 240 Title I subawards totaling $527.9 million. Auditors tested a sample of 36 Title I subawards that were reported to the FSRS and found errors in all of the subawards. Specifically: • 10 subawards totaling $1.5 million were not reported at all. • 26 subawards totaling $89.4 million were reported 34-146 days late, lacked sufficient project descriptions on how the funds were utilized, and did not agree to supporting documentation by a total of $1.3 million. In addition, 7 subawards totaling $39.2 million were reported twice. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management: • Due to continued technical difficulties experienced with entering subawards into FSRS, the Department did not attempt to report any subawards for the ESSER and SEI programs. • Due to technical difficulties experienced with entering the Title I subawards into FSRS, and a lack of designated staff with experience, the Department did not complete all entries into the system and duplicated others. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-008. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425U (American Rescue Plan - Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425U210037 (COVID-19) (March 24, 2021 - September 30, 2023). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.367A (Supporting Effective Instruction State Grants); Federal Award Identification Number (award period): S367A220032 (July 1, 2022 - September 30, 2023). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.010A (Title I Grants to Local Educational Agencies); Federal Award Identification Number (award period): S010A220033 (July 1, 2022 - September 30, 2023). Recommendation: Department management should prioritize seeking solutions from the federal oversight agency on technical difficulties. In addition, Department management should ensure staff are properly trained and available to complete FFATA reporting as required. Views of Responsible Officials of the Auditee: The Department of Public Instruction concurs with the Auditor’s finding and recommendation. We strive to comply with FFATA reporting requirements; however; we continue to struggle due to system limitations. Ongoing conversation and support are sought from the U.S. Department of Education to aid in a more complete reporting within the FFATA system. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary School Emergency Relief (ESSER), Supporting Effective Instruction (SEI), and Title I Grants to Local Educational Agencies (Title I) programs. See finding 2023-007 for a description. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-008.

INACCURATE ANNUAL REPORTING The Department of Public Instruction (Department) did not accurately report Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) data to the U.S. Department of Education. During the annual reporting period, 272 public-school units (PSUs) incurred $1.5 billion in expenditures related to the program. Auditors reviewed the expenditures reported in the ESSER Annual Report for a sample of 60 PSU’s and found the following errors: • 20 PSUs (33%) were included with inaccurate expenditure amounts, resulting in total errors of $69 million. • 29 PSUs (48%) were included without required information, including the number of full-time equivalent (FTE) positions funded and/or the criteria used to allocate funds. Inaccurate reporting of ESSER data prevents the U.S. Department of Education from monitoring the state’s progress on preventing, preparing for, and responding to coronavirus impacts on education. Additionally, any subsequent use of the data for public transparency could provide an inaccurate view of ESSER program spending to citizens. According to Department management, the ESSER Annual Report was prepared using data from several sources and the data was not reconciled to ensure accuracy. Federal regulations require that the Department submit an annual report describing how the State and subrecipients used the awarded funds. Federal regulations also require the Department to establish and maintain effective internal control over federal awards that provide reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The federal regulations define internal control to include the processes for achieving reliable reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Numbers (award periods): S425D200037 (COVID-19) (May 11, 2020 - September 30, 2021) and S425D210037 (COVID-19) (January 5, 2021 - September 30, 2022). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425U (American Rescue Plan - Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425U210037 (COVID-19) (March 24, 2021 - September 30, 2023). Recommendation: Department management should prioritize developing and implementing detailed review procedures over the ESSER Annual Report data to ensure accuracy. In addition, Department management should monitor the procedures to ensure corrective action takes place. Views of Responsible Officials of the Auditee: The Department of Public Instruction concurs with the Auditor’s finding and recommendations. The data inaccuracies noted have been corrected and were submitted via email to the U.S. Department of Education on December 12, 2023. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary School Emergency Relief (ESSER), Supporting Effective Instruction (SEI), and Title I Grants to Local Educational Agencies (Title I) programs. See finding 2023-007 for a description. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-013.

INACCURATE ANNUAL REPORTING The Department of Public Instruction (Department) did not accurately report Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) data to the U.S. Department of Education. During the annual reporting period, 272 public-school units (PSUs) incurred $1.5 billion in expenditures related to the program. See Finding 2023-009 for a description.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Low Income Household Water Assistance Program (LIHWAP). Auditors reviewed all 85 subawards totaling $16.8 million that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, FFATA reporting for LIHWAP was not completed during the audit period because unfilled vacancies reduced the number of staff available to carry out the FFATA reporting requirements. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.499 (Low Income Household Water Assistance Program); Federal Award Identification Number (award period): 2101NCLWC6 (May 28, 2021 – September 30, 2023). Recommendation: Department management should prioritize the development of a contingency plan to ensure FFATA reporting is completed during periods of staff shortages. Views of Responsible Officials of the Auditee: Management agrees with this finding. While there are still vacant positions, some Business Operations Budget roles were filled. We will ensure compliance with the FFATA reporting requirement as we progress through transitional and crucial core operations. See Schedule of Findings and Questioned Costs for footnote.

Foster Care Funding Used Incorrectly The Department of Health and Human Services (Department) incorrectly used Foster Care Title IV-E (Foster Care) funds to reimburse counties. During the audit period, the Department reimbursed counties approximately $28.8 million to cover the costs of care for 5,834 beneficiaries. Auditors reviewed the $28.8 million in Foster Care reimbursement payments and found that the Division of Social Services (DSS) used Foster Care funds to reimburse a county for a beneficiary that was also receiving Supplemental Security Income (SSI). The Title IV-E State plan does not allow a beneficiary that is receiving SSI to also receive Title IV-E Foster Care funding. Payments totaling $35,504 ($26,050 federal share) were reimbursed to the county for the beneficiary. As a result, there is an increased cost to the Foster Care program for both the State and the federal government. In addition, the Department may be required to pay $26,050 (federal share) back to the federal government. According to Department management, the error occurred because of inaccurate application of established eligibility policies by the county DSS staff. Federal regulations require the Department to have an approved Title IV-E State plan in order to be eligible to receive federal funding for the Foster Care program. Per the Title IV-E State plan, when a child is eligible for both Foster Care and SSI, the county DSS office may choose to use either Foster Care or SSI to fund the child’s cost of care. Information regarding the benefits available under each program should be carefully considered by the county DSS so that an informed decision can be made in the child’s best interest. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number Number (title): 93.658 (Foster Care Title IV-E); Federal Award Identification Number (award period): 2301NCFOST (October 1, 2022 – September 30, 2023). Recommendation: Department management should analyze the error to specifically identify why the error occurred and develop additional training or establish other procedures to prevent future errors from occurring. In addition, Department management should determine if the Foster Care funds should be recouped. Views of Responsible Officials of the Auditee: Management agrees with the finding and auditor’s recommendation. The Division of Social Services implemented measures to prevent future non-compliance in Title IV-E Foster Care eligibility and recouped the funds. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not submit complete and timely subaward information for subrecipients of the Foster Care Title IV-E (Foster Care) Program to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 329 subawards totaling $88.5 million that were required to be reported to the FSRS during the audit period and found the following errors: •246 subawards totaling $65.2 million were not reported at all. •83 subawards totaling $23.3 million were reported 134 days late. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the required FFATA reporting for the Foster Care program was not completed because of turnover in the Division of Social Services Business Operations Section. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.658 (Foster Care Title IV-E); Federal Award Identification Numbers (award periods): 2201NCFOST (October 1, 2021 – September 30, 2022) and 2301NCFOST (October 1, 2022 – September 30, 2023). Recommendation: Department management should prioritize the development of a contingency plan to ensure that FFATA reporting is completed when employee turnover occurs. Views of Responsible Officials of the Auditee: Management agrees with this finding. Management will implement plans to ensure compliance with the FFATA reporting requirement as we progress through transitional and crucial core operations.

Deficiencies in the Adoption Assistance Eligibility Determination Process The Department of Health and Human Services (Department) made Adoption Assistance Title IV-E (Adoption Assistance) benefit payments to adoptive parents based on inaccurate eligibility determinations. During the audit period, approximately 13,500 beneficiaries received $72.3 million in Adoption Assistance benefits. The task of determining eligibility for the Adoption Assistance program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 93 beneficiaries that had benefits totaling $611,796 paid to adoptive parents on their behalf during the audit period and found one (1.01%) beneficiary that did not meet the program’s special needs eligibility requirements. While evaluating the eligibility error, auditors also identified a sibling of the beneficiary that received Adoption Assistance benefits. After reviewing the sibling’s case file, auditors determined that the sibling also did not meet the program’s special needs eligibility requirements. Payments totaling $12,336 ($9,042 federal share) were paid to adoptive parents on behalf of these ineligible beneficiaries. As a result, there is an increased cost to the Adoption Assistance program for both the State and the federal government. Even though the tests identified only $12,336 ($9,042 federal share) that was paid on behalf of ineligible beneficiaries, if tests were extended to the entire population, questioned costs could be greater than $25,000 and the Department may be required to pay the federal share back to the federal government. According to Department management, the errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff utilize the Child Placement and Payment System (CPPS) to input data and make eligibility determinations; however, the Department is responsible for establishing the eligibility determination policies, maintaining CPPS, and facilitating training. Federal regulations provide adoption assistance to adoptive parents for a child with special needs. Special needs means that there is a specific factor or condition, such as ethnic background, age, or membership in a minority or sibling group, or the presence of factors such as medical conditions or physical, mental, or emotional handicaps. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number Number (title): 93.659 (Adoption Assistance); Federal Award Identification Numbers (award periods): 2201NCADPT (October 1, 2021 - September 30, 2022) and 2301NCADTP (October 1, 2022 - September 30, 2023). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training or establish other procedures to prevent future errors from occurring. In addition, Department management should determine if the Adoption Assistance funds should be recouped. Views of Responsible Officials of the Auditee: Management agrees with the finding and auditor’s recommendation. The Division of Social Services implemented measures to prevent future non-compliance in Title IV-E Adoption Assistance eligibility and recouped the funds. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Eligibility Determination Process The Department of Health and Human Services (Department) made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 2.3 million beneficiaries received $18.6 billion in Medicaid benefits. The task of determining eligibility for the Medicaid program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 111 beneficiaries that had benefits totaling $34 million paid on their behalf during the audit period. Auditors found two (1.8%) beneficiaries that were ineligible because they moved out of state and continued to receive benefits they were not entitled to receive. Payments totaling $7,982 (federal share $5,894) were paid on behalf of these beneficiaries. In addition to the eligibility errors noted above, auditors also identified 38 beneficiaries whose case files were either missing required eligibility documentation, such as self-employment verification, or inaccurate calculations and household composition were used. However, when auditors redetermined eligibility using the correct information, the beneficiaries were found to be eligible. As a result, there is an increased cost to the Medicaid Program for both the state and federal government. The program is jointly financed by these two governments and is administered by the state. Even though the tests only identified $7,982 (federal share $5,894) that was paid on behalf of ineligible beneficiaries, if tests were extended to the entire population, questioned costs could be greater than $25,000. Although $7,982 ($5,894 federal share) resulted from the errors identified, the amount of Medicaid funds paid on behalf of ineligible beneficiaries is likely greater. Self-attestation by applicants is accepted for certain elements of the Modified Adjusted Gross Income (MAGI) methodology of determining eligibility and further verification or documentation is not required. Auditors tested participant eligibility using the documentation contained in the case files, which includes self-attested data that could not be verified by the auditors. According to Department management, the errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff utilize NC FAST to input data and make eligibility determinations; however, the Department is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training. Federal regulations require that the Department, or its designee, determine eligibility for all individuals applying for or receiving benefits in accordance with eligibility requirements defined in the approved state plan. Further, federal regulations require that documentation be obtained as needed to determine if a beneficiary meets specific income standards and documentation must be maintained to support eligibility determinations. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-023. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 2205NC5MAP (October 1, 2021 –September 30, 2022) and 2305NC5MAP (October 1, 2022 – September 30, 2023). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring. Views of Responsible Officials of the Auditee: The Department agrees with this finding. As required by the North Carolina Legislature, the Department has delegated the administration of Medicaid eligibility determinations to the 100 local county offices of the Division of Social Services (DSS). The Department provides the North Carolina Families Accessing Services Through Technology (NC FAST) the system, issues eligibility policies, facilitates training and provides technical support to the county DSS offices to enable their administration of eligibility determinations. Using Centers for Medicare & Medicaid Services’ (CMS) Payment Error Rate Measurement PERM standards as a model, the Department set an acceptable error rate of 3.2% for the accuracy of county eligibility determinations. The Department monitors the accuracy of each county’s eligibility determinations and implements accuracy improvement plans, as necessary. As part of the monitoring process, the Department engages with the counties to determine if adjustments are needed to the policy, training facilitation or the NC FAST system. The Department reviewed the errors identified in the audit and will take appropriate steps to correct the improper eligibility determinations.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the State Opioid Response (Opioid) grant program to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 30 subawards totaling $35.9 million that were required to be reported to the FSRS during the audit period and found that none were reported as required. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the Division of Mental Health, Developmental Disabilities and Substance Abuse Services (DMH/DD/SAS) did not complete the FFATA reporting due to essential staff turnover across the Division. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.788 (Opioid STR); Federal Award Identification Numbers (award periods): H79TI083312 (September 30, 2021 – September 29, 2023) and H79TI085757 (September 30, 2022 – September 29, 2023). Recommendation: Department management should establish a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. Views of Responsible Officials of the Auditee: Management agrees with this finding and recommendation. The Division of Mental Health, Developmental Disabilities, and Substance Use Services (DMHDDSUS) Business and Finance Office did not have the necessary staff adequately trained in FFATA reporting during SFY23 which led to reports not being completed. The Division hired a new Business Allocation Manager in July 2023 to oversee the FFATA reporting process and new policies and procedures were developed. DMHDDSUS will review and revise the FFATA reporting process to include a contingency plan for staff turnover. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Health and Human Services (Department) did not adequately monitor $39.1 million in federal funds passed to subrecipients to address the opioid abuse crisis. Auditors reviewed the monitoring procedures over all nine subrecipients that received State Opioid Response (Opioid) funds during the period. The Department’s monitoring procedures required reviews over both fiscal and program areas for all subrecipients. However, auditors found that no reviews were completed for eight (89%) subrecipients that received $38.9 million in Opioid funds. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for opioid treatment and prevention services. According to Department management, the Department implemented a pause in monitoring due to the coronavirus pandemic; however, management did not get approval from the federal oversight agency. Federal regulations require the Department 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. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.788 (Opioid STR); Federal Award Identification Numbers (award periods): H79TI083312 (September 30, 2021 – September 29, 2023) and H79TI085757 (September 30, 2022 – September 29, 2023). Recommendation: Department management should obtain federal oversight agency approval to deviate from required processes and procedures. In addition, Department management should dedicate resources to: •Review and revise monitoring procedures as necessary in response to the operations impacted by the pandemic to ensure funds are used in accordance with federal requirements. •Follow-up on revised monitoring procedures to ensure corrective action is taken. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The eight subrecipients were not monitored because the Division of Mental Health, Developmental Disabilities, and Substance Use Services prioritized support of the Department’s ongoing response to the global COVID-19 pandemic (e.g., outreach, prevention, testing, vaccination). This resulted in a pause in monitoring of subrecipients. The Division is in the final stages of updating and strengthening its subrecipient monitoring policy and process. Those updates will include, among other things, requesting federal approval prior to deviating from required processes and procedures. The Division will ensure appropriate monitoring during times of business interruption, such as a public health emergency, or periods of high staff vacancies. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not submit complete, accurate, and timely subaward information for subrecipients of the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Substance Abuse Block Grant (SABG) to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 113 subawards totaling $77.5 million that were required to be reported to the FSRS during the audit period and found the following errors: • 105 subawards totaling $76.3 million were not reported at all. • 3 subawards totaling $167.1 thousand were reported 6 to 40 days late. In addition, auditors found that the Department reported $13.6 million in subaward expenditures that did not agree to supporting documentation. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the Division of Mental Health, Developmental Disabilities and Substance Abuse Services (DMH/DD/SAS) did not complete the FFATA reporting due to essential staff turnover across the Division. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-026. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI083468 (October 1, 2020 - September 30, 2022), B08TI083540 (March 15, 2021 – March 14, 2024), B08TI083959 (September 1, 2021 – September 30, 2025), B08TI084599 (September 1, 2021 – September 30, 2025), B08TI084663 (October 1, 2021 – September 30, 2023), and B08TI085825 (October 1, 2022 – September 30, 2024). Recommendation: Department management should prioritize the development of a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. In addition, Department management should monitor the contingency plan to ensure corrective action is taken. Views of Responsible Officials of the Auditee: Management agrees with this finding and recommendation. The Division of Mental Health, Developmental Disabilities, and Substance Use Services (DMHDDSUS) Business and Finance Office did not have the necessary staff adequately trained in FFATA reporting during SFY23 which led to reporting errors and reports not being completed. The Division hired a new Business Allocation Manager in July 2023 to oversee the FFATA reporting process and new policies and procedures were developed. DMHDDSUS will review and revise the FFATA reporting process to include a contingency plan for staff turnover. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Health and Human Services (Department) did not adequately monitor $59.6 million in federal funds passed to subrecipients for providing treatment and prevention services for substance abuse. Auditors reviewed the monitoring procedures over all 36 subrecipients that received substance abuse block grant (SABG) funds during the period. The Department’s monitoring procedures required reviews over both fiscal and program areas for all subrecipients. However, auditors found that no reviews were completed for 34 (94%) subrecipients that received $58.6 million in SABG funds. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for substance abuse treatment and prevention services. According to Department management, the Department implemented a pause in monitoring due to the coronavirus pandemic; however, management did not get approval from the federal oversight agency. Federal regulations require the Department 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. This finding was previously reported in the 2022 Statewide Single Audit as finding number 2022-027. Federal Award Information: Federal Awarding Agency U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI083468 (October 1, 2020 – September 30, 2022), B08TI084663 (October 1, 2021 – September 30, 2023), B08TI083959 (September 1, 2021 – September 30, 2025), B08TI084599 (September 1, 2021 – September 30, 2025), B08TI083540 (March 15, 2021 – March 14, 2024) and B08TI085825 (October 1, 2022 – September 30, 2024). Recommendation: Department management should obtain federal oversight agency approval to deviate from required processes and procedures. In addition, Department management should dedicate resources to: • Review and revise monitoring procedures as necessary in response to the operations impacted by the pandemic to ensure funds are used in accordance with federal requirements. • Follow-up on revised monitoring procedures to ensure corrective action is taken. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The thirty-six subrecipients were not monitored because the Division of Mental Health, Developmental Disabilities, and Substance Use Services prioritized support of the Department’s ongoing response to the global COVID-19 pandemic (e.g., outreach, prevention, testing, vaccination). This resulted in a pause in monitoring of subrecipients. The Division is in the final stages of updating and strengthening its subrecipient monitoring policy and process. Those updates will include, among other things, requesting federal approval prior to deviating from required processes and procedures. The Division will ensure appropriate monitoring during times of business interruption, such as a public health emergency, or periods of high staff vacancies. See Schedule of Findings and Questioned Costs for footnote.

Subrecipients Were Not Paid Timely The Department of Health and Human Services (Department) paid subrecipients of the Emergency Solutions Grant Program (ESGP) more than 30 days after receiving the payment request. During the audit period, the Department paid $24.2 million to ESGP subrecipients. Auditors tested a sample of 40 subrecipient payments totaling $365,000 and found that 25 (63%) payments were not paid until 31 to 153 days after receiving the payment requests. Subrecipients rely on ESGP funding to improve the number and quality of emergency shelters, provide essential services to shelter residents, re-house homeless individuals and families, and prevent families and individuals from becoming homeless. When subrecipients do not receive grant funds in a timely manner, it could impact their ability to provide these services to some of the states? most vulnerable citizens. According to Department management, subrecipients were not paid timely because of staffing shortages and a significant increase in workload. In addition to the annual ESGP allocation, the Department received additional funding through the Coronavirus Aid, Relief and Economic Security (CARES) Act. The additional funding significantly increased the number of subrecipient payment requests that needed to be processed, and the combination of key staff positions being vacant and the increase in the workload caused delays in processing the payments. Federal regulations require the Department to pay each subrecipient within 30 days after receiving the subrecipient?s payment request. Federal Award Information: Federal Awarding Agency: U.S. Department of Housing and Urban Development; Assistance Listing Number (title): 14.231 (Emergency Solutions Grant Program); Federal Award Identification Numbers (award periods): E-20-DC-37-001 (September 2, 2020 ? September 2, 2022) and E-20-EW-37-001 (COVID-19) (July 8, 2020 ? July 8, 2022). Recommendation: Department management should establish a contingency plan to ensure continuity of operations when workloads increase, and staffing shortages occur. Views of Responsible Officials of the Auditee: Management agrees with this finding. During the time period within the scope of this audit, three-fourths of the Division of Aging and Adult Services Budget Office positions were vacant. This was also the period of time when the COVID-19 pandemic began, and a significant amount of additional grant funding was received for Emergency Solutions Grant (ESG) and other programs. The combination of staff vacancies and the increased workload resulting from the rapid increase in new funding resulted in delays to approving payments to subrecipients. See Schedule of Findings and Questioned Costs for footnote.

Administration Funds Used for Unallowable Activities The Department of Commerce (Department) incorrectly used $18,028 of Unemployment Insurance (UI) administration award funds. During the audit period, the Department spent $116.8 million to administer the UI program. To administer the UI program, funds are allowed for both automation and nonautomation expenditures for the first 15 months of the award period and only automation expenditures for the remaining 21 months of the award period. Auditors tested 26 out of 1,750 UI expenditures, totaling $5.9 million, related to awards that were in the automation only period and found 4 errors totaling $18,028 that were not allowed. As a result, the $18,028 is considered questioned costs and the Department may be required to pay the funds back to the federal government. Furthermore, the funds could have been used for automation activities such as purchasing new computers and software for the UI program. According to Department management, reviews over the expenditures were not detailed enough to ensure only allowable expenditures were charged to the award during the automation period. Federal regulations require costs to conform to limitations and exclusions that apply to the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; Assistance Listing Number (title): 17.225 (Unemployment Insurance); Federal Award Identification Number (award period): UI-35666-21-55-A-37(October 1, 2020 ? December 31, 2023). Recommendation: Department management should develop and implement detailed review procedures over expenditures to ensure compliance with federal award requirements. Views of Responsible Officials of the Auditee: The Division of Employment Security agrees with this finding and has implemented corrective actions to strengthen internal controls and help prevent future errors of this nature. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Monitoring of Coronavirus Relief Funds The North Carolina Pandemic Recovery Office (NCPRO), a division of the Office of State Budget and Management, did not adequately monitor $159.9 million in federal funds used for expenditures incurred due to the COVID-19 pandemic. Auditors reviewed the monitoring procedures over subrecipients of state agencies that expended coronavirus relief funds. NCPRO?s monitoring procedures required monthly reviews of these subrecipients? expenditure reports. However, auditors found no evidence of this review. In addition, auditors tested a sample of 40 direct expenditures of state agencies and found no evidence of review of supporting documentation. Lastly, auditors reviewed the risk assessment procedures over all subrecipients. NCPRO?s monitoring plan required additional monitoring activities for all subrecipients assessed as high-risk. Auditors reviewed all 23 subrecipients that were assessed as high-risk and found that these additional monitoring activities were not completed for 9 (39%) of the subrecipients. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may have reduced funding available to respond to the COVID-19 pandemic. According to NCPRO management, the agency did not have sufficient personnel to complete the monitoring procedures established at the inception of the program. Subsequent legislation identified NCPRO as responsible for the administration of additional federal COVID-19 programs, and management did not revise existing monitoring procedures to reflect these additional responsibilities. Furthermore, monitoring procedures in place did not require that the results of reviews or other monitoring activities be documented. Federal regulations require NCPRO to: ? Establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. ? 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. This finding was previously reported in the 2021 Statewide Single Audit as finding number 2021-001. Federal Award Information: Federal Awarding Agency: U.S. Department of the Treasury; Assistance Listing Number (title): 21.019 (Coronavirus Relief Fund); Federal Award Identification Numbers (award periods): SLT0025 (March 1, 2020 - December 31, 2021) and SLT0237 (March 1, 2020 - December 31, 2021). Recommendation: NCPRO management should review and revise monitoring procedures over future federal programs as necessary in response to changes in operations, including evaluating the feasibility of procedures given the available personnel. In addition, NCPRO management should ensure that monitoring procedures over future federal programs include a requirement that personnel document completion of the procedures. Views of Responsible Officials of the Auditee: The Office of State Budget and Management and the North Carolina Pandemic Recovery Office accept the finding and have made improvements to ensure future federal funds are adequately monitored. See Schedule of Findings and Questioned Costs for footnote.

Errors in Program Spending The Department of Public Safety (Department) made $486,807 in overpayments of rent and utility assistance from the Emergency Rental Assistance program. During the audit period, the Department processed approximately 159,000 individual household applications totaling $635 million in rent and utility assistance payments. Auditors recalculated the $635 million rent and utility assistance payments to determine if the payment amounts were within the maximum thresholds established by the Department. The Department?s policy states that payment amounts should be the lesser of the established threshold or the amount that is owed by the applicant. Auditors found 25 overpayments totaling $27,015. Auditors then tested 95 individual household applications totaling $923,000 in rent and utility payments and found that documentation for three (3%) applications did not support the amount paid, resulting in overpayments totaling $26,530. Lastly, auditors reviewed the number of months of financial assistance that were provided to an individual household since the inception of the Emergency Rental Assistance program. The Department?s policy states that financial assistance for an individual household may not exceed 15 months. Auditors analyzed the database of approximately 114,000 households and identified 37,762 households that could have received more months of financial assistance than allowed. From the 37,762 households identified above, auditors tested 151 households that received $1.8 million in financial assistance. Auditors found that 84 (56%) households received one to 15 more months of financial assistance than allowed, resulting in overpayments totaling $433,262. As a result, the $486,807 in overpayments is considered questioned costs and the Department may be required to pay the funds back to the federal government. Furthermore, the overspent funds could have been used to provide rent and utility assistance to other eligible households in need. According to Department management, rent and utility payments were calculated using incorrect thresholds due to either a system programming code error or system malfunction. In addition, staff did not follow policies and procedures during the review and approval of financial assistance applications. Federal regulations require that costs be adequately documented and consistent with the program regulations that apply to the federal award. In addition, federal regulations and Department policy limit the financial assistance an eligible household may receive to 15 months. Certain aspects of aspects of this finding were previously reported in the 2021 Statewide Single Audit as finding number 2021-002. Federal Award Information: Federal Awarding Agency: U.S. Department of the Treasury; Assistance Listing Number (title): 21.023 (Emergency Rental Assistance); Federal Award Identification Numbers (award periods): ERA0019 (COVID-19) (January 11, 2021 ? December 31, 2022) and ERAE0098 (COVID-19) (May 5, 2021- September 30, 2025). Recommendation: Department management should analyze the payment calculation errors to identify and make the necessary updates to the system. Until the system issues are resolved, Department management should design and implement alternative procedures to ensure financial assistance payments are calculated correctly. In addition, Department management should develop additional training for staff or establish additional monitoring procedures over the application review and approval process. Views of Responsible Officials of the Auditee: The North Carolina Office of Recovery and Resiliency (NCORR) accepts the Auditor?s finding that the Department made errors in program spending. NCORR?s Compliance and Business Systems Department are actively working to reconcile the population of awards impacted by the errors identified. NCORR previously began recapture efforts on many of the awards identified during this audit, however, any remaining erroneous awards identified will immediately enter the recapture process. In the event any recaptured amounts enter default, NCORR reserves the right to engage federal partners and additional resources, such as collections agencies, to recover the funds. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $24.1 million in federal financial assistance funding to 6,930 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 40 students who received federal financial assistance and whose enrollment status changed. Three (8%) students were reported with an incorrect status change. Failure to report accurate student enrollment status changes to the NSLDS could prevent eligible students from receiving federal financial assistance in the future. Further, reporting inaccurate data could affect decisions made by the federal government regarding the effectiveness of financial assistance programs. According to College management, the College relied on the National Student Clearinghouse, a third-party service provider, to ensure accurate reporting of enrollment status changes. Management did not monitor the information reported to the NSLDS to ensure its agreement with College records. Federal regulations require the College to accurately report student status changes to the NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P211921 (July 1, 2021 ? June 30, 2022). Recommendation: College management should implement monitoring procedures over information that the National Student Clearinghouse submits to NSLDS to ensure all students with enrollment status changes are accurately reported. Views of Responsible Officials of the Auditee: College management concurs with the finding and recommendation. On September 2, 2022, management corrected the enrollment status for the three students identified with an incorrect status change. The College?s Senior Registrar is implementing an internal audit process in November to ensure all students with enrollment status changes are accurately reported to the National Student Loan Data System (NSLDS). See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $3.5 million in federal financial assistance funding to 978 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 40 students who received federal financial assistance and whose enrollment status changed. Two (5%) students were reported with an incorrect status change. Failure to report accurate student enrollment status changes to the NSLDS could prevent eligible students from receiving federal financial assistance in the future. Further, reporting inaccurate data could affect decisions made by the federal government regarding the effectiveness of financial assistance programs. According to College management, the College relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate reporting of enrollment status changes. Management did not monitor the information the Clearinghouse reported to the NSLDS to ensure it agreed with College records. Federal regulations require the College to accurately report student status changes to the NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P211936 (July 1, 2021 - June 30, 2022). Recommendation: College management should implement monitoring procedures over information that the Clearinghouse submits to NSLDS to ensure all students with enrollment status changes are accurately reported. Views of Responsible Officials of the Auditee: College management agrees with the audit finding and acknowledges that there were deficiencies in their enrollment status reporting process. To address these deficiencies, effective June 30, 2022, additional verification procedures have been implemented that will ensure that the College is routinely monitoring the information reported to NSLDS as compared with the College?s records to ensure that all student status changes are correctly reported to NSLDS per federal regulations. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $2.8 million in federal financial assistance funding to 720 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 40 students who received federal financial assistance and whose enrollment status changed. Seven (18%) students were not reported. Failure to report accurate student enrollment status changes to the NSLDS could prevent eligible students from receiving federal financial assistance in the future. Further, reporting inaccurate data could affect decisions made by the federal government regarding the effectiveness of financial assistance programs. According to College management, the errors occurred because personnel omitted an enrollment status change report submission in May 2022 and no independent verification was in place to detect the omission. Federal regulations require the College to accurately report student status changes to the NSLDS. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P211966 (July 1, 2021 ? June 30, 2022). Recommendation: College management should implement monitoring procedures, such as an independent verification, to ensure all enrollment status change reports are submitted to NSLDS. Views of Responsible Officials of the Auditee: College management agrees with the finding and recommendation. The Enrollment Reporting schedule in the College Registrar?s Office has been updated to ensure that reporting of student enrollment information occurs every month. Enrollment Reports will be shared with the Financial Aid Office to confirm monthly updates in NSLDS. This procedure will ensure that the College submits all student status changes on a monthly basis. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) and Supporting Effective Instruction (SEI) programs. Auditors reviewed all 298 SEI subawards totaling $60.9 million that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. Auditors also reviewed all 1,716 ESSER subawards totaling $3.3 billion that were required to be reported to the FSRS during the audit period and found that the Department stopped FFATA reporting on ESSER in December 2021. As a result, 1,291 subawards totaling $230.1 million made during 2022 were not reported. Auditors then tested a sample of 60 ESSER subawards that were reported and found one or more errors. Specifically: ? 51 subawards totaling $760.1 million did not include required information on how the funds were utilized. ? 30 subawards totaling $732 million were reported 47-61 days late. ? 6 subawards totaling $8.2 million were reported with either the wrong subrecipient or federal award information. ? 5 subawards totaling $1.1 million were reported twice. ? 9 subawards totaling $1.1 million were not reported at all. ? 38 subawards totaling $757 million did not agree to supporting documentation by a total of $805 thousand. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS or when it is reported incorrectly, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management: ? The errors found in the ESSER subawards that were reported occurred due to limited staffing resources. ? Additionally, Department management stopped entering ESSER subawards into FSRS in December 2021 due to technical difficulties experienced. ? Lastly, due to the difficulties experienced with entering the ESSER subawards into FSRS, the Department did not attempt to report any subawards for the SEI program. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Numbers (award periods): S425D200037 (COVID-19) (May 11, 2020 - September 30, 2021) and S425D210037 (COVID-19) (January 5, 2021 - September 30, 2022). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425U (American Rescue Plan - Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425U210037 (COVID-19) (March 24, 2021 - September 30, 2023). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.367 (Supporting Effective Instruction State Grants); Federal Award Identification Number (award period): S367A210032 (July 1, 2021 - September 30, 2022). Recommendation: Department management should prioritize seeking solutions from the federal oversight agency on technical difficulties. In addition, Department management should ensure staff are available to complete FFATA reporting as required. Views of Responsible Officials of the Auditee: The Department of Public Instruction (DPI) concurs with the finding and recommendation. While additional resources were commissioned to complete FFATA reporting requirements, technical considerations in the FFATA system remain problematic. The system restricts the number of entries per month, which makes it impossible for DPI to report awards within the required time limit. The Office of Federal Programs has continued to make requests to the federal oversight agency for technical assistance with the system. See Schedule of Findings and Questioned Costs for footnote.

Incomplete Monitoring The Department of Public Instruction (Department) did not complete all planned monitoring activities for 329 public school units (PSUs) that received $1.77 billion in federal funding from three programs during the audit period. Auditors reviewed the Department?s fiscal monitoring plan over all three programs which required site visits at 20 PSUs. However, auditors found that the Department did not complete site visits for 10 (50%) PSUs that received $34.1 million in funding. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for addressing the impacts of the COVID-19 pandemic on public education and providing services to public educators to improve student academic achievement. According to Department management, monitoring activities could not be completed as originally planned due to prioritizing other activities such as assisting external agencies with investigations of PSU?s and performing additional work related to closeout reviews for multiple Charter Schools that closed during the year. Furthermore, staffing issues continued to be a concern and vacancies required management to prioritize the investigations and Charter School closings over fiscal monitoring. Federal regulations require the Department 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. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425C (Governor?s Emergency Education Relief Fund); Federal Award Identification Numbers (award periods): S425C200034 (COVID-19) (June 1, 2020 - September 30, 2021) and S425C210034 (COVID-19) (January 8, 2021 - September 30, 2022). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Numbers (award periods): S425D200037 (COVID-19) (May 11, 2020 ? September 30, 2021) and S425D210037 (COVID-19) (January 5, 2021 - September 30, 2022). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425U (American Rescue Plan - Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425U210037 (COVID-19) (March 24, 2021 - September 30, 2023). Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.367 (Supporting Effective Instruction State Grants); Federal Award Identification Number (award period): S367A210032 (July 1, 2021 - September 30, 2022). Recommendation: Department management should review and revise monitoring procedures as necessary in response to changes in operations. In addition, Department management should prioritize the development of a contingency plan to ensure monitoring is completed when employee turnover occurs. Views of Responsible Officials of the Auditee: The Department of Public Instruction (DPI) concurs with the finding and recommendation. As noted in the finding, ongoing investigations involving external agencies and reviews requiring expanded scope have demanded significantly more time than anticipated by any of the parties involved. Some of this work is ongoing and will continue to impact fiscal monitoring work for the Monitoring and Compliance section within the Office of School Business Services. Other factors impacted the ability of Monitoring and Compliance to complete fiscal monitoring reviews during fiscal year 2022, including staffing issues and multiple Charter School closings, which added complexity to the closure workload and necessitated additional resources. Staffing has been an issue at DPI, but also within the PSUs (Public School Units) selected for monitoring. Vacancies and turnover within PSU positions such as CFO and Director of Federal Programs, resulted in delays throughout the monitoring process. The complexity of various Pandemic Relief funding streams has burdened other agencies with additional audit procedures which required interaction with the monitoring team as they serve as a conduit for other state agencies unfamiliar with PSUs. Monitoring and Compliance serves in this role to lessen the burden and help to facilitate audit work. See Schedule of Findings and Questioned Costs for footnote.

Incomplete Monitoring The Department of Public Instruction (Department) did not complete all planned monitoring activities for 329 public school units (PSUs) that received $1.77 billion in federal funding from three programs during the audit period. See finding 2022-009 for a description.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) and Supporting Effective Instruction (SEI) programs. See finding 2022-008 for a description. This finding was previously reported in the 2021 Statewide Single Audit as finding number 2021-015.

Incomplete Monitoring The Department of Public Instruction (Department) did not complete all planned monitoring activities for 329 public school units (PSUs) that received $1.77 billion in federal funding from three programs during the audit period. See finding 2022-009 for a description. This finding was previously reported in the 2021 Statewide Single Audit as finding number 2021-016.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not submit complete, accurate, and timely Federal Funding Accountability and Transparency Act (FFATA) reporting for the Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) and Supporting Effective Instruction (SEI) programs. See finding 2022-008 for a description.

Incomplete Monitoring The Department of Public Instruction (Department) did not complete all planned monitoring activities for 329 public school units (PSUs) that received $1.77 billion in federal funding from three programs during the audit period. See finding 2022-009 for a description.

Immunization Funds Used for Unallowable Activities The Department of Health and Human Services (Department) incorrectly used $127,676 of Immunization Cooperative Agreements (Immunization) program funds. During the audit period, the Department spent $101.2 million in Immunization funds to establish and maintain health services programs for vaccine-preventable diseases. The Department entered into contracts with vendors and subrecipients (collectively called agreements), to administer the Immunization program. Auditors tested 26 of the 145 agreements that had expenditures totaling $13.3 million and found one (4%) agreement that used the funds on activities not allowed by the Immunization program. As a result, the $127,626 is considered questioned costs and the Department may be required to pay the funds back to the federal government. In addition, the funds could have been used on activities that help control the spread of infectious diseases through immunization. According to Department management, unallowable activities were charged to the Immunization program because a purchase order was mistakenly issued using the incorrect funding source and it was not detected during the review and approval process. Federal regulations require Immunization program funds be used by states to assist them in meeting the costs of establishing and maintaining preventive health service programs. In addition, federal regulations require costs to be necessary and reasonable; authorized; adequately documented, and consistent with the program regulations that apply to the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.268 (Immunization Cooperation Agreements); Federal Award Identification Number (award period): 6NH231P922624 (COVID-19) (July 1, 2019 - June 30, 2024). Recommendation: Department management should ensure that staff responsible for reviewing and approving program spending have a clear understanding of the funding sources that can be used. Views of Responsible Officials of the Auditee: The Department agrees with this finding regarding the SFY 22 audit of Immunization funds that found that $127,626 was expended against the Immunization grant for consulting services in error. These expenditures were reclassified in September 2022 (SFY 23), which is after the audit period. The Department, in responding to a once-in-a-lifetime, global pandemic, was engaged in multiple cross-departmental functions and activities; including contracts necessary to address the needs of the state throughout the pandemic. This included a significant number of contracts and purchases which had to be completed very quickly. We will ensure that staff responsible for reviewing and approving program spending have a clear understanding of the funding sources that can be used. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not report complete and accurate subaward information for some subrecipients of the Immunization Cooperative Agreements grant to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 186 subawards totaling $42.9 million that were required to be reported to the FSRS during the audit period and found the following errors: ? 74 subawards totaling $17.2 million were not reported at all. ? Two subawards totaling $200,419 were overreported by $171,081 because they were reported with incorrect amounts. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS or when it is reported incorrectly, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the incomplete and inaccurate reporting occurred because staff prioritized vaccine allocation, distribution, and utilization over FFATA reporting requirements. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.268 (Immunization Cooperative Agreements) Federal Award Identification Numbers (award periods): 6NH23IP922624 (COVID-19) (July 1, 2019 ? June 20, 2024) and 5NH23IP922624-03 (July 1, 2021 ? June 30, 2022). Recommendation: Department management should develop a contingency plan to ensure FFATA reporting is completed and reviewed for accuracy when priorities need to be shifted to meet other demands. Views of Responsible Officials of the Auditee: The Department agrees with the finding and is developing plans to ensure accurate and complete reporting in accordance with the Federal Funding Accountability and Transparency Act (FFATA), specifically during times of business disruption such as a public health emergency. Division of Public Health (DPH) staff were responding to a once-in-a-lifetime, global pandemic and were engaged in the largest mass vaccination efforts in modern public health history. The goal of the DPH Immunization Branch was to implement the COVID-19 Vaccination Program as a critical component to reduce COVID-19-related illnesses, hospitalizations, and deaths and to help restore societal functioning. As such, incomplete reporting occurred because DPH prioritized its limited staff and resources on vaccine allocation, distribution, and utilization over FFATA reporting requirements. Vaccines are one of the greatest success stories in public health and the COVID-19 vaccine is still a critical component of the United States' strategy to address the COVID-19 pandemic. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the TANF Eligibility Determination Process The Department of Health and Human Services (Department) paid Temporary Assistance for Needy Families (TANF) benefits to ineligible families based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 56,600 families received $129.3 million in TANF benefits. The task of determining eligibility for the TANF program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements, establishing eligibility determination policies, maintaining NC FAST , and facilitating training. Auditors redetermined eligibility for a sample of 93 families that had benefits totaling $212,647 paid to or on their behalf during the audit period. Auditors found two (2.2%) families to be ineligible for cash assistance during the coverage period. Payments totaling $4,935 were paid to these ineligible families. In addition to the eligibility errors noted above, auditors also identified 10 families whose income calculations were inaccurate or whose case files were missing some of the required eligibility documentation. Examples of missing information included kinship verifications, required child custody statements, and online verification documentation. However, when auditors redetermined eligibility using the correct information, the families were found to be eligible. As a result, there is an increased cost to the TANF program, and the funds could have been used to provide benefits to other eligible families. Even though the tests identified only $4,935 that was paid to the ineligible families, if tests were extended to the entire population, questioned costs could be greater than $25,000. According to Department management, the errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. Federal regulations state that recipients are only eligible if they meet the requirements of a financially needy family with children. Further, state eligibility manuals require documentation to support eligibility determinations. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Identification Numbers (award periods): 2101NCTANF (October 1, 2020 to September 30, 2022) and 2201NCTANF (October 1, 2021 to September 30, 2023). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training for county DSS staff or establish other procedures as necessary to prevent future errors from occurring. Views of Responsible Officials of the Auditee: Management agrees with this finding and will implement a correction action plan to appropriately assess the issue. See Schedule of Findings and Questioned Costs for footnote.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Temporary Assistance for Needy Families (TANF) program. Auditors reviewed all 270 subawards totaling $166.8 million that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. The TANF subawards were administered by two divisions within the Department and according to Department management, ? The Division of Social Services (DSS) did not complete the FFATA reporting for 182 subawards totaling $98.5 million because significant turnover during the audit period reduced the number of staff available to carry out the FFATA reporting requirements. ? The Division of Child Development and Early Education (DCDEE) did not complete the FFATA reporting for the remaining 88 subawards totaling $68.3 million because there was a misunderstanding as to who was responsible for completing the FFATA reporting. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Identification Numbers (award periods): 2101NCTANF (October 1, 2020 ? September 30, 2022) and 2201NCTANF (October 1, 2021 - September 30, 2023). Recommendation: Department management should prioritize the development of a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. Additionally, Department management should provide clear guidance about FFATA reporting responsibilities to all Department divisions. Views of Responsible Officials of the Auditee: The Department agrees with the finding and is prioritizing the development of plans to ensure FFATA reporting compliance. See Schedule of Findings and Questioned Costs for footnote.

Inaccurate TANF Data on Families Was Submitted to the Federal Government The Department of Health and Human Services (Department) submitted inaccurate Temporary Assistance for Needy Families (TANF) data to the U.S. Department of Health and Human Services? Administration for Children and Families (ACF). During the reporting period, approximately 10,600 families received approximately $26.3 million in cash assistance from the TANF program. Auditors tested a sample of case files for 60 families from the quarterly performance reports that were submitted for the reporting period and found 10 (17%) cases where the number of months the participant received assistance was reported incorrectly. In addition, the Department over-reported the total number of families receiving assistance by approximately 2,900 (27%) families. The Department?s failure to submit accurate data could lead to penalties. A penalty of 4% of the adjusted State Family Assistance Grant (SFAG) can be imposed for each quarter the Department fails to submit an accurate, complete, and timely report. Based on the federal fiscal year 2021 SFAG, the penalty could be up to $10.2 million. Furthermore, inaccurate data could impact the Department?s Work Participation Rate (WPR) calculation. The data collected in the quarterly performance report is used by ACF to determine whether the Department achieved the WPR. Failure to achieve the WPR could also result in additional penalties. According to Department management, the quarterly performance reports submitted for federal fiscal year 2021 were not accurate due to a programming code error as well as programming code changes needed after the transition to NC FAST , which occurred in state fiscal year 2015. The Division of Social Services (DSS) is aware of the code changes needed and has been working with the Department?s NC FAST and IT staff to correct coding, criteria, and conversion issues related to the transition to NC FAST. However, they were unable to resolve all issues before submitting the federal fiscal year 2021 reports. Federal regulations require the Department to submit quarterly performance reports with data on the families receiving TANF assistance. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Identification Number (period): 2101NCTANF (October 1, 2020 ? September 30, 2022). Recommendation: Department management should continue working with the NC FAST and IT staff to identify and correct unresolved programming code issues to ensure accurate reports are submitted. In addition, until the programming code issues are resolved, Department management should design and implement alternative procedures to ensure accurate data is reported. Views of Responsible Officials of the Auditee: Management agrees with this finding. The inaccurate reporting of a recipient?s number of months received is a known issue and is a result of coding changes needed after the transition to NC FAST. NC FAST has created a 60 Month Time Clock table to capture this data, and the division is aware of the coding changes needed to use this table for reporting. This coding change is already on the ACF-199 project list, but was unable to be completed prior to the submission of the FFY 21 data. The inaccurate reporting regarding the number of families was due to a programming code error in which cases were not deduplicated for each report month. The incorrect code has been identified and will be corrected to ensure cases are only counted once per month. See Schedule of Findings and Questioned Costs for footnote.

FFATA Reporting Not Completed The Department of Health and Human Services (Department) did not complete the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Social Services Block Grant (SSBG). Auditors reviewed all 240 subawards totaling $55.7 million that were required to be reported to the FFATA Subaward Reporting System (FSRS) during the audit period and found that none were reported as required. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. The SSBG subawards were administered by two divisions within the Department and according to Department management, ? The Division of Social Services (DSS) did not complete the FFATA reporting for 230 subawards totaling $41.3 million because significant turnover during the audit period reduced the number of staff available to carry out the FFATA reporting requirements. ? The Division of Mental Health, Developmental Disabilities and Substance Abuse Services (DMH/DD/SAS) did not complete the FFATA reporting for the remaining 10 subawards totaling $14.4 million due to essential staff turnover across the Division. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.667 (Social Services Block Grant); Federal Award Identification Numbers (award periods): 2101NCSOSR (October 1, 2020 ? September 30, 2022) and 2201NCSOSR (October 1, 2021 - September 30, 2023). Recommendation: Department management should prioritize the development of a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. Views of Responsible Officials of the Auditee: The Department agrees with the finding and is prioritizing the development of plans to ensure FFATA reporting compliance. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Health and Human Services (Department) did not adequately monitor subrecipients that received $57.5 million in Social Services Block Grant (SSBG) funds during the audit period. SSBG is administered by three divisions within the Department and each division is responsible for monitoring the subrecipients that received SSBG funds. Auditors reviewed the monitoring activities over 28 of the 63 subrecipients and found that no monitoring was completed for 7 (25%) subrecipients that received $3.6 million in SSBG funds. Inadequate monitoring increases the risk that federal funds may not be used in accordance with federal requirements, which may reduce the funding available for providing essential services to individuals and families that help reduce dependency and promote self-sufficiency, and protect children and adults from neglect, abuse, and exploitation. According to Department management, the seven subrecipients were not monitored because the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services implemented a pause in monitoring the Local Management Entity/Managed Care Organizations (LME/MCO?s) due to the coronavirus pandemic; however, management did not get approval from the federal oversight agency. In addition, vacancies in positions responsible for overseeing the monitoring process prevented management from developing alternative monitoring methods during the pause. Federal regulations require the Department 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. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.667 (Social Services Block Grant) Federal Award Identification Numbers (award periods): 2101NCSOSR (October 1, 2020 - September 30, 2022); 2201NCSOSR (October 1, 2021 ? September 30, 2023). Recommendation: Department management should obtain federal agency oversight approval to deviate from required processes and procedures. In addition, Department management should establish contingency plans to ensure monitoring activities are completed during employee turnover. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The seven subrecipients were not monitored because the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services prioritized support of the Department?s ongoing response to the global COVID-19 pandemic (e.g., outreach, prevention, testing, vaccination). This resulted in a pause in monitoring the Local Management Entity/Managed Care Organizations (LME/MCO?s); In addition, vacancies in positions responsible for overseeing the monitoring process prevented management from developing alternative monitoring methods during the pause. See Schedule of Findings and Questioned Costs for footnote.

Errors in Medicaid Billing and Payment Process The Department of Health and Human Services (Department) made overpayments to Medicaid providers during the fiscal year ended June 30, 2022. During that period, the Department processed more than 24 million original fee-for-service claims totaling $8.1 billion in payments. Auditors tested the medical documentation for a sample of 151 original fee-for-service claims totaling approximately $19.0 million in payments and identified 14 (9.3%) claims that contained errors. Specifically: ? Auditors were not able to test six (4.0%) claims because the providers failed to provide the medical documentation to support the services that were billed, resulting in overpayments totaling $11,708 (federal share $8,658). ? The medical documentation provided for eight (5.3%) claims did not support the services billed by the provider, resulting in overpayments totaling $1,469 (federal share $1,085). In addition, auditors recalculated the payments for 87 original fee-for-service claims totaling approximately $18.9 million and identified two (2.3%) maternity event claims that were reimbursed at the incorrect billing rate, resulting in net overpayments totaling $125 (federal share $93). As a result, there is an increased cost to the Medicaid program which is jointly financed by the state and federal government and is administered by the state. In addition, when providers do not provide access to medical documentation or do not maintain documentation to support the services billed, it increases the risk of improper payments for ineligible services. Even though the tests identified only $13,302 in overpayments (federal share $9,836), if tests were extended to the entire population, questioned costs could be greater than $25,000 and the Department may be required to pay the funds back to the federal government. According to Department management, there were several reasons for the errors: ? Providers did not respond to several requests by the Division of Health Benefits to provide the medical documentation for audit purposes. ? Providers did not document and/or maintain adequate medical records to support the services billed in the claim. ? The maternity event claims were reimbursed at the incorrect billing rate because the Department did not provide rate changes to General Dynamics Information Technology (GDIT) to update the claims processing system. Federal regulations require costs to be adequately documented and consistent with program regulations that apply to the federal award. In addition, providers sign an agreement that requires them to maintain records disclosing the extent of services furnished to recipients and, on request, furnish the records to the Department. Furthermore, North Carolina General Statute 108C-11 requires providers to cooperate with all announced and unannounced audits. Providers who fail to grant prompt and reasonable access or who fail to timely provide specifically designated documentation to the Department may be terminated from the North Carolina Medicaid program. This finding was previously reported in the 2021 Statewide Single Audit as finding number 2021-021. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program); Federal Award Identification Numbers (award periods): 2105NC5MAP (October 1, 2020 ? September 30, 2021) and 2205NC5MAP (October 1, 2021 ? September 30, 2022). Recommendation: Department management should determine if the failure to submit medical documentation should result in the providers? termination or suspension from participation in the Medicaid program. In addition, Department management should analyze each error and follow-up on the overpaid claims to specifically identify corrective action such as further education of providers and recoupment of costs. Lastly, Department management should work with GDIT to get the claims processing system updated with the correct rates so that the impacted claims can be reprocessed. Views of Responsible Officials of the Auditee: The Division of Health Benefits (DHB) agrees with this finding. DHB is dedicated to claims payment accuracy and continues to work with providers to minimize errors in the claims payment process. DHB will analyze each error and take immediate and appropriate corrective action, including recouping any identified overpayments and emphasizing provider education where necessary. A Tentative Notice of Decision (TND) will be sent to each provider to recoup any overpayment identified. Providers who failed to submit documentation as requested will be reviewed and appropriate corrective action will be taken. DHB will also conduct a six-month post payment review of these providers? fee-for-service paid claims to determine if errors are recurring. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Eligibility Determination Process The Department of Health and Human Services (Department) made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 2.2 million beneficiaries received $17.6 billion in Medicaid benefits. The task of determining eligibility for the Medicaid program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 147 beneficiaries that had benefits totaling $38 million paid on their behalf during the audit period and found two (1.36%) eligibility errors. Specifically: ? One (0.68%) beneficiary was determined eligible for the incorrect Medicaid group, and received services during the coverage period they were not entitled to receive. Payments for those services totaling $846 (federal share $627) were paid on behalf of this beneficiary. ? One (0.68%) beneficiary was found to be ineligible for a portion of the coverage period due to inaccurate eligibility calculations. Payments totaling $92 (federal share $68) were paid on behalf of this beneficiary during the ineligible portion of the coverage period. In addition to the eligibility errors noted above, auditors also identified 32 beneficiaries whose case files were either missing required eligibility documentation, such as self-employment verification, or inaccurate calculations and household composition were used or were missing a completed recertification. However, when auditors redetermined eligibility using the correct information the beneficiaries were found to be eligible. Beneficiaries continued to receive benefits without a completed recertification because of the ongoing coronavirus public health emergency. As a result, there is an increased cost for the Medicaid Program for both the state and federal government. The program is jointly financed by these two governments, and is administered by the state. Even though the tests identified only $938 in overpayments (federal share $695), if tests were extended to the entire population, questioned costs could be greater than $25,000. Although $938 resulted from the errors identified, the amount of Medicaid funds paid on behalf of ineligible beneficiaries is likely greater. Self-attestation by applicants is accepted for certain elements of the Modified Adjusted Gross Income methodology of determining eligibility. Further verification or documentation is not required. Auditors tested participant eligibility using the documentation contained in the case files, which includes self-attested data that could not be verified by the auditors. According to Department management, the errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff utilize NC FAST to input data and make eligibility determinations; however, the Department is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training. Federal regulations require that the Department, or its designee, determine eligibility for all individuals applying for or receiving benefits in accordance with eligibility requirements defined in the approved state plan. Further, federal regulations require that documentation be obtained as needed to determine if a beneficiary meets specific income standards and documentation must be maintained to support eligibility determinations. This finding was previously reported in the 2021 Statewide Single Audit as finding number 2021-022. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program); Federal Award Identification Numbers (award periods): 2105NC5MAP (October 1, 2020 ?September 30, 2021) and 2205NC5MAP (October 1, 2021 ? September 30, 2022). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring. Views of Responsible Officials of the Auditee: The Department agrees with this finding. As required by the North Carolina Legislature, the Department has delegated the administration of Medicaid eligibility determinations to the 100 local county offices of the Division of Social Services (DSS). The Department provides the NC FAST system, issues eligibility policies, facilitates training and provides technical support to the county DSS? to enable their administration of eligibility determinations. Using the Centers for Medicare and Medicaid Services? (CMS) Payment Error Rate Measurement (PERM) standards as a model, the Department set an acceptable error rate of 3.2% for the accuracy of county eligibility determinations. The Department monitors the accuracy of each county?s eligibility determinations and implements accuracy improvement plans as necessary. As part of the monitoring process, the Department engages with the counties to determine if adjustments are needed to policy, training facilitation or the NC FAST system. The Department has reviewed the specific errors identified in the audit and will take appropriate steps to correct the improper eligibility determinations. See Schedule of Findings and Questioned Costs for footnote.

Funds Not Used on Primary Prevention Programs The Department of Health and Human Services (Department) did not allocate and use $84,279 of Substance Abuse Block Grant (SABG) funds for primary prevention programs as required. During the federal award period, the Department was required to allocate and use $9.1 million (20%) of the $45.4 million received for SABG on primary prevention programs designed to reduce the risk of substance abuse. However, the Department only allocated and used 19.82%. As a result, $84,279 is considered questioned costs and the Department may be required to pay the funds back to the federal government. In addition, the funds were not used on prevention strategies as intended, which aim to reduce the impact of substance abuse such as awareness and education to individuals. According to Department management, the error occurred because the staff responsible for award spending misunderstood the calculation requirements for determining the amount required for primary prevention programs. Federal regulations require that no less than 20% of SABG funds be spent on primary prevention programs to educate and counsel individuals to reduce the risk of substance abuse. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Number (award period): B08TI083050 (October 1, 2019 ? September 30, 2021). Recommendation: Department management should ensure that staff responsible for determining award spending have a clear understanding of the calculation requirements. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The Division of Mental Health, Developmental Disabilities, and Substance Use Services (DMH/DD/SUS) is updating and strengthening its grant financial monitoring policies and processes. See Schedule of Findings and Questioned Costs for footnote.

Funds Spent After Award Ended The Department of Health and Human Services (Department) incorrectly used $317,153 of Substance Abuse Block Grant (SABG) funds from an award that ended. During the award period, the Department spent $45.4 million in SABG funds to provide treatment and prevention services for substance abuse. The Department?s 2020 SABG award period ended on September 30, 2021 and the Department had 90 days after the award ended to pay for expenditures that were incurred during the award period. Auditors tested $2.9 million SABG expenditures that were paid after the award ended and found that expenditures totaling $317,153 (11%) were outside the period of performance. As a result, the Department may be required to pay $317,153 back to the federal government. Furthermore, using grant expenditures outside the award period prevents the Department from monitoring and budgeting program activities, which could put future funding available for additional program activities at risk for reversion to the federal government. According to Department management, expenditures are reclassified to prior award periods to help ensure full utilization of grant funds; however, reviews over the reclassified expenditures were not detailed enough to ensure expenditures were within the period of performance. Federal regulations require the Department to charge the federal award for allowable costs incurred during the period of performance (award period). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Number (award period): B08TI083050 (October 1, 2019 ? September 30, 2021). Recommendation: Department management should develop and implement detailed review procedures over grant expenditures to ensure compliance with period of performance requirements. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The Division of Mental Health, Developmental Disabilities, and Substance Use Services is updating and strengthening its grant financial monitoring policies and processes. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not report complete and accurate subaward information for some subrecipients of the Substance Abuse Block Grant (SABG) to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 19 subawards totaling $47.8 million that were required to be reported to the FSRS during the audit period and found the following errors: ? 14 subawards totaling $47.3 million were not reported at all. ? 1 subaward totaling $311,000 was overreported by $165,926 because it was reported with the incorrect amount. In addition, auditors found that the Department reported $1.2 million in expenditures for five subrecipients in the wrong period. The FFATA was enacted to help reduce wasteful spending in government by empowering every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to Department management, the incomplete and inaccurate reporting occurred because of essential staff turnover during the year. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI083050 (October 1, 2019 ? September 30, 2021), B08TI083468 (October 1, 2020 - September 30, 2022), and B08TI083540 (March 15, 2021 ? March 14, 2023). Recommendation: Department management should prioritize the development of a contingency plan to ensure FFATA reporting is completed and reviewed for accuracy when employee turnover occurs. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. The Federal Funding Accountability and Transparency Act (FFATA) reporting was not completed correctly as available staff prioritized support of the Department?s ongoing response to the global COVID-19 pandemic (e.g., outreach, prevention, testing, vaccination). Available staff were not adequately trained in FFATA reporting which led to over-reporting the subaward totaling $311,000 by $165,926 due to a duplication error on the FFATA award worksheet for one Local Management Entity/Managed Care Organizations. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department of Health and Human Services (Department) did not adequately monitor $47 million in federal funds passed to subrecipients for providing treatment and prevention services for substance abuse. Auditors reviewed the monitoring procedures over subrecipients that received substance abuse block grant (SABG) funds. The Department?s monitoring procedures required reviews over both fiscal and program areas for all subrecipients. However, auditors reviewed all 14 subrecipients and found that no reviews were completed for 12 (86%) subrecipients that received $46.3 million in SABG funds. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may reduce the funding available for substance abuse treatment and prevention services. According to Department management, the Department implemented a pause in monitoring due to the coronavirus pandemic; however, management did not get approval from the federal oversight agency. In addition, vacancies in positions responsible for overseeing the monitoring process prevented management from developing alternative monitoring methods during the pause. Federal regulations require the Department 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. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Identification Numbers (award periods): B08TI084663 (October 1, 2021 ? September 30, 2023), B08TI083468 (October 1, 2020 ? September 30, 2022), B08TI083959 (September 1, 2021 ? September 30, 2025), B08TI084599 (September 1, 2021 ? September 30, 2025), and B08TI083540 (March 15, 2021 ? March 14, 2023). Recommendation: Department management should obtain federal oversight agency approval to deviate from required processes and procedures. In addition, Department management should establish contingency plans to ensure monitoring procedures are completed during employee turnover. Views of Responsible Officials of the Auditee: Management agrees with the finding and recommendation. Subrecipients were not monitored because the Division of Mental Health, Developmental Disabilities, and Substance Abuse Services prioritized support of the Department?s ongoing response to the global COVID-19 pandemic (e.g., outreach, prevention, testing, vaccination). This resulted in a pause in monitoring the Local Management Entity/Managed Care Organizations (LME/MCO?s). See Schedule of Findings and Questioned Costs for footnote.

Inadequate Monitoring of Coronavirus Relief Funds The North Carolina Pandemic Recovery Office (NCPRO), a division of the Office of State Budget and Management, did not adequately monitor $2.92 billion in federal funds used for expenditures incurred due to the COVID-19 pandemic. Specifically, NCPRO did not: ? Review subrecipient expenditures. ? Complete separate monitoring activities for high-risk subrecipients. ? Review subrecipient audit reports. ? Review direct expenditures of state entities. First, auditors reviewed the monitoring procedures over subrecipients that received coronavirus relief funds. NCPRO?s monitoring procedures required reviews of subrecipient expenditure reports and supporting documentation. However, auditors tested a sample of 60 out of 3,007 subrecipients and found no evidence of this review for 57 (95%) subrecipients. Second, auditors reviewed the risk assessment procedures over all subrecipients. NCPRO?s monitoring plan required separate monitoring activities for subrecipients assessed as high risk. Auditors reviewed all 25 subrecipients that were assessed as high-risk and found that these separate monitoring activities were not completed for 14 (56%) of the subrecipients. Third, auditors reviewed the monitoring procedures for a sample of 15 subrecipients that were required to have an audit in accordance with the Uniform Guidance and found no evidence that NCPRO verified the audits were performed. Lastly, auditors tested a sample of 60 direct expenditures of state entities and found no evidence of review of supporting documentation. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may have reduced funding available to respond to the ongoing COVID-19 pandemic. According to NCPRO management, monitoring procedures did not require that the results of reviews and other monitoring activities be documented. Further, management did not review or revise monitoring procedures following changes in federal programs and operations. These changes required management to prioritize other responsibilities, resulting in personnel not being available for monitoring. Federal regulations require NCPRO to: ? Establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. ? 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. ? Verify that every subrecipient is audited as required. Federal Award Information: Federal Awarding Agency: U.S. Department of the Treasury; Assistance Listing Number (title): 21.019 (Coronavirus Relief Fund); Federal Award Identification Numbers (award periods): SLT0025 (March 1, 2020 - December 31, 2021) and SLT0237 (March 1, 2020 - December 31, 2021). Recommendation: NCPRO management should ensure that monitoring procedures are designed and implemented, including a requirement that personnel document the completion of the procedures. In addition, NCPRO management should review and revise monitoring procedures as necessary in response to changes in federal programs or operations, including contingency plans to address personnel shortages. Views of Responsible Officials of the Auditee: NCPRO accepts this finding. NCPRO established internal monitoring and review standards that were higher than those required at the federal level and without regard to budget and staff limitations. The General Assembly ultimately funded NCPRO at half of the recommended amount, which left the office understaffed and contributed to the inadequate documentation of monitoring procedures of CRF funds. The Recovery Act required the distribution, coordination, expenditure, and monitoring of CRF funds to occur within an urgent seven-month period from the passage of Session Law 2020-4 (May 4, 2020) to the program end date (December 30, 2020). On December 27, 2020, the Coronavirus Relief and Response Supplemental Appropriations Act of 2021 was signed into law extending the expenditure of Coronavirus Relief Funds through December 31, 2021. NCPRO acknowledges that a lack of staffing and funding and the temporary nature of NCPRO contributed to the State Auditor?s finding that the monitoring efforts were not as robust as they should be. To that point, NCPRO began investing in additional monitoring staff throughout 2021, and engaged an external firm to assist with program, staffing, and internal controls design closely following federal and state standards. Additionally, NCPRO worked to strengthen processes associated with the nine controls previously implemented and increased the frequency of expenditure verification. NCPRO plans to apply these changes to the CRF dollars as well as the additional federal pandemic recovery funds that it will manage for the State of North Carolina with the passage of additional federal legislation. NCPRO and OSBM also took steps to seek additional longer-term funding from the NC General Assembly for NCPRO to improve these functions. At present, NCPRO is statutorily required to dissolve on June 30, 2023. Despite the lack of documented monitoring, NCPRO was able to collect and has highlighted the success stories from recipients and subrecipients in using CRF to help North Carolina?s people, communities, and businesses recover from the pandemic. These success stories can be accessed on the NCPRO website. See Schedule of Findings and Questioned Costs for footnote.

Errors in Program Spending The Department of Public Safety (Department) incorrectly used Emergency Rental Assistance (ERA) program funds. During the audit period, the Department provided $75.1 million in ERA funds to assist households with rent and utility payments. To maximize the benefits of the ERA program, the Department transferred a portion of ERA funds to reimburse rent and utility payments that were previously paid by other funding sources. Auditors reviewed the $21.5 million in transfer activity between the ERA program and other funding sources and initially found that some expenditures were reimbursed twice, resulting in overpayments of $1,201,030. Auditors then tested a sample of 60 of the remaining transfer payments and found errors in 9 (15%) of the payments, totaling $3,385. Specifically: ? Four payments did not agree to the supporting documentation. ? Two payments were for expenditures that were not allowed. ? Two payments were for expenditures that were reimbursed twice, resulting in additional overpayments. ? One payment did not have documentation to support that the expenditures occurred within the period of performance. Additionally, auditors tested a sample of 60 payments made on behalf of households and found errors in 13 (22%) of the payments, totaling $5,285. Specifically: ? 11 payments did not agree to the supporting documentation and occurred outside the period of performance. ? One payment did not have documentation to support that the charges occurred within the period of performance. ? One payment was for expenditures that were previously paid. Lastly, auditors tested 90 payments for utility assistance and found errors in 70 (78%) of the payments, totaling $131,995. Specifically: ? 49 payments did not have documentation to support that the charges occurred within the period of performance. ? Ten payments were for charges that were previously paid. ? Eight payments did not agree to the supporting documentation. ? Two payments were for charges that occurred outside the period of performance. ? One payment was keyed incorrectly. As a result of errors in ERA program spending, the Department may be required to pay $1,341,695 back to the U.S. Department of the Treasury. In addition, there is an increased risk that federal funds may not be used in accordance with the federal requirements, which reduces funding available to assist other households affected by the COVID-19 pandemic. According to Department management, the errors occurred because the reviews over grant expenditures were not detailed enough to ensure funds were used in accordance with federal regulations. Federal regulations require the Department to: ? Establish and maintain effective internal controls over the federal award that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. ? Charge the federal award for allowable costs incurred after the effective date of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of the Treasury; Assistance Listing Number (title): 21.023 (Emergency Rental Assistance); Federal Award Identification Number (award period): 1505-0266 (COVID-19) (January 11, 2021 ? December 31, 2021). Recommendation: Department management should develop and implement detailed review procedures over grant expenditures to ensure compliance with federal regulations. Auditor?s Response: The Office of the State Auditor (OSA) is required to provide additional explanation when an agency?s response could potentially cloud an issue, mislead the reader, or inappropriately minimize the importance of auditor findings. Generally Accepted Government Auditing Standards state, when the audited entity?s comments are inconsistent or in conflict with the findings, conclusions, or recommendations in the draft report, the auditors should evaluate the validity of the audited entity?s comments. If the auditors disagree with the comments, they should explain in the report their reasons for disagreement. The Department of Public Safety (Department) response included statements that mislead the reader. To ensure the availability of complete and accurate information, OSA offers the following clarifications. The Emergency Rental Assistance (ERA) program was implemented to assist households impacted by the COVID-19 pandemic with rent and utility payments. Since this was an emergency funding program, the U.S. Department of the Treasury (Treasury) did not issue formal guidance at the time of the award. The Treasury subsequently published frequently asked questions (FAQs ) as guidance regarding requirements for administering the ERA program. The Department?s response includes references to the FAQs to support its disagreement with the audit finding in two main areas: documentation required to support both the utility charges (allowable costs ) and the time period for when the utility charges were incurred (period of performance). The Department points to FAQ #1 to support its belief that written attestations satisfy the requirement to validate utility charges. However, the Department narrowly based its interpretation on FAQ #1 and did not consider all of the 42 FAQs in totality. FAQ #6 states that utility charges should be supported by a bill, invoice, or evidence of payment. In addition, FAQ #9 states that a grantee may provide for assistance in arrears but not for charges incurred before March 13, 2020. FAQ #1 supports that written attestations can be used for household eligibility, but it does not support that written attestations can be used to determine whether utility charges were incurred after the start of the pandemic. Auditors requested the Department to get clarification from the Treasury on the use of written attestations to support allowable costs and period of performance. The Department did not. FIRST, the Department stated: The support documentation provided contains all of the information needed to accept these awards. Treasury ERA FAQ dated August 25th, 2021 states: ?In all cases, grantees must document their policies and procedures for determining a household?s eligibility to include policies and procedures for determining the prioritization of households in compliance with the statute and maintain records of their determinations. Grantees must also have controls in place to ensure compliance with their policies and procedures and prevent fraud. Grantees must specify in their policies and procedures under what circumstances they will accept written attestations from the applicant without further documentation to determine any aspect of eligibility or the amount of assistance, and in such cases, grantees must have in place reasonable validation or fraud-prevention procedures to prevent abuse.? (p.2-3) ? this guidance clearly supports that written attestations are allowable for any aspect of eligibility or the amount of assistance, including the number of months the applicant is behind on their utility payments. This response misleads the reader to believe that written attestations for determining eligibility would be sufficient to ensure compliance with allowable costs and period of performance. Written attestations of eligibility do not provide support to determine whether utility charges were incurred after March 13, 2020. For the referenced payments, the Department did not provide evidence to support allowable costs and period of performance, as stated in FAQ #6 and FAQ #9. SECOND, the Department stated: ?the support documentation provided contains all of the information needed to accept these awards. This response again misleads the reader to believe that written attestations of eligibility provide support to determine whether utility charges were incurred after the start of the pandemic. THIRD, the Department stated: The data provided through the DSAs is equivalent to utility statements provided directly to customers. One such requirement was to only share monthly charges incurred for services provided from April 1, 2020. Therefore, payments provided based on this documentation could not have occurred outside the period of performance. Additionally, ? COVID-related utility payment plans were eligible under the period performance, as this type of payment plan did not exist prior to the start of the pandemic. This response misleads the reader to believe that entering into data sharing agreements (DSAs) with utility providers releases the Department from its responsibility to ensure utility charges were incurred after March 13, 2020. It does not. Regardless of the agreements with the utility providers, the Department must ensure compliance with period of performance. Auditors evaluated the same underlying data provided by the utility providers that the Department used to make determinations for amounts paid. The auditors were unable to conclude if the utility charges were incurred after March 13, 2020. Lastly, the Department insists that COVID-related payment plans automatically meet the period of performance requirement. While households impacted by the COVID-19 pandemic may qualify for these new payment plans, the payment plans could include pre-pandemic charges. Without further validation of when the utility charges were incurred, the Department could not determine whether charges were only incurred after the start of the pandemic. FOURTH, the Department stated: ?the support documentation provided contains all of the information needed to accept these awards. The aforementioned ERA FAQ supports that written attestations are allowable for any aspect of eligibility or the amount of assistance, thereby including the number of months the applicant is behind on their utility payments. The basic requirements outlined in the DSAs and the evidence within the dataset itself (identifying the totaling charges from June to December) confirm that the assistance provided was within the period of performance. This response again misleads the reader to believe that written attestations of eligibility provide support to determine if utility charges were incurred after the start of the pandemic. In addition, the Department?s response that the evidence within the dataset itself confirms that the assistance provided was within the period of performance is false. Auditors found that the only evidence suggesting whether the charges were incurred within the period of performance was the name of the dataset file itself. The auditors found no other detail in the actual dataset to determine when the charges were incurred. FIFTH, the Department stated: For a separate payment in question based on a DSA, the Department provided information on the key data points used to match HOPE applicant data with utility provider's customer data prior to payment, as well as an additional utility bill supporting the relationship between the applicant and utility company. The Department has sufficiently demonstrated the relationship between applicant and provider. This response misleads the reader to believe that the Department ensured the applicant qualified for the assistance provided. However, the Department did not provide evidence to fully support the relationship between the applicant and utility provider. In addition, the payment was for $5,103. The Department should have identified the payment as possible fraud given the high dollar amount. SIXTH, the Department stated: ?the Auditor?s statement ?According to Department management, the errors occurred because the reviews over grant expenditures were not detailed enough to ensure funds were used in accordance with federal regulations? is misleading. The Department acknowledges that there were oversights regarding the reclassifications of payments and that select awards lacked sufficient documentation to firmly support that assistance provided was within the period of performance. OSA?s statement is not misleading. In its response, the Department itself acknowledged ?there were oversights? and that select awards lacked sufficient documentation?? In other words, reviews over grant expenditures were not detailed enough. The federal awarding agency, Governor, Legislators, and the citizens of North Carolina should consider these clarifications when evaluating the Department?s response to the audit finding and recommendation. Views of Responsible Officials of the Auditee: The North Carolina Office of Recovery and Resiliency (NCORR) partially accepts the Auditor?s finding that the Department incorrectly used ERA program funds. Regarding the Auditor?s statement that some of the transfer expenditures were reimbursed twice, resulting in overpayments of $1,201,030- ? NCORR agrees that there were errors with some of the transfer expenditures. Full corrective action was completed in January 2022. Regarding the Auditor?s statement that there were 9 errors in the remaining transfer payments, totaling $3,385: ? NCORR agrees that there were errors with six transfer payments. The Department will conduct additional case management, reclassification, or recapture to bring the awards into compliance (as appropriate). ? NCORR disagrees that there were errors with three transfer payments. The support documentation provided contains all of the information needed to accept these awards. Treasury ERA FAQ dated August 25th, 2021 states: ?In all cases, grantees must document their policies and procedures for determining a household?s eligibility to include policies and procedures for determining the prioritization of households in compliance with the statute and maintain records of their determinations. Grantees must also have controls in place to ensure compliance with their policies and procedures and prevent fraud. Grantees must specify in their policies and procedures under what circumstances they will accept written attestations from the applicant without further documentation to determine any aspect of eligibility or the amount of assistance, and in such cases, grantees must have in place reasonable validation or fraud-prevention procedures to prevent abuse.? (p.2-3) NCORR has confidence that this guidance clearly supports that written attestations are allowable for any aspect of eligibility or the amount of assistance, including the number of months the applicant is behind on their utility payments. HOPE Program Policy provides the option to verify a utility assistance amount with information collected by a verified third party. Third party verification for the number of months past due was an option, but not a requirement. Regarding the Auditor?s statement that there were 13 errors in payments made on behalf of households, totaling $5,285: ? NCORR agrees that there were errors with two payments on behalf of households. The Department will conduct additional case management, reclassification, or recapture to bring the awards into compliance (as appropriate). ? NCORR disagrees that there were errors with 11 payments on behalf of households. For two payments in question, NCORR affirms that the support documentation provided contains all of the information needed to accept these awards. For the other 9 payments in question, NCORR communicated the data requirements to the utility providers when entering into the Data Sharing Agreements (DSAs). The data provided through the DSAs is equivalent to utility statements provided directly to customers. One such requirement was to only share monthly charges incurred for services provided from April 1, 2020. Therefore, payments provided based on this documentation could not have occurred outside the period of performance. Additionally, NCORR supports that COVID-related utility payment plans were eligible under the period performance, as this type of payment plan did not exist prior to the start of the pandemic. Regarding the Auditor?s statement that there were 70 errors in payments for utility assistance totaling $131,995: ? NCORR agrees that there were errors with 26 payments for utility assistance. Two payments have already been recovered. The Department will conduct additional case management, reclassification, or recapture to bring the remaining awards into compliance (as appropriate). ? NCORR disagrees that there were errors with 44 payments for utility assistance. For 34 of the payments in question, NCORR reiterates that the support documentation provided contains all of the information needed to accept these awards. The aforementioned ERA FAQ supports that written attestations are allowable for any aspect of eligibility or the amount of assistance, thereby including the number of months the applicant is behind on their utility payments. For four payments in question based on a DSA, the Department communicated to the Auditor that some utility providers were uncomfortable sharing the level of detail for individual monthly charges. The basic requirements outlined in the DSAs and the evidence within the dataset itself (identifying the totaling charges from June to December) confirm that the assistance provided was within the period of performance. For a separate payment in question based on a DSA, the Department provided information on the key data points used to match HOPE applicant data with utility provider?s customer data prior to payment, as well as an additional utility bill supporting the relationship between the applicant and utility company. The Department has sufficiently demonstrated the relationship between applicant and provider. For five payments in question including a payment plan, NCORR reiterates that payment plans were eligible. Request for Amendment: In the Errors in Program Spending finding, NCORR believes that the Auditor?s statement ?According to Department management, the errors occurred because the reviews over grant expenditures were not detailed enough to ensure funds were used in accordance with federal regulations? is misleading. NCORR has confidence that the raw data provided from utility companies through the DSAs had sufficient details to ensure funds were used in accordance with federal regulation. The Department acknowledges that there were oversights regarding the reclassifications of payments and that select awards lacked sufficient documentation to firmly support that assistance provided was within the period of performance. Therefore, the Department requests that the Auditors statement is removed. See Schedule of Findings and Questioned Costs for footnote.

Inaccurate Reporting The Department of Public Safety (Department) did not accurately report Emergency Rental Assistance (ERA) program data to the U.S. Department of the Treasury (Treasury). During the audit period, the Department provided $75.1 million in ERA funds to assist households with rent and utility payments. Auditors reviewed the two ERA program reports required to be submitted during the audit period and found errors in both. Specifically: ? For the April 2021 report, the Department underreported funds distributed to households by $633,656. Additionally, the Department underreported the number of households receiving assistance by 805 households. ? For the May 2021 report, the Department underreported funds distributed to households by $156,910. Additionally, the Department underreported the number of households receiving assistance by 218 households. Inaccurate reporting of ERA data prevents the Treasury from monitoring the state?s progress on assisting households affected by the COVID-19 pandemic. Additionally, any subsequent use of the data for public transparency could provide an inaccurate view of ERA program spending to citizens. According to Department management, they were not given sufficient notice of the reporting requirements prior to the deadline submission. Additionally, the reviews of the reports were not completed to ensure the reports were prepared accurately. Under the Treasury Reporting Guidance for the Emergency Rental Assistance Program, all states that received ERA funds must submit monthly reports including the total number of households that received assistance and the total amount of ERA funds distributed. Federal Award Information: Federal Awarding Agency: U.S. Department of the Treasury; Assistance Listing Number (title): 21.023 (Emergency Rental Assistance); Federal Award Identification Number (award period): 1505-0266 (COVID-19) (January 11, 2021 ? December 31, 2021). Recommendation: Department management should ensure that staff overseeing the federal award have a clear understanding of reporting requirements. In addition, Department management should develop and implement detailed review procedures over the completed reports to ensure accurate reporting. Views of Responsible Officials of the Auditee: The North Carolina Office of Recovery and Resiliency (NCORR) accepts the Auditor?s finding that the Department did not accurately report ERA program data to the Department of the Treasury (Treasury) by underreporting the funds distributed to households and the number of households receiving assistance for April and May of 2021. With additional Treasury guidance, NCORR produced updated reports in November of 2021, however the Department acknowledges that further reconciliation efforts are necessary. NCORR has further developed the application system of record to align more closely with the accounting system. Therefore, data provided for subsequent reports are a more accurate representation of assistance provided. Department staff have become more proficient with the Treasury reporting requirements since the initial reports were produced. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $19.2 million in federal financial assistance funding to 4,057 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 40 students who received federal financial assistance and whose enrollment status changed. Six (15%) students were reported with an incorrect status change. Failure to accurately report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility. According to College management, the errors occurred due to key employee turnover and inadequate training of the new employees responsible for the enrollment reporting process. Federal regulations require the College to accurately report student status changes to the NSLDS. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P202643 (July 1, 2020 - June 30, 2021) and P268K212643 (July 1, 2020 - June 30, 2021). Recommendation: College management should ensure that new employees are adequately trained to perform their assigned duties. Views of Responsible Officials of the Auditee: Forsyth Technical Community College agrees with both the finding and the accompanying recommendation which encompasses ensuring that new employees are adequately trained to perform their assigned duties. The College intends to utilize succession planning to reduce the risk of inaccurate reporting that can occur due to employee turnover and ensure new employees attend training on the enrollment reporting process. The College also intends to implement an internal auditing process for our enrollment reporting to assist in identifying any status errors and inaccurate reporting to NSLDS in the interim. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $492 thousand in federal financial assistance funding to 147 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 21 students who received federal financial assistance and whose enrollment status changed. Eight (38%) students were reported with an incorrect status change. Failure to accurately report student enrollment status changes to the NSLDS could impact student Pell eligibility. According to College management, the College relied on error reports from the National Student Clearinghouse, a third-party service provider, to ensure accurate reporting of enrollment status changes. Management did not monitor the information reported to the NSLDS to ensure its agreement with College records. Federal regulations require the College to accurately report student status changes to the NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P192882 (July 1, 2020 - June 30, 2021). Recommendation: College management should implement monitoring procedures to ensure all students with enrollment status changes are accurately reported to the NSLDS. Views of Responsible Officials of the Auditee: Management agrees with the audit finding and acknowledges that there were deficiencies in our enrollment status reporting process. To address these deficiencies, effective December 17, 2021, additional verification procedures have been implemented that require frequent reconciliation steps be conducted between the College?s Registrar, Admissions and Records Technician, and Financial Aid Director to identify student enrollment changes at various intervals throughout semesters in a timely manner. These procedures will ensure that the College is routinely monitoring the information reported to NSLDS as compared with the College?s records to ensure that all student status changes are accurately reported to NSLDS per Federal regulations. See Schedule of Findings and Questioned Costs for footnote.

Financial Aid Exceeded Student Needs The College awarded federal financial assistance that exceeded the financial need of students. During the audit period, the College disbursed approximately $20 million in Pell and Direct Loan funds to 3,840 students. Auditors tested award calculations for a sample of 60 students and found two (3%) students that were awarded more funds than allowed by a total of $368. As a result, $368 is considered questioned costs and the College may be required to pay the funds back to the federal government. In addition, the funds could have been awarded to other students or reduced the cost of the federal program. [Questioned Costs ~ ALN 84.063 - $0; ALN 84.268 - $368]. According to College management, the errors occurred because procedures were not in place to review and adjust award calculations when the student?s enrollment status changed. Federal regulations require the College to determine Pell awards for students based on the student?s enrollment status, cost of attendance, expected family contribution, and the maximum allowed amount established by Congress. Additionally, federal regulations require the College to coordinate awards among various programs to ensure that total aid is not awarded in excess of the student?s financial need or cost of attendance. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P202495 (July 1, 2020 - June 30, 2021) and P268K212495 (July 1, 2020 - June 30, 2021). Recommendation: College management should design and implement procedures, such as verifying student award amounts when enrollment status changes occur. Views of Responsible Officials of the Auditee: Pitt Community College agrees with the finding and recommendation. Attendance changes will be reviewed on a daily basis as reports of non-attendance, withdraws and reinstatements are provided by the Registrar?s Office. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not timely or accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $20 million in federal financial assistance funding to 3,840 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Eight (13%) students were not reported in accordance with federal compliance requirements. Specifically: ? Six students were reported with incorrect statuses. ? One student was reported with incorrect academic program data. ? One student was reported 77 days after the status change occurred. Failure to timely and accurately report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility. According to College management, the College relied on the National Student Clearinghouse, a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. Management did not monitor the information reported to the NSLDS to ensure its agreement with College records. Federal regulations require the College to notify the NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for timely and accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P202495 (July 1, 2020 - June 30, 2021) and P268K212495 (July 1, 2020 - June 30, 2021). Recommendation: College management should implement monitoring procedures to ensure all students with enrollment status changes are identified and timely and accurately reported to the NSLDS. Views of Responsible Officials of the Auditee: Pitt Community College agrees with the finding and recommendation. The enrollment is now being handled by the Registrar and Financial Aid Director together. The Financial Aid Director is now reviewing reports through NSLDS to ensure the reporting submitted to Clearinghouse is accurate for all students. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The University did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $121.5 million in federal financial assistance funding to 13,133 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Two (3%) students were reported with an incorrect status change. Failure to report accurate student enrollment status changes to NSLDS could impact student Pell and Direct Loan eligibility. According to University management, the errors occurred because the University did not review a specific error report provided by the National Student Clearinghouse (Clearinghouse), which identifies potential graduate errors that need to be resolved prior to submission to NSLDS. The University was not aware of this report due to the loss of knowledge resulting from employee turnover. Additionally, the University did not monitor the information reported to NSLDS through the Clearinghouse to ensure its agreement with University records. Federal regulations require the University to accurately report student status changes to NSLDS. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P201962 (July 1, 2020 - June 30, 2021) and P268K211962 (July 1, 2020 - June 30, 2021). Recommendation: University management should implement contingency plans to reduce the risk of inaccurate reporting due to employee turnover. University management should also implement monitoring procedures to ensure accurate reporting of enrollment status changes to NSLDS through the Clearinghouse. Views of Responsible Officials of the Auditee: The University of North Carolina at Greensboro (UNCG) agrees with the finding and recommendation. Per discussions with UNCG's National Student Clearinghouse (NSC) representative, UNCG has identified a new way to report the enrollment records to NSC that will result in less errors. The Enrollment Reporting procedures in the University Registrar's Office have been updated to include a review of the specific error report generated by NSC where these errors would be identified. The University Registrar's Office has already begun the process to update the records of students currently with a graduate error and the process is approximately 75% complete. See Schedule of Findings and Questioned Costs for footnote.

Failure to Notify Direct Loan Recipients of Their Right to Cancel Loans The College did not notify Direct Loan recipients of their right to cancel the loans. During the audit period, the College disbursed approximately $3.69 million in federal Direct Loans to 571 students. Auditors tested a sample of 60 students who received federal Direct Loans during the audit period and found that none of the students were notified of their right to cancel the loan. Failure to notify loan recipients of their right to cancel loans increases the risk of default because recipients could remain obligated for loans they would have otherwise cancelled. According to College management, the financial aid department recently streamlined communications to recipients in an attempt to avoid duplicative efforts; however, there were no monitoring procedures in place to ensure that the new method of communication was sufficient to meet federal requirements. Federal regulations require the College to notify loan recipients of their right to cancel loans in writing no earlier than 30-days before and no later than 30-days after loan funds are credited to a student?s account. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award periods): P268K201925 (July 1, 2019 ? June 30, 2020) and P268K211925 (July 1, 2020 ? June 30, 2021). Recommendation: College management should implement monitoring procedures to ensure that notifications provided to loan recipients are timely and include all required information concerning their right to cancel loans. Views of Responsible Officials of the Auditee: Davidson-Davie Community College agrees with the finding and has implemented the following corrective actions as of September 1, 2021. Upon the date of disbursement of a Federal Direct Loan, a notification is sent to each recipient via email by Ellucian Colleague, the college?s student information system. In accordance with 34 CFR 668.165(a), this notification advises the Federal Direct Loan recipient of the following: ? Instructions on how to view the amount and date of the disbursement via the secure student portal. ? The right to cancel all or a portion of the loan and have the loan proceeds returned to the U.S. Department of Education. ? The procedures and deadlines by which the Federal Direct Loan recipient must notify the school that they wish to cancel the loan. Ellucian Colleague maintains a permanent record of this notification, which includes the text of the notification and the date it was sent to the Federal Direct Loan recipient. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $19.2 million in federal financial assistance funding to 4,057 students subject to this reporting requirement. See finding 2021-004 for a description.

Financial Aid Exceeded Student Needs The College awarded federal financial assistance that exceeded the financial need of students. During the audit period, the College disbursed approximately $20 million in Pell and Direct Loan funds to 3,840 students. [Questioned Costs ~ ALN 84.063 - $0; ALN 84.268 - $368]. See finding 2021-006 for a description.

Enrollment Status Reporting Errors The College did not timely or accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $20 million in federal financial assistance funding to 3,840 students subject to this reporting requirement. See finding 2021-007 for a description.

Enrollment Status Reporting Errors The University did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $121.5 million in federal financial assistance funding to 13,133 students subject to this reporting requirement. See finding 2021-008 for a description.

Inaccurate Annual Reporting The Department of Public Instruction (Department) did not accurately report Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) data to the U.S. Department of Education. During the reporting period, the Department awarded $354.5 million to 266 public-school units (PSUs) that incurred $72.6 million in expenditures related to the program. Auditors reviewed the awards and expenditures reported in the ESSER Annual Report and identified errors for 138 (52%) PSUs. Specifically: ? 119 PSUs were included with inaccurate amounts, resulting in total errors in awards and expenditures of $1.89 million and $13.89 million, respectively. ? 17 PSUs were included but had no award or expenditure activity, resulting in overreported awards and expenditures of $1.69 million and $234,764, respectively. ? Two PSUs were omitted, resulting in underreported awards and expenditures of $113,266 and $113,133, respectively. Inaccurate reporting of ESSER data prevents the U.S. Department of Education from monitoring the state?s progress on preventing, preparing for, and responding to coronavirus impacts on education. Additionally, any subsequent use of the data for public transparency could provide an inaccurate view of ESSER program spending to citizens. According to Department management, the ESSER Annual Report was prepared using data collected from PSU surveys, and the financial data elements were not reconciled or compared to the Department?s internal records to ensure the accuracy of the PSU financial data. In accordance with the April 30, 2020 Funding Certification and Agreement, the Department was required to submit the ESSER Annual Report to the U.S. Department of Education. The ESSER Annual Report included instructions for reporting the amount of PSU expenditures and awards for the period March 13, 2020 through September 30, 2020. Federal regulations also require the Department to establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The federal regulations define internal control to include processes for achieving reliable reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425D200037 (COVID-19) (May 11, 2020 - September 30, 2021). Recommendation: Department management should develop and implement review procedures over the ESSER Annual Report data received from the PSUs to ensure accuracy with internal financial records. Views of Responsible Officials of the Auditee: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. Processes for future reporting have been amended to ensure additional controls are in place to promote greater accuracy. Required data elements will be pulled from internal DPI data to the extent possible. Data elements still requiring the use of self-reported data from Public School Units (PSUs) will be verified for inaccuracies prior to being aggregated for state agency reporting. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Public Instruction (Department) did not report complete, accurate, and timely subaward information for some subrecipients of the Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) program to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). During the reporting period, the Department made ESSER subawards totaling $1.82 billion to public school units (PSUs). Auditors tested a sample of 60 subawards that were required to be reported to the FSRS and found the following errors: ? 30 subawards were overreported by $140 million because they were reported twice. ? 21 subawards totaling $39.2 million were reported 175 to 206 days late. ? Eight subawards totaling $12.3 million were not reported at all. In addition, auditors reviewed the 52 subawards that were reported to FSRS and found errors in one or more key data elements. The FFATA was enacted to empower every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported accurately or timely to the FSRS, citizens do not have reliable information about how federal funds are being used in their communities. According to Department management, FFATA reporting errors occurred for two reasons: ? Department management did not assign FFATA reporting responsibilities until December 2020 and had limited resources for completing the required reporting. ? Department staff and management encountered technical difficulties with the FSRS and were unable to identify alternative solutions. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more in the FSRS by the end of the month following the month in which the obligation was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Numbers (award periods): S425D200037 (COVID-19) (May 11, 2020 - September 30, 2021) and S425D210037 (COVID-19) (January 5, 2021 - September 30, 2022). Recommendation: Department management should prioritize assignment of reporting responsibilities and implement contingency plans to address staff shortages. In addition, Department management should continue to seek solutions from the federal oversight agency on technical difficulties and implement revised procedures as solutions are identified to ensure complete, accurate, and timely reporting. Views of Responsible Officials of the Auditee: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. Additional staff was employed in fall of 2021 to complete FFATA reporting requirements. Technical considerations in the FFATA system remain a concern as the system constrains the number of entries per award to 100 per month making it impossible to report awards within the required time limit. Additional requests to the federal oversight agency for technical assistance with the system have been made by DPI. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Monitoring The Department of Public Instruction (Department) did not complete all planned monitoring activities for the Education Stabilization Fund - Elementary and Secondary School Emergency Relief (ESSER) program. During the fiscal year ended June 30, 2021, the Department awarded $387.5 million in ESSER funds to public school units (PSUs) to help mitigate the impact of the COVID-19 pandemic on public education. Auditors reviewed the Department?s monitoring plan which required various risk-based monitoring activities over both fiscal and program areas for all PSUs that received ESSER funds. ? Program monitors developed a plan to review and determine whether the spending activity for all 319 PSUs complied with the program requirements. Auditors found that these reviews were not completed for 299 (94%) of the PSUs. ? Fiscal monitors developed a separate plan to review expenditure documentation for 40 PSUs. Auditors found that these reviews were not completed for 28 (70%) of the 40 PSUs. In addition, auditors reviewed the Department?s monitoring tool and found that it omitted several compliance requirements. Inadequate monitoring increases the risk that federal funds may not be used in accordance with the federal requirements, which may have reduced funding available to address the impacts of the COVID-19 pandemic on public education. In addition, inadequate monitoring could result in sanctions from the federal oversight agency that may reduce future federal funding in this program. According to Department management, monitoring activities could not be completed as originally planned due to resource constraints as the Department received additional ESSER awards during the year. The additional awards required management to prioritize technical assistance and other responsibilities, resulting in staff not being available for monitoring. Federal regulations require the Department 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. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; Assistance Listing Number (title): 84.425D (Elementary and Secondary School Emergency Relief Fund); Federal Award Identification Number (award period): S425D200037 (COVID-19) (May 11, 2020 - September 30, 2021). Recommendation: Department management should review and revise monitoring activities. In addition, Department management should establish contingency plans to address staff shortages. Views of Responsible Officials of the Auditee: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. Internal programmatic monitoring procedures were amended with the addition of ESSER II and ESSER III in 2021. A risk assessment, monitoring plan, four-element monitoring instrument, and monitoring schedule were created and approved in March 2021. The monitoring plan enables all PSUs receiving funding through ESSER I, II, and III programs to have a compliance monitoring event by September 30, 2024, the end of ESSER period of availability. In fall 2021, additional staff dedicated to ESSER program were hired to assist with grant administration and monitoring. The aforementioned documents will be formally submitted as part of an update to the initial ESSER Monitoring and Internal Control Plan that was originally submitted in fall 2020 to the U.S. Department of Education. The Department agrees that it was not able to complete the full scope of the initial fiscal monitoring plan by June 30, 2021. This is due to lack of staffing resources, which is a challenge that is not unique to DPI, as a result of the world-wide COVID pandemic. Given the resources available, the staff prioritized those PSUs at the highest risk level. In addition to the 12 that were completed by June 30, 2021, the Department has since completed 23, with the remaining 5 to be completed by March 31, 2022. The Department is actively addressing staffing shortages via several avenues: ? Contracting for specific ESSER grant programs with qualified auditing firms. ? Actively recruiting to fill the vacant fiscal monitoring positions (2 have been filled since June 30, 2021). As the Department moves forward, the fiscal monitoring team will focus on normal activities staging the highest at-risk PSUs as the priority. The contracted support track will focus on the specific ESSER grants and highest-risk attributes specific to the ESSER funding. The Department believes this approach will allow maximization of limited staffing resources. The Department will continue to update and ensure the ESSER Fiscal Monitoring plan is current and relevant. The Department will ensure that updates are provided to U.S. Department of Education. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not report complete, accurate, and timely subaward information for some subrecipients of the Epidemiology and Laboratory Capacity cooperative agreement (ELC) to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Auditors reviewed all 330 subawards totaling $128.6 million that were required to be reported to the FSRS and found the following errors: ? 238 subawards totaling $117 million were not reported at all. ? 74 subawards totaling $8.6 million were reported between two to six months late. ? 17 subawards totaling $6.2 million were reported at the incorrect amount. In addition, auditors found that 91 subawards were reported to the FSRS with the incorrect month and subaward obligation dates. The FFATA was enacted to empower every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported accurately or timely to the FSRS, citizens do not have reliable information about how federal funds are being used in their communities. According to Department management, the errors occurred because there were no formal procedures or policies in place to ensure that all subawards reported in the FSRS were complete, accurate, and reported within the required timeframe. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS no later than the end of the month following the month in which the obligation was made. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.323 (Epidemiology and Laboratory Capacity for Infectious Diseases); Federal Award Identification Number (award period): NU50CK000530 (August 1, 2019 ? July 31, 2024). Recommendation: Department management should develop and implement policies and procedures to ensure complete, accurate, and timely reporting. Views of Responsible Officials of the Auditee: Management concurs with this finding. As stated in our response to Inadequate Monitoring of Local Health Departments, the enormity of the pandemic created additional challenges for the Department. The Department has processes in place to address FFATA reporting and to ensure results are submitted timely. The Department believes there was a technical issue regarding 68 of the 238 subawards (found not entered), which prevented these reports from being saved in FSRS. The Department has opened a help desk ticket with FSRS and is re-entering those subawards at the time of writing this response. We will augment our FFATA reporting process and create a formal policy to include monitoring and standardization of FFATA reporting. Further, the Department will train backup staff in each Section to ensure adequate staffing is in place to manage the reporting. Together, these measures will ensure on-going complete, accurate, and timely reporting. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Monitoring of Local Health Departments The Department of Health and Human Services (Department) did not adequately monitor $46.4 million in federal funds passed to local health departments as part of the Epidemiology and Laboratory Capacity (ELC) cooperative agreement to help detect, prevent, and respond to emerging infectious diseases. Auditors reviewed the Department?s monitoring procedures for all 85 local health departments that received ELC funds during the fiscal year ended June 30, 2021. The Department?s monitoring procedures included collecting and reviewing data from the local health departments. However, auditors found that Department personnel did not: ? Review evidence or other support to determine if funds were spent according to the agreement. ? Ensure all local health departments submitted the data. Inadequate monitoring increased the risk that federal funds would not be used in accordance with federal regulations, which could have reduced funding available for responding to emerging infectious diseases. According to Department management, they did not have adequate monitoring procedures in place because they prioritized the obligation and technical assistance of ELC funds over monitoring in order to help the local health departments quickly respond to the COVID-19 pandemic. Federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulation, and the terms and conditions of the federal award.? Monitoring the local health departments is an effective control over compliance. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.323 (Epidemiology and Laboratory Capacity for Infectious Diseases); Federal Award Identification Number (award period): NU50CK000530 (August 1, 2019 ? July 31, 2024). Recommendation: Department management should prioritize the development and implementation of procedures, even when unforeseen events occur, to ensure that the local health departments are monitored for compliance with federal regulations. Views of Responsible Officials of the Auditee: Management agrees with this finding. We also acknowledge that the audit period under review occurred during an unprecedented worldwide pandemic, and when efforts were focused on saving lives, protecting high-risk and vulnerable populations, and preserving hospital capacity. We note the COVID-19 pandemic is by no means over as new variants and vaccine hesitancy suggest further challenges to come. In March of 2020, the highly transmissible virus known as COVID-19 resulted in a global pandemic which upended nearly every facet of life and laid bare the vulnerabilities of our health systems and communities. Our early response was complicated by an uncoordinated federal response, a collapse of the global supply chain, and lack of adequate staffing resources at the state and local levels of government. The overarching strategy employed by NCDHHS in its COVID-19 response was organized around two primary pillars: ? Mitigation and Prevention strategies to prevent or slow the spread of COVID-19 across the population in total (such as through public education and messaging, policy making and guidance, PPE procurement and distribution, and eventually vaccination); and ? Response Mobilization, including both case-based containment (such as through identification/testing, case investigation and contract tracing, isolation, and quarantine protocols with wrap-around supports) and surge capacity planning and intervention. The Department quickly partnered with our 85 local health departments and districts to mobilize the response at the local level. During this audit period (July 1, 2020 ? June 30, 2021), there were 948,176 cases of COVID-19, 12,064 COVID-19 associated deaths, and 12,889,960 COVID tests administered. At the height of the January 2021 surge, there were over 11,000 cases and over 100 deaths reported in one day, over 500 new COVID-19 hospital admissions, and over 750 active outbreaks and clusters. By contrast, the worst influenza season in the past 10 years had 391 influenza associated deaths during the entire season. Given the grave state of the COVID-19 outbreak at the time, and that no vaccine or treatment was available for the first nine months of the pandemic, the Department prioritized the rapid allocation and availability of the COVID-19 supplemental funds to ensure that pandemic response measures and programmatic monitoring were initiated as rapidly as possible. Local Health Departments are entities of local government and, therefore, are subject to annual single county audits. They are also long-standing partners of NCDHHS. These facts led to the Department?s determination that these local entities were a low risk for fiscal noncompliance. Even so, the Department engaged in weekly meetings with Local Health Departments, providing technical assistance, fielding questions, and communicating federally allowable and unallowable activities. Management understands the importance of programmatic and fiscal monitoring and the need to collect, verify and report data on a timely basis. A pandemic such a COVID-19 comes with no playbook, so we prioritized programmatic monitoring, followed by reporting and fiscal monitoring. Doing so allowed North Carolina to implement our mitigation and prevention strategies and largely avoid the worst effects of COVID-19 - ranking us 31st among all states for cases per capita and 36th for deaths per capita attributed to COVID-19. The Department has implemented additional processes and procedures to ensure that local health departments are adequately monitored for fiscal compliance with federal regulations. The Department has also established a uniform reporting platform that captures fiscal and programmatic reporting and document submission by Local Health Departments, reviews that data for completeness and accuracy, and conducts randomized desk audits. Even though monitoring was delayed during the audit review period, we have subsequently addressed this finding and we are up-to-date on all past and current monitoring activities. See Schedule of Findings and Questioned Costs for footnote.

Weatherization Funds Were Overspent The Department of Health and Human Services (Department) overspent Low-Income Home Energy Assistance Program (LIHEAP) weatherization funds by $308,000. During the federal award period, the Department provided $15,502,000 (16.03%) of the $96.7 million received for LIHEAP to the Department of Environmental Quality (DEQ) to provide residential weatherization and other home repairs to low-income families. However, the federal awarding agency only approved them to use $15,194,000 (15.71%) for these activities. As a result of the weatherization overspending, $308,000 is considered questioned costs and the Department may be required to pay the funds back to the federal government. In addition, the overspent funds could have been used to assist low-income households pay their monthly energy expenses. The Department?s Division of Social Services (Division) obtained a waiver from the U.S. Department of Health and Human Services, Administration for Children and Families that approved them to use $15,194,000 (15.71%) of the LIHEAP federal award on weatherization activities. According to the Division, they were unaware another waiver was needed to use funds in excess of what was previously approved. Federal regulations require that no more than 15% of the funds allotted or available to the grantee for a federal fiscal year be used for low-cost residential weatherization or other energy-related home repairs unless the federal awarding agency grants a waiver that allows up to 25% to be used. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.568 (Low-Income Home Energy Assistance Program); Federal Award Identification Number (award period): 1901NCLIEA (October 1, 2018 - September 30, 2020). Recommendation: Department management should ensure that staff overseeing the federal award have a clear understanding of waiver requirements. Views of Responsible Officials of the Auditee: The Department agrees with this finding. To gain clarification on this finding, the Division met with the Administration of Children and Families and was advised that multiple waivers can be submitted when it is determined that Weatherization activities will exceed the approved percentage requested on the initial waiver. It was our understanding that the request for a waiver to spend more than the 15% was a one-time request that must be made prior to April. Due to that timeframe, our waiver request is based upon budget as actual year-end expenditures are not available at that time. Weatherization activities that exceeded the approved waiver request were due to that factor as well as the fact that the Crisis Intervention Program was under expensing, causing the percentage of weatherization to go up. See Schedule of Findings and Questioned Costs for footnote.

Errors in FFATA Reporting The Department of Health and Human Services (Department) did not report complete and accurate subaward information for some subrecipients of the Low-Income Home Energy Assistance Program (LIHEAP) to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). The LIHEAP is administered at the state level by the Division of Social Services (DSS) and the Department of Environmental Quality (DEQ). The DSS Business Operations Section is responsible for completing the FFATA reporting for the entire program. Auditors reviewed all 226 subawards totaling $113.9 million that were required to be reported to the FSRS during the audit period and found that 126 subawards totaling $38 million were not reported. In addition, auditors reviewed the 100 subawards that were reported to FSRS and found errors in one or more key data elements. The FFATA was enacted to empower every American citizen with the ability to hold the government accountable for each spending decision. When subaward information is not reported accurately to the FSRS, citizens do not have complete and accurate information about how federal funds are being used in their communities. According to the DSS management, the incomplete and inaccurate reporting occurred because the DSS Business Operations Section was understaffed and focused priorities on COVID operational tasks. Significant turnover during the audit period reduced the number of staff available to carry out the FFATA reporting requirements. For the subawards reported to the FSRS, the DSS did not review the submission to ensure agreement with source documentation. The FFATA requires direct recipients of grants or cooperative agreements to report first-tier subawards of $30,000 or more to the FSRS. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.568 (Low-Income Home Energy Assistance Program); Federal Award Identification Numbers (award periods): 2101NCLIEA (October 1, 2020 -September 30, 2022); 2001NCE5C3 (COVID-19) (March 27, 2020 ? September 30, 2021). Recommendation: Department management should establish a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. Additionally, Department management should develop review procedures over the submitted reports to ensure accuracy. Views of Responsible Officials of the Auditee: The Department agrees with this finding. Various Business Operations positions were vacant during this timeframe with staff focused on supporting critical core and COVID operations. The Department will establish a contingency plan to ensure FFATA reporting is completed when employee turnover occurs. In addition, Department management will review and develop additional procedures as needed to confirm submitted reports are accurate. See Schedule of Findings and Questioned Costs for footnote.

Errors in Medicaid Provider Billing and Payment Process The Department of Health and Human Services (Department) made overpayments to Medicaid providers during the fiscal year ended June 30, 2021. During that period, the Department processed more than 46 million original fee-for-service claims totaling $10.8 billion in payments. Auditors reviewed the medical documentation for a sample of 151 original fee-for-service claims totaling approximately $20.1 million in payments and identified eight (5.3%) claims that contained errors. Specifically: ? Three (2.0%) claims lacked documentation to support the services rendered by the provider. ? Three (2.0%) laboratory claims lacked a provider signature. ? Two (1.3%) claims contained medical coding errors which impacted the payment calculation. Even though the tests identified only $396 in overpayments (federal share $292), if tests were extended to the entire population, questioned costs could be greater than $25,000. As a result, there is an increased cost to the Medicaid Program for both the state and federal government. The program is jointly financed by these two governments and is administered by the state. Additionally, the overpaid funds could have been used to provide other services. According to Department management, the documentation and coding errors were due to clerical errors and inadequate documentation maintained by the health care providers. Federal regulations require costs to be adequately documented; authorized; necessary and reasonable; and be consistent with program regulations that apply to the federal award. Additionally, providers sign an agreement that requires them to maintain records disclosing the extent of services furnished to recipients and, on request, furnish the records to the Department. This finding was previously reported in the 2020 Statewide Single Audit as finding number 2020-037. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Number (award period): 2105NC5MAP (October 1, 2020 ? September 30, 2021). Recommendation: Department management should analyze each error to specifically identify corrective action such as further education of providers. In addition, the Department should follow-up on the overpaid claims for immediate collection. Views of Responsible Officials of the Auditee: The Department agrees with this finding. The Department is dedicated to claims payment accuracy and continues to work with providers to minimize errors in the claims payment process. The Centers for Medicare & Medicaid Services (CMS) has established an acceptable payment error rate for North Carolina of 3.2% based on the total dollars paid in error compared to the total dollars in the sample population. The Department acknowledges the payment error rate reflected in this audit sample is less than the CMS standard. The Department will analyze each error and take immediate and appropriate corrective action, including recouping any identified overpayments and emphasizing provider education where necessary. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Eligibility Determination Process The Department of Health and Human Services (Department) made Medical Assistance Program (Medicaid) payments to providers based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 2.1 million beneficiaries received $14.1 billion in Medicaid benefits. The task of determining eligibility for the Medicaid program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors redetermined eligibility for a sample of 152 beneficiaries that had benefits totaling $47.1 million paid on their behalf during the audit period and found three (1.97%) eligibility errors. Specifically: ? Two (1.31%) beneficiaries were determined eligible for the incorrect Medicaid group, and received services during the coverage period they were not entitled to receive. Payments for those services totaling $2,762 (federal share $2,029) were paid on behalf of those beneficiaries. ? One (0.66%) beneficiary was found to be ineligible for a portion of the coverage period due to inaccurate eligibility calculations. Payments totaling $109 (federal share $80) were paid on behalf of this beneficiary during the ineligible portion of the coverage period. In addition to the eligibility errors noted above, auditors also identified 20 beneficiaries whose case files were either missing required eligibility documentation, such as child support verifications, or inaccurate calculations and household composition were used. However, when auditors redetermined eligibility using the correct information the beneficiaries were found to be eligible. As a result, there is an increased cost for the Medicaid Program for both the state and federal government. The program is jointly financed by these two governments, and is administered by the state. Even though the tests identified only $2,871 in overpayments (federal share $2,109), if tests were extended to the entire population, questioned costs could be greater than $25,000. Although $2,871 resulted from the errors identified, the amount of Medicaid funds paid on behalf of ineligible beneficiaries is likely greater. Self-attestation by applicants is accepted for certain elements of the Modified Adjusted Gross Income methodology of determining eligibility. Further verification or documentation is not required. Auditors tested participant eligibility using the documentation contained in the case files, which includes self-attested data that could not be verified by the auditors. According to the Department, the eligibility errors occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff utilize NC FAST to input data and make eligibility determinations; however, the Department is responsible for establishing the eligibility determination policies, maintaining NC FAST, and facilitating training. Federal regulations require that the Department, or its designee, determine eligibility for all individuals applying for or receiving benefits in accordance with eligibility requirements defined in the approved state plan. Further, federal regulations require that documentation be obtained as needed to determine if a beneficiary meets specific income standards and documentation must be maintained to support eligibility determinations. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 2005NC5MAP (October 1, 2019 ? September 30, 2020) and 2105NC5MAP (October 1, 2020 ? September 30, 2021). Recommendation: Department management should analyze each error to specifically identify why the errors occurred and develop additional training or establish other procedures as necessary to prevent future errors from occurring. Views of Responsible Officials of the Auditee: The Department agrees with this finding. As required by the North Carolina Legislature, the Department has delegated the administration of Medicaid eligibility determinations to the 100 local county offices of the Division of Social Services (DSS). The Department provides the NC FAST system, issues eligibility policies, facilitates training and provides technical support to the county DSS? to enable their administration of eligibility determinations. Using CMS?s PERM standards as a model, the Department set an acceptable error rate of 3.2% for the accuracy of county eligibility determinations. The Department monitors the accuracy of each county?s eligibility determinations and implements accuracy improvement plans as necessary. As part of the monitoring process, the Department engages with the counties to determine if adjustments are needed to policy, training facilitation or the NC FAST system. The Department has reviewed the specific errors identified in the audit and will take appropriate steps to correct the improper eligibility determinations. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Provider Enrollment and Termination Process The Department of Health and Human Services? (Department) contracted agent did not properly screen and enroll Medicaid providers. The Department paid approximately $14.1 billion in Medicaid funds to 18,048 providers during the fiscal year ended June 30, 2021. The Division of Health Benefits (DHB) contracts with General Dynamics Information Technology (GDIT) to screen and enroll providers. However, the Department is responsible for establishing the enrollment screening policies and procedures and monitoring GDIT?s work. GDIT performed screening and enrollment activities on 4,187 providers that were paid $3.7 billion during the audit period. Auditors examined the enrollment screening documentation maintained in NCTracks for a sample of 93 paid providers that had screening and enrollment activities during the audit period. Auditors found one or more errors in nine (9.7%) provider records. Specifically: ? In seven (7.5%) provider records, GDIT searches of the Centers for Medicare and Medicaid Services (CMS) Adverse Action Report and the North Carolina Provider Penalty database were performed using incorrect Social Security Numbers (SSN), Employer Identification Numbers (EIN), or National Provider Information (NPI) and some searches excluded relevant information such as name, SSN and EIN. ? In one (1.1%) provider record, there was no evidence that GDIT performed a background check or searched the CMS Adverse Action Report or the North Carolina Provider Penalty database for a new owner. ? In one (1.1%) provider record, there was no evidence that GDIT verified whether an out of state provider was eligible to participate in their state?s Medicaid program. Provider enrollment screening is an important tool in preventing fraud. When providers are not screened and enrolled properly, it increases the risk that ineligible providers will be paid for services provided to Medicaid program recipients. Keeping ineligible providers from enrolling in the state?s Medicaid program also reduces the likelihood that resources will be needed to identify and recover overpayments from such providers. According to Department management, the errors occurred during the provider enrollment screening process because of GDIT?s failure to follow established procedures even though the information was available in NCTracks that would have allowed them to perform the enrollment screening procedures correctly. Federal regulations require that providers be screened and enrolled in accordance with 42 CFR part 455, subpart E. Specifically, the state Medicaid agency: ? Is to 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. ? Is to require providers to consent to criminal background checks, including fingerprinting checks when required to do so under state law or by the level screening based on fraud, waste, or abuse, as determined for that category of provider. ? May rely on the results of the provider screening performed by the Medicaid agencies of other states. The North Carolina State Plan (Plan) also requires the Medicaid state agency to check any other databases as the Secretary may prescribe such as the online North Carolina Provider Penalty Tracking database that is maintained by the Department. This finding was previously reported in the 2020 Statewide Single Audit as finding number 2020-039. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; Assistance Listing Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 2005NC5MAP (October 1, 2019 ? September 30, 2020) and 2105NC5MAP (October 1, 2020 ? September 30, 2021). Recommendation: Department management should analyze the errors and re-evaluate their monitoring procedures as necessary to prevent future errors from occurring. In addition, Department management should determine if GDIT's failure to follow established enrollment screening policies and procedures is an indicator that they are not meeting the terms and conditions of their contract with the Department. Views of Responsible Officials of the Auditee: The Department agrees with this finding. In response to the State Fiscal Year 2020 (SFY2020) finding, the Department analyzed the errors noted and implemented additional monitoring procedures to ensure GDIT was properly conducting the manual screening processes. Additionally, the Department initiated development of a system enhancement to automate the searches of the NC Provider Penalty Tracking Database and the CMS Adverse Action Report. The Department made great progress, as evidenced by the reduction in the error rate since the prior audit and continues in our effort to reduce errors. The system enhancement was implemented on January 30, 2022. This enhancement will further reduce the potential for human keying errors as well as provide the Department with an additional reporting tool to improve monitoring efforts over provider screening. The Department has reviewed the specific errors identified in the audit and has taken appropriate steps to correct the provider records. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient Monitoring The Department did not adequately monitor $68.9 million in federal funds passed to state agencies, non-profits, and other organizations (collectively called subrecipients) for providing assistance to crime victims. Auditors reviewed a sample of 60 out of 4,450 reimbursement requests paid to subrecipients and found that 10 of 60 (17%) requests were paid without supporting documentation for the amount being requested. Auditors then requested the Department to obtain the missing supporting documentation for those 10 payments from the subrecipients. Upon reviewing the support for these 10 payments, auditors discovered that documentation for 4 of the 10 payments did not support the amount paid. Payments totaling $2,098 are being questioned. In addition, auditors reviewed the risk assessment procedures over projects awarded to subrecipients during the audit period. The Department?s monitoring plan requires a risk assessment for all projects within 90 days of the project assignment to the grant manager. Auditors reviewed a sample of 70 of the 175 projects awarded during the audit period and found that risk assessments for 4 (6%) of the projects were performed 10-59 days late. As a result, the Department may be required to pay $2,098 back to the United States Department of Justice. Furthermore, inadequate monitoring increased the risk that federal funds would not be used in accordance with the federal requirements, which could have reduced funding available for the victims of sexual assault, domestic abuse, child abuse, and other crimes. According to Department management, new employees were still learning the monitoring requirements and made unintentional errors that were not detected. Further, management did not have adequate policies and procedures in place to ensure sufficient monitoring was performed. However, federal regulations required the Department 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. ? Evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. This finding was previously reported in the 2019 Statewide Single Audit as finding number 2019-001. Federal Award Information: Federal Awarding Agency: U.S. Department of Justice; CFDA Number (title) 16.575 (Crime Victim Assistance); Federal Award Identification Numbers (award periods): 2016-VA-GX-0075 (October 1, 2015 ? September 30, 2019); 2017-VA-GX-0050 (October 1, 2016 -September 30, 2020); 2018-V2-GX-0061 (October 1, 2017 ? September 30, 2021). Recommendation: Department management should ensure new employees are properly supervised while they are learning the monitoring requirements. Additionally, management should develop policies and procedures to ensure subrecipients are adequately monitored such as thorough reviews of reimbursement requests and a tracking tool to ensure risk assessments are performed within the required time period. Views of Responsible Officials of the Auditee: The Department accepts the findings by the Office of the State Auditor (OSA) that the Commission did not adequately monitor federal funds passed through the Commission to subrecipients. The Department acknowledges the report?s findings regarding inadequately reviewed reimbursements totaling less than $2,100 of the $68.9 million reviewed by the auditor. The Commission has undertaken more staff training and professional development. The Department acknowledges that while 100% of all risk assessments were completed, 4 of the 175 projects received their risk assessment outside of the prescribed timeline. The Commission has ensured that 100% of required pre-award risk assessments were completed prior to opening grants for FFY beginning October 1, 2020. The Commission also encourages all grant managers to complete risk assessments as soon as they are able once a project has been assigned to them. The workflow within our online Grants Management System has also been improved to remind grant managers to complete their risk assessments in a timely fashion. See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal Requirements The University did not have a documented risk assessment over protecting students? financial aid information or a designated individual to coordinate the information security program as required by federal regulations. During the audit period, the University disbursed approximately $15.1 million in federal financial assistance to 1,560 students subject to this requirement. As a result, student information is more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented. According to University management, the error occurred because responsible staff were unaware that federal regulations require a risk assessment that identifies risks to employee training and management over security, confidentiality, and integrity of students? financial aid information. In addition, there was not a designated individual to coordinate the information security program due to employee turnover. The Gramm-Leach Bliley Act requires financial institutions to designate an individual to develop, implement, and maintain an information security program that includes a documented risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), 84.063 (Federal Pell Grant Program), 84.268 (Federal Direct Student Loans), 84.379 (Teacher Education Assistance for College and Higher Education Grants); Federal Award Identification Numbers (award period): P007A193094 (July 1, 2019 - June 30, 2020), P033A193094 (July 1, 2019 - June 30, 2020), P063P190321 (July 1, 2019 - June 30, 2020), P268K200321 (July 1, 2019 - June 30, 2020), and P379T200321 (July 1, 2019 - June 30, 2020). Recommendation: University management should ensure responsible staff receive training on the federal regulation required under the Gramm-Leach-Bliley Act and revise its information security program as necessary. Views of Responsible Officials of the Auditee: The University agrees with the finding and will implement the necessary actions as it relates to Information Security Program requirements addressed. This matter will be given special emphasis in our on-going monitoring efforts. All corrective actions have an anticipated completion date of May 2021. See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV Funds The University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $47.3 million in federal financial assistance to 4,789 students. Auditors tested the return calculations for a sample of 49 out of 243 students that met the requirements and had Title IV calculations performed. Auditors found seven students (14%) for which unearned funds totaling $5,217 were returned to the Title IV program between six and 34 days late. As a result, the untimely return of those funds prevented them from being allocated to other students or used to reduce the cost of federal programs. According to University management, the errors occurred because procedures were not sufficient enough to ensure other departments were notifying the Registrar?s Office in a timely manner of students who unofficially withdrew during the period. Federal regulations state that if the total amount of assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the institution?s determination that the student withdrew, the difference must be returned to the Title IV program. Additionally, to ensure that Title IV funds are returned within a reasonable period of time, federal regulations require schools to determine the withdrawal date in cases of unofficial withdrawals within 30 calendar days from the earliest of the end of (1) the payment period or period of enrollment, as applicable, (2) the academic year, or (3) the student?s educational program. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): CFDA 84.007 (Federal Supplemental Educational Opportunity Grants), CFDA 84.063 (Federal Pell Grant Program), and CFDA 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P007A193097 (July 1, 2019 - June 30, 2020), P063P190322 (July 1, 2019 - June 30, 2020), and P268K200322 (July 1, 2019 - June 30, 2020). Recommendation: University management should design and implement procedures to ensure that withdrawals are identified and reported timely to the Registrar?s Office so that funds are returned on a timely basis in accordance with federal compliance requirements. Views of Responsible Officials of the Auditee: Fayetteville State University agrees with the finding and recommendation as it relates to Untimely Return of Title IV Funds. Based on this finding, the University is strengthening its current procedures to include the following: ? Additional communication has been added to Canvas to remind faculty of critical deadlines. The University will continue to send communication to faculty regarding the importance of timely submission of grades to identify students who are unofficially withdrawn. ? The Registrar will monitor 20% of the unofficial withdrawals at the end of each term. The Registrar will be responsible for the corrective action. Corrective action was completed in February 2021. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2020, the University requested approximately $126.7 million in financial aid subject to the requirements. Auditors tested all 21 drawdowns that occurred during the audit period and found two (10%) that exceeded the immediate need of students. This resulted in excess cash balances totaling $7,752 that were returned 353 days late. As a result, the additional funds on hand at the University prevented them from being allocated to other students or reducing the cost of federal programs. According to University management, there were adjustments made to student award calculations following the request for funds that were not communicated to personnel responsible for drawing down funds. In addition, there was no further review performed to determine if an excess cash balance existed. Federal regulations require that the University request funds that do not exceed the amount immediately needed for disbursements to students and parents. Any amounts not disbursed by the end of the third business day are considered excess cash and are required to be promptly returned within the next seven calendar days. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants); 84.033 (Federal Work-Study Program); 84.063 (Federal Pell Grant Program); 84.268 (Federal Direct Student Loans); 84.379 (Teacher Education Assistance for College and Higher Education Grants); Federal Award Identification Numbers (award period): P007A193138; P033A193138; P063P190317; P268K200317; P379T200317 (July 1, 2019 - June 30, 2020). Recommendation: University management should design and implement monitoring procedures over the drawdown process to ensure requested funds do not exceed the immediate need for disbursements and any excess cash is promptly returned in accordance with federal compliance requirements. Further, these monitoring procedures should ensure that all changes made to student award calculations are communicated prior to drawing down funds. Views of Responsible Officials of the Auditee: North Carolina Agricultural and Technical State University (NCAT) agrees with the finding and recommendations and has developed monitoring procedures for the drawdown process of federal funds to ensure the amount awarded does not exceed the immediate need for disbursements. NCAT will review and adjust its monitoring and closeout procedures to ensure all changes made to students' awards requiring funds be returned to the federal government are performed in a timely manner, especially after the funds have been initially closed out. All excess cash has been identified and returned in accordance with federal compliance requirements. Annually, the Associate Director will notify all Financial Aid Office personnel that the programs have been reconciled, closed, and that any revisions to the program closeout must be cleared by the Director. The Financial Aid Director will place a lock on all federal funds after the reconciliation and closeout of funds. The Director and Associate Director will closely monitor the programs after the close out year. The following actions have been taken: ? The Federal Pell Grant and Federal Direct Loan funds have been returned to the federal programs as of September 2020. The G5 account is currently updated and the programs were closed again. A letter was received from the U.S. Department of Education dated September 30, 2020 advising that NCAT had successfully closed out the Direct Loan program. ? The Financial Aid Director has locked the funds for the prior years. ? The required staff have been notified of the finding, locking of funds and the requirement to notify the Director if changes are needed. The Director and Associate Director will closely monitor the funding after the year has been closed out. See Schedule of Findings and Questioned Costs for footnote.

Errors in Returns of Title IV Funds The College incorrectly returned funds to the Title IV program (financial aid) after students supported by the program withdrew from school. Also, some funds were returned late. During the audit period, the College disbursed approximately $1.1 million in financial aid to 289 students. Auditors tested the return calculations for all 13 students that met the requirements and had Title IV calculations performed. Auditors found 6 students (46%) for which the amount returned was incorrect. For 5 (39%) of the 6 students, the College also returned the funds to the Title IV program late. As a result, the College over returned $1,707 to the Title IV program and returned $2,905 between 22 and 130 days late. These funds could have been allocated to other students or used to reduce the cost of federal programs. According to College management, the errors occurred because the Business Office did not have adequate procedures in place to ensure the correct amounts were returned to the Department of Education within a timely manner. Federal regulations state that if the total amount of assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the institution?s determination that the student withdrew, the difference must be returned to the Title IV program. Additionally, to ensure that Title IV funds are returned within a reasonable period of time, federal regulations require schools to determine the withdrawal date in cases of unofficial withdrawals within 30 calendar days from the earliest of the end of (1) the payment period or period of enrollment, as applicable, (2) the academic year, or (3) the student?s educational program. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.063 (Federal Pell Grant Program), Federal Award Identification Numbers (award period): P007A193155 (July 1, 2019 - June 30, 2020), P063P193101(July 1, 2019 - June 30, 2020). Recommendation: College management should design and implement procedures that ensure the responsible personnel return the correct amounts on a timely basis. Views of Responsible Officials of the Auditee: Roanoke-Chowan Community College concurs with the audit finding. The errors in the Return of Title IV funds were the result of staff not running the Financial Aid posting process in a timely manner. Therefore, the reduction in student Financial Aid awards was not completed within 45 days, once the College became aware that students had withdrawn. The Financial Aid staff performed R2T4 within the 45-day time requirement, but the Financial Aid transmittal posting process was not completed by the Business Office staff as specified by College procedures. This oversight was due to the Business Office not having trained staff available to complete the Financial Aid posting process during the time period in which this error occurred. R-CCC has now hired qualified staff to ensure that the Return to Title IV requirement is fulfilled. The College has also implemented a procedure in which electronic messages are sent from the Financial Aid Office to the Business Office when a Financial Aid transmittal posting needs to be completed, and the Business Office responds electronically to the Financial Aid Office, once the posting has been completed. If Financial Aid does not receive that confirmation within several days, the Financial Aid Office will follow-up with the Business Office to see if the posting process was completed. See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal Requirements The College did not have a documented risk assessment over protecting students? financial aid information as required by federal regulations. During the audit period, the College disbursed approximately $1.2 million in federal financial assistance to 289 students subject to this requirement. As a result, student information is more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented. According to College management, the error occurred because responsible staff were unaware that federal regulations require a risk assessment that identifies risks to employee training and management over security, confidentiality, and integrity of students? financial aid information. The Gramm-Leach Bliley Act requires financial institutions to develop, implement, and maintain an information security program that includes a documented risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), 84.063 (Federal Pell Grant Program), Federal Award Identification Numbers (award period): P007A193155 (July 1, 2019 - June 30, 2020), P033A203155 (July 1, 2019 - June 30, 2020), P063P193101(July 1, 2019 - June 30, 2020). Recommendation: College management should ensure responsible staff receive training on the federal regulation required under the Gramm-Leach-Bliley Act and revise its information security program as necessary. Views of Responsible Officials of the Auditee: Roanoke-Chowan Community College concurs with the audit finding. An Informational Technology Security and Risk Assessment was completed by the NC Community College System Informational Technology Division at Roanoke-Chowan Community College in November 2020 to identify security and risk levels with the ongoing technology, to identify the disclosure of information, to put safeguards in place with the College to minimize disclosures, and to make recommendations for improvement. The College outsourced most of its IT operating platforms and processes to the NC Community College Informational Technology Division last year. The System Office is responsible for the safeguarding of student data maintained in the Colleague databases with the College and instituting controls to minimize the risk of accidental disclosure of such data. These safeguards are being accomplished with stringent password controls (double password sign ons) and verifiable identities for access. The physical protection of such data remains the responsibility of the College. The IT Division of the System Office and the College are in the process of developing a risk assessment program for safeguarding student financial data as well as employee and personal student information and the disclosure of such information as per the Family Education Rights and Privacy Act (FERPA) and the Gramm-Leach-Bliley Act (15 U.S. Code ? 6801 et seq., hereinafter ?GLBA?). This process will involve employees in the Student Services and Business Office Division, who come into contact with such information. This process will become the College?s Informational Security Administration and Procedures. See Schedule of Findings and Questioned Costs for footnote.

Funds Reserved for School Improvement Activities Used Elsewhere The Department used $1.84 million of federal funds earmarked for school improvement activities on other activities. The Department was awarded $451 million in 2017 Title I, Part A funds, of which $31.5 million was earmarked for school improvement activities. Auditors compared the Department?s records of public school unit (PSU) spending for the 2017 award period to the total federal reimbursement drawdowns and discovered that documentation for $1.84 million did not support the earmarked purpose of school improvement activities. As a result, the Department could be required to pay $1.84 million back to the United States Department of Education. Furthermore, inadequate monitoring of award spending increases the risk that federal funds would not be used in accordance with federal requirements, which reduces the funding available for school improvement activities. According to Department management, the error occurred because the Agency Financial Services division did not have procedures in place to ensure internal budget status reports were updated timely. Furthermore, this prevented the cash management section from correctly reconciling spending across the various open award years. In accordance with the Elementary and Secondary Education Act, the Department is required to reserve 7% of their Title I, Part A award for school improvement activities. Further, federal regulations require costs to be adequately documented and in conformance with limitations of the federal award. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Grants to Local Education Agencies); Federal Award Identification Number (award period): S010A170033 (July 1, 2017 - September 30, 2018). Recommendation: Department management should develop procedures to ensure budget status reports and detailed reconciliations of spending by award year are completed timely and accurately throughout the year. Views of Responsible Officials of the Auditee: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. The Financial Services Division within DPI formed a new Grant Section in March 2020, which consists of a Grant Accountant and two General Accountants. The major objective for this section is to monitor, review, approve and reconcile all federal fund draws. The Grant Section works with program managers and the budget section to ensure that budget allocations are correct. The Grant Section reconciles the agency?s 208 report to the federal USED G5 report to ensure drawdown accuracy by program. See Schedule of Findings and Questioned Costs for footnote.

Inadequate Award Communication The Department did not adequately and timely notify subrecipients of federal award information for four audited federal programs including Title I, Part A , 21st Century Community Learning Centers (CCLC), Career and Technical Education (CTE), and Special Education - Grants to States. In total, subrecipients of these programs received approximately $822 million during the fiscal year. Auditors reviewed subawards made during fiscal year 2020 and found that required information was not adequately communicated to subrecipients. Specifically, ? Award information provided to Special Education subrecipients omitted the federal award identification number and period of performance requirements. ? Award information provided to Title I, Part A subrecipients omitted period of performance requirements. ? Award information provided to CTE subrecipients omitted the federal award identification number. Additionally, auditors found that the Department did not timely communicate award information for subawards made in fiscal year 2020. Specifically, ? In a sample of 66 out of 267 Title I, Part A subrecipients, 22 (33%) were sent award information two to five months after their applications had been approved and they began spending the funds. Additionally, 17 (26%) had approved applications, but were not sent award information until prompted by the audit. ? In a sample of 18 out of 82 21st CCLC subrecipients, 2 (11%) had approved applications, but were not sent award information until prompted by the audit. As a result, there is an increased risk that federal funds were not used in accordance with federal requirements. According to Department management, they did not have procedures to ensure all required award information was adequately and timely communicated to subrecipients. Federal regulations require the Department to clearly identify every subaward to the subrecipient and include specific federal award information at the time of the award. Certain aspects of this finding were previously reported in the 2019 Statewide Single Audit as finding numbers 2019-015 and 2019-048. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Part A, Grants to Local Education Agencies); Federal Award Identification Number (award period): S010A190033 (July 1, 2019 - September 30, 2020). Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.027 (Special Education - Grants to States (IDEA, Part B)); Federal Award Identification Number (award period): H027A190092 (July 1, 2019 - September 30, 2020). Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.173 (Special Education - Preschool Grants (IDEA Preschool)); Federal Award Identification Number (award period): H173A190096 (July 1, 2019 - September 30, 2020). Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.048 (Career and Technical Education - Basic Grants to States); Federal Award Identification Number (award period): V048A190033 (July 1, 2019 - September 30, 2020). Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.287 (Twenty-First Century Community Learning Centers); Federal Award Identification Number (award period): S287C190033 (July 1, 2019 - September 30, 2020). Recommendation: Department management should prioritize the development and implementation of procedures to ensure required award information is adequately and timely communicated to subrecipients. Views of Responsible Officials of the Auditee: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. The finding noted deficiencies within several divisions, which have taken the following corrective actions. ? For Title I, Part A, the grant award notification letter has been amended to include the period of availability and is now in use during the new fiscal year. For both Title I, Part A and 21st CCLC, a standard operating procedure for grant award letter tracking processes was developed and is in use. It includes the use of a centralized tracking document to ensure letters are sent within the required timeframe. ? The Career and Technical Education regional services team has adopted DPI?s Universal GAN template which includes the required information, including the federal award identification number. The completed document will be sent to all school districts in the month of June as part of their Perkins Grant Award Notification. ? The Exceptional Children division, which oversees the Special Education grant, has engaged in collaborative corrective action to ensure proper notification of grant awards. The division has worked with other federal programs and school business in the development of a grant award notification letter to include the required components, including the grant award amount, federal award identification number, and period of availability. These tasks are in the process of being formally operationalized and documented in internal procedures to ensure timely future compliance. See Schedule of Findings and Questioned Costs for footnotes.

Unallowable Award Liquidation The Department improperly charged $7.3 million of expenditures to a Special Education - Grants to States award that was no longer available for obligations. For the fiscal year, the Department spent $347.7 million to provide for the education of children with disabilities. The 2017 award obligation period ended during our audit year. This award began on July 1, 2017, and ended on September 30, 2019. The Department had 90 days to liquidate obligations made during the award period. Auditors found the Department had reclassified $7.3 million in Local Education Agency (LEA) and charter school expenditures charged to subsequent period awards to the expired 2017 award without evidence that the expenditures were obligated during the award period. As a result, the Department may be required to pay $7.3 million back to the United States Department of Education. Further, improper adjustments of expenses can skew data used to monitor and budget for program activities, putting funding that could be used for additional program activities at risk for reversion to the federal government. According to Department management, the Agency Financial Services division had insufficient procedures for monitoring the spending of funds reserved and budgeted for the award. Federal regulations require the Department to charge the federal award for allowable costs incurred during the period of performance (award period). The U.S. Department of Education specifies this period as the 27 months extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following year. This finding was previously reported in the 2019 Statewide Single Audit as finding number 2019-016. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.027 (Special Education - Grants to States (IDEA, Part B)); Federal Award Identification Number (award period): H027A170092 (July1, 2017 - September 30, 2018). Recommendation: Department management should prioritize the development and implementation of procedures to ensure timely monitoring of award budgets and spending for compliance with period of performance requirements. Views of Responsible Officials of the Auditee: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. The Financial Services Division within DPI developed and implemented general operating procedures for IDEA funding oversight in August 2020. These procedures clearly articulate the process for completing reallocations, the requirements that must be satisfied when reallocating funds, and any timing limitations for reallocation of funds (including a prohibition on reallocating funds during the liquidation period). DPI worked diligently to implement these procedures in a timely manner following the notification of this issue in the previous fiscal year. Unfortunately, by the time the issue was identified, it had already been repeated in the subsequent award year (which was a previous fiscal year). See Schedule of Findings and Questioned Costs for footnote.

Inadequate Award Communication The Department did not adequately and timely notify subrecipients of federal award information for four audited federal programs including Title I, Part A, 21st Century Community Learning Centers (CCLC), Career and Technical Education (CTE), and Special Education - Grants to States. In total, subrecipients of these programs received approximately $822 million during the fiscal year. See finding 2020-008 for a description.

Information Security Program Does Not Meet Minimum Federal Requirements The University did not have a documented risk assessment over protecting students? financial aid information or a designated individual to coordinate the information security program as required by federal regulations. During the audit period, the University disbursed approximately $15.1 million in federal financial assistance to 1,560 students subject to this requirement. See finding 2020-002 for a description.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2020, the University requested approximately $126.7 million in financial aid subject to the requirements. See finding 2020-004 for a description.

Information Security Program Does Not Meet Minimum Federal Requirements The College did not have a documented risk assessment over protecting students? financial aid information as required by federal regulations. During the audit period, the College disbursed approximately $1.2 million in federal financial assistance to 289 students subject to this requirement. See finding 2020-006 for a description.

Inadequate Award Communication The Department did not adequately and timely notify subrecipients of federal award information for four audited federal programs including Title I, Part A, 21st Century Community Learning Centers (CCLC), Career and Technical Education (CTE), and Special Education - Grants to States. In total, subrecipients of these programs received approximately $822 million during the fiscal year. See finding 2020-008 for a description.

Deficiencies in Transfer Monitoring The College did not obtain updated financial aid history through the National Student Loan Data System (NSLDS) for transfer students before disbursing Title IV aid. During the audit period, the College disbursed approximately $3.8 million in financial aid to 1,135 students. Auditors determined that the College failed to obtain updated financial aid history for all 29 transfer students that received $57,373 in Title IV aid during the 2019-2020 award year. Failure to obtain updated financial aid history for transfer students could result in the disbursement of Title IV funds to students who have reached their lifetime award limits and impact students? Pell eligibility. According to College management, the employee responsible for obtaining updated financial aid history for transfer students was not properly trained. As a result, the employee was unaware that attempts to obtain this information from the NSLDS were unsuccessful. Further, there were no monitoring procedures in place to ensure that updated financial aid history for transfer students was obtained and reviewed prior to disbursing Title IV aid. Federal regulations require the College to request updated information about transfer students so it can make certain required determinations before disbursing funds. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.063 (Federal Pell Grant Program); Federal Award Identification Number (award period): P063P193040 (July 1, 2019 - June 30, 2020). Recommendation: College management should ensure that all financial aid staff are adequately trained to perform their assigned duties. Additionally, College management should implement monitoring procedures to ensure federal requirements are met for all transfer students. Views of Responsible Officials of the Auditee: The Office of Financial Aid at Cleveland Community College agrees with the finding identified. The steps taken to address the recommendation follows. The Financial Aid Office reviewed the College?s workflow for transfer monitoring and compared to the latest version of the North Carolina Community Colleges System (NCCS) workflow. Minor changes were made to the College?s internal workflow to ensure all required information is performed accurately within the transfer monitoring process. Additionally, the College updated the workflow to include timeframes for when each step must be performed, and recurring reminders have been added to the calendar for the Assistant Director of Financial Aid. Finally, the Director of Enrollment Services and Assistant Director of Financial Aid participated training based on NCCCS transfer monitoring training materials. After implementing the new workflow, the Director of Enrollment Services assisted during the first transfer monitoring cycle for the fall 2020 term and observed the Assistant Director of Financial Aid perform this responsibility the following cycles. The College has a clear understanding of the transfer monitoring process. Corrective action was completed on September 23, 2020 in response to receiving the draft finding on September 17, 2020. See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting Errors The University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $14.3 million in federal financial assistance funding to 1,556 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Eight (13%) students were not reported in accordance with federal compliance requirements. Specifically: ? One student was not reported to NSLDS at all. ? Seven students were reported with incorrect statuses. Failure to report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility. According to University management, the University relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. Management did not monitor the information reported to NSLDS to ensure its agreement with University records. Federal regulations require the University to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for timely and accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P190321 (July 1, 2019 - June 30, 2020) and P268K200321 (July 1, 2019 - June 30, 2020). Recommendation: University management should monitor submissions of student enrollment status changes submitted by the Clearinghouse to ensure they are reported timely and accurately to the NSLDS. University management should also implement monitoring procedures to ensure all students with enrollment status changes are identified and communicated to the appropriate parties. Views of Responsible Officials of the Auditee: The University agrees with the finding and will implement the necessary actions as it relates to Enrollment Reporting errors. This matter will be given special emphasis in our on-going monitoring efforts. All corrective actions have an anticipated completion date of May 2021. See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal Requirements The University did not have a documented risk assessment over protecting students? financial aid information or a designated individual to coordinate the information security program as required by federal regulations. During the audit period, the University disbursed approximately $15.1 million in federal financial assistance to 1,560 students subject to this requirement. See finding 2020-002 for a description.

Enrollment Status Reporting Errors The University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $47.3 million in federal financial assistance funding to 4,789 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Twenty-one (35%) students were reported 109 to 263 days after the status change occurred. Failure to report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility. According to University management, the errors occurred because procedures were not sufficient enough to ensure other departments were notifying the Registrar?s Office in a timely manner of enrollment changes in students who had graduated. Additionally, the University did not monitor the information reported to NSLDS through the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure its agreement with University records. Federal regulations require the University to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for timely and accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): CFDA 84.063 (Federal Pell Grant Program) and CFDA 84.268 (Federal Direct Student Loans); Federal Award Identification Numbers (award period): P063P190322 (July 1, 2019 - June 30, 2020) and P268K200322 (July 1, 2019 - June 30, 2020). Recommendation: University management should design and implement procedures to ensure that enrollment status changes are reported to the Registrar?s Office timely so those changes can be updated in NSLDS in accordance with federal compliance requirements. University management should also implement monitoring procedures to ensure timely reporting of enrollment status changes to NSLDS through the Clearinghouse. Views of Responsible Officials of the Auditee: Fayetteville State University agrees with the findings and the recommendations as it relates to Enrollment Reporting Errors. Based on this finding, the University is strengthening its current procedures to include the following: ? The University provided critical information to administration, faculty, and staff regarding the timeliness of grade submissions and other documentation required by the Office of the Registrar to complete critical end of term processing. ? The Registrar will continue to send notifications to faculty of critical deadlines via email and Canvas. ? Steps have been taken to ensure continued education/training of the Office of the Registrar staff on the graduated student file submission process using the National Student Clearinghouse Academy webinars. ? Multiple graduation only files will be sent to the National Student Clearinghouse during the degree clearance process. ? The Registrar leadership has been granted access to NSLDS to monitor the information reported to NSLDS through the National Student Clearinghouse to ensure accurate reporting of University records. The Registrar will trace 15% of graduated students at the end of each fall and spring term. The Registrar will be responsible for the corrective action. Corrective action was completed in February 2021. See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV Funds The University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $47.3 million in federal financial assistance to 4,789 students. See finding 2020-003 for a description.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2020, the University requested approximately $126.7 million in financial aid subject to the requirements. See finding 2020-004 for a description.

Enrollment Status Reporting Errors The College did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $1 million in federal financial assistance funding to 289 students subject to this reporting requirement. Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Four (7%) students were not reported in accordance with federal compliance requirements. Specifically: ? One student was not reported at all. ? Three students were reported with incorrect statuses. Failure to report student enrollment status changes to the NSLDS could impact student Pell eligibility. According to College management, the College relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. Management did not monitor the information reported to NSLDS to ensure its agreement with College records. Federal regulations require the College to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant funds. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for timely and accurate reporting. Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.063 (Federal Pell Grant Program) Federal Award Identification Number (award period): P063P193101 (July 1, 2019 - June 30, 2020). Recommendation: College management should monitor submissions of student enrollment status changes submitted by the Clearinghouse to ensure they are reported timely and accurately to the NSLDS. College management should also implement monitoring procedures to ensure all students with enrollment status changes are identified and communicated to the appropriate parties. Views of Responsible Officials of the Auditee: Roanoke-Chowan Community College concurs with the audit finding. The College is strengthening its current procedure to monitor changes, knowing that there is a delay with posting enrollment status changes to both the National Student Clearinghouse (NSC) and National Student Loan Database System (NSLDS), and that the delay is putting the College out of compliance. Updated procedures have been put in place to ensure that the College is compliant with the Federal regulations. See Schedule of Findings and Questioned Costs for footnote.

Errors in Return of Title IV Funds The College incorrectly returned funds to the Title IV program (financial aid) after students supported by the program withdrew from school. Also, some funds were returned late. During the audit period, the College disbursed approximately $1.1 million in financial aid to 289 students. See finding 2020-005 for a description.

Information Security Program Does Not Meet Minimum Federal Requirements The College did not have a documented risk assessment over protecting students? financial aid information as required by federal regulations. During the audit period, the College disbursed approximately $1.2 million in federal financial assistance to 289 students subject to this requirement. See finding 2020-006 for a description.

Inadequate Award Communication The Department did not adequately and timely notify subrecipients of federal award information for four audited federal programs including Title I, Part A, 21st Century Community Learning Centers (CCLC), Career and Technical Education (CTE), and Special Education - Grants to States. In total, subrecipients of these programs received approximately $822 million during the fiscal year. See finding 2020-008 for a description.

Enrollment Status Reporting Errors The University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $14.3 million in federal financial assistance funding to 1,556 students subject to this reporting requirement. See finding 2020-016 for a description.

Information Security Program Does Not Meet Minimum Federal Requirements The University did not have a documented risk assessment over protecting students? financial aid information or a designated individual to coordinate the information security program as required by federal regulations. During the audit period, the University disbursed approximately $15.1 million in federal financial assistance to 1,560 students subject to this requirement. See finding 2020-002 for a description.

Enrollment Status Reporting Errors The University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $47.3 million in federal financial assistance funding to 4,789 students subject to this reporting requirement. See finding 2020-018 for a description.

Untimely Return of Title IV Funds The University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $47.3 million in federal financial assistance to 4,789 students. See finding 2020-003 for a description.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2020, the University requested approximately $126.7 million in financial aid subject to the requirements. See finding 2020-004 for a description.

Inadequate Award Communication The Department did not adequately and timely notify subrecipients of federal award information for four audited federal programs including Title I, Part A, 21st Century Community Learning Centers (CCLC), Career and Technical Education (CTE), and Special Education - Grants to States. In total, subrecipients of these programs received approximately $822 million during the fiscal year. See finding 2020-008 for a description.

Information Security Program Does Not Meet Minimum Federal Requirements The University did not have a documented risk assessment over protecting students? financial aid information or a designated individual to coordinate the information security program as required by federal regulations. During the audit period, the University disbursed approximately $15.1 million in federal financial assistance to 1,560 students subject to this requirement. See finding 2020-002 for a description.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2020, the University requested approximately $126.7 million in financial aid subject to the requirements. See finding 2020-004 for a description.

Inadequate Monitoring of Program Expenditures The Department did not monitor counties that received funds for family reunification services for the Promoting Safe and Stable Families grant. During the audit period, the Department provided $3.4 million in family reunification service funds to counties. Inadequate monitoring increased the risk that the Department would not detect if funds intended to be spent reuniting separated families were not used in accordance with federal regulations. As a result, families otherwise eligible for assistance may not have been served. According to Department management, they did not have procedures in place to ensure that the funds spent for family reunification services were in compliance with federal regulations. Federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulation, and the terms and conditions of the federal award.? Monitoring the funds sent to the counties would be an effective control over compliance. This finding was previously reported in the 2019 Statewide Single Audit as finding number 2019-054. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.556 (MaryLee Allen Promoting Safe and Stable Families); Federal Award Identification Numbers (award periods): G-1801NCFPSS (October 1, 2017 ? September 30, 2019), G-1901NCFPSS (October 1, 2018 ? September 30, 2020), and 2001NCFPSS (October 1, 2019 ? September 30, 2021). Recommendation: Department management should prioritize the implementation of procedures to ensure that the funds spent for family reunification services are in compliance with federal regulations. Views of Responsible Officials of the Auditee: The Department agrees with the finding. In 2020, the NC Division of Social Services (DSS) convened a Family Reunification Monitoring Steering Committee that developed procedures, devised the monitoring plan, and updated the Family Reunification Services Policy and the Service Information System (SIS) Code Definitions to reflect the new monitoring procedures. Implementation of the monitoring activities was delayed by the COVID-19 Pandemic. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Adoption Assistance Title IV-E Eligibility Determination Process The North Carolina Department of Health and Human Services (Department) made Adoption Assistance Title IV-E payments based on inaccurate eligibility determinations. During the audit period, approximately 13,000 families received $59.2 million in Adoption Assistance Title IV-E benefits. The task of determining eligibility for the Adoption Assistance Title IV-E program has been delegated to the county departments of social services (DSS). However, the Department was responsible for ensuring compliance with the eligibility requirements. Auditors reviewed the client case files for a sample of 60 families that received Adoption Assistance Title IV-E payments during the audit period and found one (1.7%) beneficiary that was not eligible. The child was not eligible to receive Title IV-E subsidy assistance because they did not meet any of the categorial eligibility requirements for a non-applicable child. The Department paid $7,608 ($5,338 federal share) on behalf of this beneficiary during the audit period. Even though the test identified only $5,338 in questioned costs, if tests were extended to the entire population, questioned costs could be greater than $25,000. As a result, there is an increased cost for the Adoption Assistance Title IV-E program for the federal government and the federal share could have been used to provide other services. According to the Department, the eligibility error occurred because of inaccurate application of established eligibility policies by the county DSS staff. The county DSS staff are responsible for collecting documentation and making the eligibility determinations, however, the Department is responsible for establishing the eligibility determination policies and training the county DSS staff. Federal regulations require that under any adoption assistance agreement entered into by a State with parents who adopt a child with special needs, the State may make adoption assistance payments to such parents?in amounts so determined, if the child meets the eligibility requirements of the program. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.659 (Adoption Assistance); Federal Award Identification Numbers (award periods): 1901NCADPT (October 1, 2018 ? September 30, 2019) and 2001NCADPT (October 1, 2019 ? September 30, 2020). Recommendation: Department management should provide adequate training and retraining as necessary to ensure that county DSS staff perform Adoption Assistance Title IV-E eligibility determinations correctly. In addition, Department management should determine if Title IV-E funds should be recouped. Views of Responsible Officials of the Auditee: The Department agrees with this finding. The beneficiary was eligible for Adoption Assistance; however, the county department of social services (DSS) staff made an error in assigning the funding source as Title IV-E as opposed to Title IV-B. The State DSS notified the County of the inaccurate eligibility determination. In September 2020, the County paid back the Title IV-E share for the period the error applied and claimed any allowable Title IV-B funds for that period. The County DSS will continue to claim Title IV-B funds for this beneficiary going forward. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the CHIP and Medicaid Provider Enrollment and Termination Process The North Carolina Department of Health and Human Services? (Department) contracted agent did not properly screen and enroll Children?s Health Insurance Program (CHIP) and Medicaid providers. The Department paid approximately $12.1 billion in Medicaid funds and $631.8 million in CHIP funds to 19,094 providers during the fiscal year ended June 30, 2020. The Division of Health Benefits (DHB) contracts with General Dynamics Information Technology (GDIT) to screen and enroll providers. However, the Department is responsible for establishing the enrollment screening policies and procedures and monitoring GDIT?s work. Auditors examined the enrollment screening documentation maintained in NCTracks for a sample of 93 providers that received CHIP or Medicaid payments during the audit period. Auditors found that one or more errors occurred in 34 (36.6%) provider records. Specifically: ? In 18 (19.4%) provider records, there was no evidence that GDIT checked credentials (licenses, accreditations or certifications) for organization providers when their enrollment was re-validated. ? In 14 (15%) provider records, GDIT searches of the Centers for Medicare and Medicaid Services (CMS) Adverse Action Report and the North Carolina Provider Penalty database were performed using incorrect Social Security Numbers (SSN), Employer Identification Numbers (EIN) or National Provider Information (NPI) and some searches excluded relevant information such as name and SSN. ? In 4 (4.3%) provider records, there was no evidence that GDIT performed background checks or performed searches of the CMS Adverse Action Report or the North Carolina Provider Penalty database for owners, office administrators, managing employee, and/or providers. ? In 3 (3.2%) provider records, there was no evidence that GDIT followed up on the results from background checks or North Carolina Penalty database searches to determine if the information would make the provider ineligible for enrollment. ? In 2 (2.2%) provider records, there was no evidence that a site visit was performed when the providers were designated as moderate categorical risk. Effective provider enrollment screening is an important tool in preventing fraud. When providers are not screened and enrolled properly it increases the risk that ineligible providers will be paid for services provided to CHIP and Medicaid program recipients. Keeping ineligible entities and individuals from enrollling in the State?s CHIP and Medicaid program as providers reduces the likelihood that extensive resources would be needed to identify and recover overpayments from fradulent providers. According to Department management, the errors occurred during the provider enrollment screening process for two reasons. First, credentials were not checked for organization providers during re-validation because the Department?s automated verification process they implemented in 2017 did not include checking credentials for all provider types, such as organization providers. Second, the other errors were caused by GDIT?s failure to follow established procedures even though the information was available in NCTracks that would have allowed them to perform the enrollment screening procedures correctly. Federal regulations require providers to be licensed in accordance with federal, state, and local laws and regulations. Additionally, providers are required to be screened and enrolled in accordance with 42 CFR part 455, subpart E. Specifically: ? Federal regulation requires that the State Medicaid agency must have a method to verify that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State and confirm that the provider?s license has not expired and that there are no current limitations on the provider?s license. ? Federal regulation requires that the State Medicaid agency must 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. ? Federal regulation requires that the State Medicaid agency must require providers to consent to criminal background including fingerprinting checks when required to do so under state law or by the level screening based on fraud, waste or abuse as determined for that category of provider. ? Federal regulation requires the State Medicaid agency to conduct pre-enrollment and post-enrollment site visits for providers who are designated as ?moderate? or ?high? categorical risk for the Medicaid program. The North Carolina State Plan (Plan) also requires specific certification and accreditation credentials to be verified during the re-validation process. Additionally, the Plan also requires the Medicaid State agency to check any other databases as the Secretary may prescribe such as the online North Carolina Provider Penalty Tracking database that is maintained by the Department. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title) 93.767 (Children?s Health Insurance Program); Federal Award Identification Numbers (award periods): 1905NC5021 (October 1, 2018 ? September 30, 2019) and 2005NC5021 (October 1, 2019 ? September 30, 2020). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 1905NC5MAP (October 1, 2018 to September 30, 2019) and 2005NC5MAP (October 1, 2019 ? September 30, 2020). Recommendation: Department management should make the necessary changes to the automated verification process to ensure that credentials are checked for all providers types. Additionally, Department management should strengthen their monitoring procedures to ensure that GDIT is properly screening and enrolling providers. The Department should determine if GDIT's failure to follow established enrollment screening policies and procedures is an indicator that they are not meeting the terms and conditions of their contract/service agreement with the Department. Views of Responsible Officials of the Auditee: The Department agrees with the screening errors noted in this finding and had taken steps to address some of the issues prior to the audit. The Department implemented automated background checks and automated site visit notifications and tracking in July 2017 and July 2018, respectively. In addition, the Department is working to implement an automated solution to conduct screening searches of the NC Provider Penalty Tracking database and the CMS Adverse Action Report in an effort to reduce the risk of human error in the provider screening process. Upon the ending of the public health emergency, the Department will implement primary source verification of provider license credentials during re-verification and enhance application monitoring procedures to include specific reviews of background check results when issues are noted. See Schedule of Findings and Questioned Costs for footnote.

CHIP and Medicaid Provider Enrollment Screening Process Needs Improvement The North Carolina Department of Health and Human Services (Department) does not have procedures in place to verify the accuracy of some of the disclosures made by providers during the Children?s Health Insurance Program (CHIP) and Medicaid enrollment screening process. While performing procedures to test the Department?s provider eligibility enrollment screening process, auditors performed a search of the North Carolina Secretary of State?s (SOS) Business Registration Database to determine if providers omitted the name, address, date of birth and Social Security number of any person with an ownership or control interest or who is an agent or managing employee of the entity in their enrollment disclosures. Auditors performed the search on a sample of 93 providers that received CHIP and Medicaid payments during the audit period and found the following: ? Four (4.3%) providers included an owner in the business registration filings they provided to the SOS that they did not include in their provider enrollment disclosures. ? Twenty (21.5%) providers included an agent or managing employee (this includes Presidents, Vice Presidents, and Officers) in the business registration filings they provided to the SOS that they did not include in their provider enrollment disclosures. These providers received $340,000 in CHIP payments and $9.2 million in Medicaid payments during the audit period. When providers do not accurately disclose all individuals that have an ownership, or control interest or who is an agent or managing employee of the entity, required screenings, such as credential verifications, background checks, and searches of federal and state penalty databases cannot be performed. This increases the risk that ineligible providers could be enrolled in the CHIP and Medicaid program. According to Department management, the State?s provider enrollment system, NCTracks, has been designed to make providers aware of all disclosures that are required under the federal regulations, however it is up to the provider to disclose any information that is relevant to them. Because there is no specific federal regulation that requires the Department to verify the accuracy of the ownership, control interest, agent or managing employee disclosures, they have not developed any procedures to verify this information. Federal regulations require the State Medicaid agency (Department) to terminate the provider?s enrollment or deny enrollment of the provider if the provider or a person with an ownership or control interest or who is an agent or managing employee of the provider fails to submit timely or accurate information. And while not required, the Centers for Medicare & Medicaid Services (CMS) recommends as a best practice; screening the information disclosed by an organizational provider under 42 CFR 455.104 against any data available from state business licensure boards. In addition, federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award? and using the Secretary of State?s Business Registration Database to determine if a provider failed to include anyone with an ownership or control interest or who is an agent or managing employee of the entity in their enrollment disclosures, would be an effective internal control over compliance. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.767 (Children?s Health Insurance Program); Federal Award Identification Numbers (award periods): 1905NC5021 (October 1, 2018 ? September 30, 2019) and 2005NC5021 (October 1, 2019 ? September 30, 2020). Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 1905NC5MAP (October 1, 2018 to September 30, 2019) and 2005NC5MAP (October 1, 2019 ? September 30, 2020). Recommendation: Department management should develop procedures to verify the accuracy of the ownership, control interest, agent or managing employee disclosures made by the provider during the enrollment process, such as using the data available in the North Carolina Secretary of State?s Business Registration Database. Views of Responsible Officials of the Auditee: The Department agrees with the finding. While verification of ownership and control information is not required by CMS and any such omitted disclosure does not indicate an ineligible provider, the Department acknowledges that when the information is available to the Department, attempting such verification is a best practice and viable method of strengthening the integrity of the Medicaid program. The Department will evaluate the methods and information available to verify the accuracy of ownership and control information submitted by providers and implement appropriate policies and procedures to adequately screen providers in accordance with federal regulations. See Schedule of Findings and Questioned Costs for footnote.

Errors in Medicaid Provider Billing and Payment Process The North Carolina Department of Health and Human Services (Department) made overpayments to Medicaid providers during state fiscal year 2020. During that period, the Department processed more than 125 million payments for fee-for-service claims totaling $8.95 billion. Auditors reviewed the medical documentation for a sample of 124 fee-for-service claims totaling approximately $33,536 and identified 2 (1.6%) claims that contained errors. Specifically: ? 1 (0.8%) claim contained medical coding errors which impacted the payment calculation. ? 1 (0.8%) claim lacked documentation to support the services rendered by the provider. In addition, auditors recalculated the payment amount for a sample of 60 fee-for-service claims totaling approximately $8,596 and identified one (1.7%) claim that was reimbursed at the incorrect rate. Even though the tests identified only $55 in overpayments (federal share $40), if tests were extended to the entire population, questioned costs could be greater than $25,000 . As a result, there is an increased cost to the Medicaid Program for both the State and Federal government. The program is jointly financed by these two governments, and is administered by the State. Additionally, the overpaid funds could have been used to provide other services. According to the Department, the documentation and coding errors were due to clerical errors and inadequate documentation being kept by the health care providers. The other error occurred because of General Dynamics Information Technology (GDIT) misunderstanding of the Division of Health Benefits (DHB) instructions for reprocessing claims during the Coronavirus healthcare pandemic. Federal regulations require costs to be adequately documented; authorized; necessary and reasonable; and be consistent with program regulations that apply to the federal award. Additionally, providers sign an agreement that requires them to maintain records disclosing the extent of services furnished to recipients and, on request, furnish the records to the Department. This finding was previously reported in the 2019 Statewide Single Audit as finding number 2019-058. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Number (award period): 2005NC5MAP (October 1, 2019 ? September 30, 2020). Recommendation: Department management should analyze each error and take immediate and appropriate corrective action including, but not limited to, education of providers and on-site or focused reviews. In addition, Department management should follow up with GDIT to determine if there are other claims that were not reprocessed correctly. Any identified overpaid claims should be followed-up for timely and appropriate collection. Views of Responsible Officials of the Auditee: The Department agrees with this finding. The Department is dedicated to claims payment accuracy and continues to work with providers to minimize errors in the claims payment process. The Department is pleased that the error rates noted in the report are well below the Centers for Medicare and Medicaid Services Payment Error Rate Measurement (PERM) error rate goal for NC of 3.2%. The Department will analyze each error and take immediate and appropriate corrective action, including recouping any overpayments identified as questioned costs, emphasizing provider education where necessary and following up with the fiscal agent to clarify and correct any claims reprocessing issues. See Schedule of Findings and Questioned Costs for footnote.

Lack of Quality Assurance Procedures Increased Risk of Undetected Errors The North Carolina Department of Health and Human Services (Department) does not have written monitoring procedures in place for some contractors who help ensure that Medicaid services, products and procedures are medically necessary. There are five contractors who help ensure that Medicaid services, products, and procedures provided to recipients are medically necessary. Auditors found that the Department does not have written quality assurance monitoring procedures for two of those contractors. Because the Department did not have written monitoring procedures in place for these contractors, they cannot ensure that prior approval requests are accurately approved or denied which increases the risk that errors (i.e. services rendered that would have been denied) could have occurred and remained undetected. During the audit period these two contractors processed approximately $150.3 million in Medicaid claims for services that required a prior approval. According to Department management, they were in the process of completing the monitoring plans, however they had to reallocate resources to meet the demands placed on the Division of Health Benefits caused by the Coronavirus healthcare pandemic. In accordance with Session Law 2010-194, the NC Department of Administration has established rules and regulations which specify the manner in which State agencies shall monitor and enforce the terms of contracts. The State?s Contract and Procurement Office?s Contract Administration Guide includes a Contract Monitoring Checklist which states that it is the responsibility of each agency to ensure all contractual obligations are met and that contract monitoring is documented which includes having written documented contract monitoring procedures and methodology. Furthermore, federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award.? Establishing written quality assurance monitoring procedures would be an effective control over compliance. This finding was previously reported in the 2019 Statewide Single Audit as finding number 2019-060. Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Identification Numbers (award periods): 1905NC5MAP (October 1, 2018 ? September 30, 2019) and 2005NC5MAP (October 1, 2019 ? September 30, 2020). Recommendation: Department management should prioritize developing written quality assurance monitoring procedures for all contractors who help ensure that Medicaid services, products and procedures are medically necessary. In addition, Department management should establish a contingency plan to ensure continuity of operations when unforeseen events occur. Views of Responsible Officials of the Auditee: The Department agrees with this finding. During State Fiscal Year (SFY) 2020, the Department was engaged in an effort to enhance the documentation of the monitoring procedures for contracted vendors which provide prior approval of Medicaid services. While documentation of the monitoring plans for the two vendors noted in the audit was not completed by June 30, 2020, documentation for one of the vendors was completed and implemented in July 2020. Due to the suspension of prior approvals during the public health emergency that began in March 2020, completion of the remaining monitoring plan is delayed and is currently targeted for August 2021, pending adjustments to the public health emergency period. Despite the lack of formal documented procedures, monitoring activities for the two vendors were conducted during the state fiscal year. While it is not certain that lack of documentation had an impact on funds paid for prior authorized services, the updated monitoring plans will ensure the vendors are reviewing and approving prior authorizations in accordance with the Department?s requirements when prior approvals are reinstated. See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the CHIP and Medicaid Provider Enrollment and Termination Process The North Carolina Department of Health and Human Services? (Department) contracted agent did not properly screen and enroll Children?s Health Insurance Program (CHIP) and Medicaid providers. The Department paid approximately $12.1 billion in Medicaid funds and $631.8 million in CHIP funds to 19,094 providers during the fiscal year ended June 30, 2020. See finding 2020-035 for a description.

CHIP and Medicaid Provider Enrollment Screening Process Needs Improvement The North Carolina Department of Health and Human Services (Department) does not have procedures in place to verify the accuracy of some of the disclosures made by providers during the Children?s Health Insurance Program (CHIP) and Medicaid enrollment screening process. See finding 2020-036 for a description.

Inadequate Subrecipient MonitoringThe Department did not adequately monitor $53.6 million in federal funds passed to state agencies, non-profits, and other organizations (collectively called subrecipients) for providing assistance to victims of crime. Specifically, the Department did not:1.Perform all required site visits.2.Review participant eligibility during site visits.3.Adequately review reimbursement requests.4.Perform required risk assessments.5.Review subrecipient audit reports.First, auditors reviewed all 141 projects that ended during the audit period. Each project was required to have a site visit during the project life. Site visits were not properly performed for 38 (27%) of the projects. Specifically,?For 12 (9%) projects, site visits were performed 2 to 95 days after the project ended.?For 26 (18%) projects, site visits were not performed at all.Second, auditors reviewed a sample of 27 of the 128 site visits performed during the audit period and found no evidence that the monitor reviewed participant eligibility in 15 (56%) of the visits.Third, auditors reviewed a sample of 83 out of 3,506 reimbursement requests paid to subrecipients and found that 23 (28%) requests were not adequately reviewed. Specifically,?For 19 (23%) requests, the supporting documentation did not support the amount being requested for reimbursement. Payments totaling $15,335 are being questioned.?For 4 (5%) requests, there was no evidence of approval prior to payment.Fourth, auditors reviewed the risk assessment procedures for the projects awarded to subrecipients during the audit period. The Department?s monitoring plan requires a risk assessment for all new subrecipients prior to awarding funds and for all projects within the first week of the project assignment to the grant manager. Auditors found deficiencies in 100% of the items tested. Specifically,?For all 5 of the new subrecipients, no risk assessment was performed prior to awarding funds.?For a sample of 35 (23%) of the 153 projects awarded during the audit period, no risk assessment was performed within the first week of project assignment to the grant manager.Fifth, auditors reviewed the monitoring process for all eight subrecipients that were required to have an audit in accordance with the Uniform Guidance and found that the Department did not obtain or review the audit reports.As a result, inadequate monitoring increased the risk that federal funds would not be used in accordance with the federal requirements, which could have reduced funding available for the victims of sexual assault, domestic abuse, child abuse, and other crimes. Further, the Department may be required to pay $15,335 back to the United States Department of Justice.According to Department management, it experienced significant turnover in recent years which reduced the number of staff who had knowledge and experience with the monitoring requirements. Further, management did not have adequate policies and procedures in place to ensure sufficient monitoring was performed.However, federal regulations required the Department 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.?Evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.?Verify that every subrecipient is audited as required.Significant aspects of this finding were previously reported in the 2018 Statewide Single Audit as finding number 2018-006.Federal Award Information: Federal Awarding Agency: U.S. Department of Justice; CFDA Number (title) 16.575 (Crime Victim Assistance); Federal Award Numbers (award periods): 2015-VA-GX-0019 (October 1, 2014 ? September 30, 2018); 2016-VA-GX-0075 (October 1, 2015 ? September 30, 2019); 2017-VA-GX-0050 (October 1, 2016 ? September 30, 2020); 2018-V2-GX-0061(October 1, 2017 ? September 30, 2021).Recommendation: Department management should ensure responsible staff receive proper training on the monitoring requirements and implement contingency planning to reduce the risk that staff turnover could lead to oversight in monitoring.Additionally, Department management should develop policies and procedures to ensure subrecipients are adequately monitored such as thorough reviews of reimbursement requests, a tracking tool for planning and completing on-site visits, a monitoring plan based on risk assessments, and updating review procedures for on-site visits.Agency Response: The Department agrees with the finding and is taking the below corrective actions.The Commission has updated the process for documenting site visits in the Grant Enterprise Management System (GEMS) to improve the agency's ability to track their progress. The Director of Grants Management also monitors site visits through a master spreadsheet to ensure they are completed throughout the year.The Commission updated its site visit tool in April of 2019 to ensure grant monitors review participant eligibility during each visit. All deficiencies identified in OSA's findings occurred prior to implementing the new tool. Grant monitors have reviewed participant eligibility during all site visits conducted since implementation of the updated tool.The Commission has implemented more stringent processes and procedures to ensure the thorough review of reimbursement requests.The Commission failed to follow its monitoring plan requiring a pre-award risk assessment for all new subrecipients and a risk assessment for all projects within the first week of the project assignment to a grant manager. Federal guidelines do not mandate risk assessments within the first week of the project's assignment. Rather, this was a stringent policy established by the Commission but unachievable when staff levels reached critical lows. However, the Commission completed 100% of the required pre-award risk assessments prior to opening grants for FFY beginning October 1, 2019. In addition, the agency has revised its policy to clarify that while federal guidelines do not mandate risk assessments within the first week of the project's assignment, grant managers are encouraged to complete the assessments as soon as practical once the project has been assigned.Finally, the Department also accepts the audit finding that it failed to obtain or review audit reports from subrecipients. Under the Uniform Guidance, a pass-through agency is required to verify that non-profit subrecipients expending more than $750,000 in federal funds during their fiscal year undergo a single audit. For the Department, this responsibility resided with a position in the Controller's Office, and staffing shortages in that office led to the deficiency noted in the audit. To ensure this responsibility is met going forward, the Department has transferred the position and the function to the Internal Audit Section, which is where it more commonly resides across state government. Establishing and filling this position is a priority for the Department.Moreover, the Department fully embraces the audit recommendation to implement contingency planning to reduce the risk of lapses in grant monitoring due to staff turnover. The Department is committed to building a robust internal control structure within the Internal Auditor's Office dedicated to federal grant compliance and oversight. The Department is also committed to enhancing the grant management staff by establishing additional grant management/oversight positions in each entity. The Department is working with its Human Resources section to appropriately classify these positions in order to attract and retain skilled staff for these important roles.See Schedule of Findings and Questioned Costs for footnote.

Benefit Overpayment Identification Procedures Need ImprovementThe North Carolina Department of Commerce (Department) did not perform required cross-matches to identify potential overpayments of Unemployment Insurance (UI) benefits. During the audit period the Department paid approximately $169 million in UI benefits to 85,000 individuals.The primary cause of overpayments is due to unreported or under-reported earnings by claimants while they claim benefits. The Department implemented the Southeast Consortium for Unemployment Benefits Integration (SCUBI) project as the new UI benefits system during the state fiscal year 2019. Prior to the implementation of SCUBI, the Department?s procedures for identifying potential overpayments included the following:?Weekly New Hires Cross-match.?Quarterly Earnings/Wage Cross-match.?Tips and Leads.Since the September 2018 implementation of SCUBI, the Department has not been able to perform the weekly new hire or the quarterly earnings/wage cross-matches. Instead, the Department relied solely on tips and leads to identify new potential overpayments. Cross-matches performed in SFY 2018 identified 3,962 potential overpayments compared to 898 identified from the cross-matches done in SFY 2019 before SCUBI was implemented.As a result, claimants could retain and continue to collect benefits they were not entitled to receive. In addition, delays in the identification of potential overpayments reduces the likelihood of future recovery.According to the Department, the cross-matches were not performed because of difficulties obtaining the data needed from SCUBI. Department management prioritized their efforts on the effective implementation of the benefit payments operations of SCUBI and focused on completing investigations of backlogged overpayments cases until the data issues with SCUBI could be resolved.Unemployment Insurance Program Letter (UIPL) No. 19-11 National Effort to Reduce Improper Payments in Unemployment Insurance (UI) Program, issued on June 10, 2011, mandated that all states be required to use the data from the National Directory of New Hires to conduct cross-matches in the State Benefit Payment Control operations by December 2011. Per the UIPL, cross-matching with the information in the National Directory of New Hires is considered one of the most effective strategies for identifying overpayments.Federal Award Information: Federal Awarding Agency: U.S. Department of Labor; CFDA Number (title): 17.225 (Unemployment Insurance); Federal Award Number (award period): UI-32617-19-55-A-37 (October 1, 2018 ? December 31, 2021).Recommendation: Department management should coordinate efforts with the vendor and internal Information Technology staff to identify methods and procedures for obtaining the data needed from the SCUBI system to perform the mandatory cross-matches.Agency Response: We agree with your audit finding identified in connection with your audit of the major federal programs of the State of North Carolina for the year ended June 30, 2019, in accordance with the Single Audit Act and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance).The Department of Commerce agrees with your recommendation, and we implemented the recommended coordination efforts with the vendor and internal IT staff so that the running and working of the cross-matches was completed in August 2019. Work with the vendor is ongoing to meet the business unit?s needs.See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV FundsThe University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $116.3 million in federal financial assistance to 11,231 students.Auditors tested the return calculations for a sample of 60 out of 280 students that met the requirements and had Title IV calculations performed. Auditors found 29 students (48%) for which unearned funds totaling $69,922 were returned to the Title IV program between three and 98 days late.As a result, the untimely return of those funds prevented them from being allocated to other students or used to reduce the cost of federal programs.According to University management, the errors occurred because of a lack of timely communication between personnel within the financial aid office responsible for the return to Title IV process during the Fall 2018 term. University management also attributed the errors to inefficiencies in the return to Title IV process that was in place during the Fall 2018 term.Federal regulations state that if the total amount of assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the institution?s determination that the student withdrew, the difference must be returned to the Title IV program.Additionally, federal regulations require that returns of Title IV funds be deposited or transferred into the Student Financial Aid account or that electronic fund transfers be initiated to the Department of Education or the appropriate lender as soon as possible, but no later than 45 days after the date the institution determined that the student withdrew.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.063 (Federal Pell Grant Program), and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should design and implement procedures that ensure timely communication between personnel responsible for the return to Title IV process so that funds are returned on a timely basis in accordance with federal compliance requirements.University management should also ensure that return to Title IV processes are designed and implemented in an efficient manner.Agency Response: The Office of Student Financial Aid at Appalachian State University agrees with the finding that was identified. The action plan to address the recommendations include several changes. The Office of Student Financial Aid re-organized our staff and created a compliance team. The compliance team has been given the authority to complete the return to Title IV process from beginning to end. The Office of Student Financial Aid conducted a nation-wide search to find a new Associate Director of Financial Aid Compliance. This staff member is charged with multiple compliance tasks including leading our compliance team. The top priority of this team is to ensure that the Return to Title IV process is conducted timely and efficiently. This position reports directly to the Director of Student Financial Aid to ensure there is no delay if additional assistance is needed with any compliance related task or concern. All compliance team members will be required to complete the NASFAA Return to Title IV course. These actions were conducted to ensure that Appalachian State has in place the necessary institutional controls to ensure the timely completion of the Return to Title IV process and to ensure timely communication between personnel responsible for the return to Title IV process.See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV FundsThe College did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the College disbursed approximately $1.6 million in financial aid to 459 students.Auditors tested the return calculations for a sample of 25 out of 122 students that met the requirements and had Title IV calculations performed. Auditors found six students (24%) in which unearned funds totaling $4,309 were returned to the Title IV program between one and 44 days late.As a result, the funds were not available for allocation to other students or for reducing the cost of federal programs.The errors occurred because the College did not have procedures in place during the audit period to ensure instructors reported withdrawals in a timely manner.Federal regulations state that if the total amount of assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the institution?s determination that the student withdrew, the difference must be returned to the Title IV program.Additionally, federal regulations require that returns of Title IV funds be deposited or transferred into the Student Financial Aid account or that electronic fund transfers be initiated to the Department of Education or the appropriate lender as soon as possible, but no later than 45 days after the date the institution determined that the student withdrew.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants) and 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should design and implement procedures to ensure that instructors report withdrawals in a timely manner so funds are returned on a timely basis in accordance with federal compliance requirements.Agency Response: Halifax Community College agrees with the finding and recommendation to implement procedures to ensure faculty report withdrawals in a timely manner so funds are returned on a timely basis in accordance with federal compliance requirements.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations . During the audit period, the College disbursed approximately $1.6 million in federal financial assistance to 459 students subject to this requirement.As a result, student information was more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented.The error occurred because the College was unaware that federal regulations require a risk assessment that identifies risks to employee training and management over the security, confidentiality, and integrity of students? financial aid information.The Gramm-Leach-Bliley Act requires financial institutions to develop, implement, and maintain an information security program that includes a risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), and 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should ensure responsible staff receive training on the federal regulations required under the Gramm-Leach-Bliley Act and revise its information security program as necessary.Agency Response: Neither the Vice President of Administrative Services nor the Director of Information Technology were aware that legislation related to the Gramm-Leach-Bliley Act was enacted and enforceable as of the fiscal year of July 1, 2018 - June 30, 2019. Neither the Vice President of Administrative Services nor the Director of Information Technology had received any messages regarding that topic from either federal or state sources of information.Halifax Community College did not believe that it was negligent in not taking actions related to the Information Security program as it completed all phases of the Enhancing Accountability in Government through Leadership and Education (EAGLE) program during the fiscal year 2018-2019, which is part of the internal control program for community colleges in North Carolina. That included submitting the IT portion of EAGLE in 2018-2019. There are five parts of the Gramm-Leach-Bliley Act that Halifax Community College needed to comply with to meet all standards of the Act. Halifax Community College met the standards of four parts of the Act. The College agrees that it did not meet one part of the Act. That part is standard (b)(l) of employee training and management of identifying reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of customer information that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of such information, and assess the sufficiency of any safeguards in place to control these risks.David Forester, Vice President of Administrative Services, with the Assistance of Caroline Harris, Director of Information Technology, will oversee the development and implementation of revised procedures to ensure the Halifax Community College will be incompliance in all aspects with the Gramm-Leach-Bliley Act. This will include a focus on a greater training of employees regarding the College?s Information Technology Program.See Schedule of Findings and Questioned Costs for footnote.

Financial Aid Policies Do Not Meet Federal RequirementsThe College?s policies do not contain the minimum elements required by federal regulations. During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students.First, the College?s verification policy omitted important elements including:?The applicants? responsibilities throughout the verification and consequences for failing to provide documentation within a specified time period.?The procedures for referring to appropriate parties any credible information indicating an applicant may have engaged in fraud or other criminal conduct during the application process.Second, the College?s satisfactory academic progress (SAP) policy does not describe how a student?s GPA and pace of completion are affected by course incompletes, withdrawals, or repetitions.Third, while the College?s SAP policy addressed the following elements, these elements were not published as required by federal regulations :?The basis on which a student may file an appeal.?The information a student must submit regarding why the student failed to make satisfactory academic progress, and what has changed in the student?s situation that will allow the student to demonstrate satisfactory academic progress at the next evaluation.?Notification procedures to students of the results of an evaluation that impacts a student?s eligibility for Title IV program funds.Additionally, the College?s withdrawal policy omitted important elements including:?A procedure for assuring returns of Title IV funds are paid in the proper sequence.?A procedure for paying the returns of Title IV funds within due dates.As a result, students could misunderstand the financial aid process and have their aid interrupted or denied.According to the College, the errors occurred because the College did not have a process in place to review and update policies to comply with federal regulations.Federal regulations require institutions to have written policies for certain elements of the student financial aid process. Specifically,?Institutions must establish and use written policies and procedures for verifying information contained in a student aid application.?Institutions must establish, publish, and apply reasonable standards for measuring whether eligible students maintain satisfactory academic progress.?Institutions must make readily available to enrolled and prospective students a summary of the requirements for the return of Title IV grant assistance.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), and 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: The College should design and implement procedures to ensure that they have reviewed and updated their policies to comply with federal regulations.Agency Response: The College agrees with the findings that the College?s Financial Aid policies did not meet the federal requirements. The Office of Financial Aid at McDowell Technical Community College has updated the policies pursuant to audit findings and recommendations.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations . During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students subject to this requirement.As a result, student information is more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented.The error occurred because the College was unaware that federal regulations require a risk assessment that identifies risks to employee training and management over the security, confidentiality, and integrity of students? financial aid information.The Gramm-Leach-Bliley Act requires financial institutions to develop, implement, and maintain an information security program that includes a risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), and 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should ensure responsible staff receive training on the federal regulation required under the Gramm-Leach-Bliley Act and revise its information security program as necessary.Agency Response: The College agrees with the findings that the College?s Information Security Program did not meet the minimum federal requirements. The College will revise and update the Information Security processes to meet federal requirements that are required under the Gramm Leach-Bliley Act. Also, responsible staff will receive training on the federal regulation required under the Gramm-Leach-Bliley Act.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance to 1,462 students subject to this requirement.As a result, student information is more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented.The error occurred because the College was unaware that federal regulations require a risk assessment that identifies risks to employee training and management over the security, confidentiality, and integrity of students? financial aid information.The Gramm-Leach-Bliley Act requires financial institutions to develop, implement, and maintain an information security program that includes a risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), 84.063 (Federal Pell Grant Program), and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should ensure responsible staff receive training on the federal regulations required under the Gramm-Leach-Bliley Act and revise its information security program as necessary.Agency Response: Nash Community College agrees with the finding that College management should ensure responsible staff receive training on the federal regulations required under the Gramm-Leach- Bliley Act and will revise our information security programs as necessary.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations . During the audit period, the College disbursed approximately $2.5 million in federal financial assistance to 666 students subject to this requirement.As a result, student information is more susceptible to unauthorized disclosure, misuse, alteration, destruction, or other compromise because risks could exist for which safeguards have not been designed and implemented.The error occurred because the College was unaware that federal regulations require a risk assessment that identifies risks to employee training and management over the security, confidentiality, and integrity of students? financial aid information.The Gramm-Leach-Bliley Act requires financial institutions to develop, implement, and maintain an information security program that includes a risk assessment over employee training and management to facilitate the design and implementation of appropriate safeguards to students? financial aid information.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), and 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should ensure responsible staff receive training on the federal regulations required under the Gramm-Leach-Bliley Act and revise its information security program as necessary.Agency Response: Rockingham Community College is in agreement with the findings of the audit and has implemented a corrective action plan.The college purchased training software and began the implementation of monthly security training campaigns in December, 2019. Employees will be required to complete each learning objective by a set deadline. This process will ensure that staff receive consistent training to identify reasonably foreseeable internal and external risks to the security of customer information as required by the Gramm-Leach-Bliley Act. The college's information security program is reviewed and updated on a regular basis. The program consists of the North Carolina Community College System's security standards, as well as college-specific standards as detailed in the RCC Business Continuity Plan.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in Cash ManagementThe University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements.Auditors tested all 51 drawdowns that occurred during the audit period and found seven (14%) that exceeded the immediate need of students by a total of $126,887. Additionally, four of these seven drawdowns resulted in excess cash balances totaling $80,036 that were returned between 17 to 31 days late.As a result, the additional funds on hand at the University prevented them from being allocated to other students or reducing the cost of federal programs.According to University management, there were changes made to student award calculations following the request for funds that were not communicated to personnel responsible for drawing down funds. In addition, there was no further review performed to determine if an excess cash balance existed.Federal regulations require that the University request funds that do not exceed the amount immediately needed for disbursements to students and parents. Any amounts not disbursed by the end of the third business day are considered excess cash and are required to be promptly returned within the next seven calendar days.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.033 (Federal Work-Study Program), 84.063 (Federal Pell Grant Program), 84.268 (Federal Direct Student Loans). U.S. Department of Health and Human Services; 93.364 (Nursing Student Loans), and 93.925 (Scholarships for Health Professions Students from Disadvantaged Backgrounds); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should design and implement monitoring procedures over the drawdown process to ensure requested funds do not exceed immediate need for disbursements and any excess cash is promptly returned in accordance with federal compliance requirements. Further, these monitoring procedures should ensure that all changes made to student award calculations are communicated prior to drawing down funds.Agency Response: Winston-Salem State University agrees with the findings and the recommendations as it relates to Deficiencies in Cash Management and will take corrective action steps to implement the OSA recommendation in order to ensure no future errors.Procedures to ensure requested funds do not exceed immediate need for disbursements and excess cash is returned promptly have been put in place. Departmental leadership will ensure that all changes made to student award calculations are communicated prior to drawing down funds. The corrective action has taken place, but there is continued monitoring to guarantee that the deficiencies which showed up in audit are resolved and all procedures for cash management are being followed by all parties.The Director of Financial Aid and the Associate Director for Compliance and Accounting will be responsible for implementing the corrective action. Corrective action was completed in September 2019 when the procedure agreed upon by all parties for cash management was implemented and we are going to review again in January 2020 to make sure the processes are working as they should.See Schedule of Findings and Questioned Costs for footnote.

Errors in Return of Title IV FundsThe University incorrectly calculated how much money to return to the Title IV program (financial aid) after students supported by the program withdrew from school. Also, some funds were either not returned or were returned late. During the audit period, the University disbursed approximately $51.9 million in financial aid to 4,401 students.Auditors tested the return calculations for a sample of 15 out of 71 students that met the requirements and had Title IV calculations performed. Auditors found 10 students (67%) for which the return calculations were incorrect.Additionally, auditors tested a sample of 34 out of 170 students that had a ?zero? GPA and found six students that met the requirements for a return of Title IV funds. Auditors reviewed documentation for the six students and found:?For 6 students (100%), the return of funds calculations were incorrect due to under and over calculations.?For 3 students (50%), the University returned funds to the Title IV program late.?For 1 student (17%), the University failed to return the required funds entirely.As a result, the University failed to return $2,932 to the Title IV program, over returned $2,556, and returned $679 between 79 and 81 days late. These funds could have been allocated to other students or used to reduce the cost of federal programs.According to University management, the errors occurred due to insufficiently trained staff resulting from employee turnover. There was also a lack of communication between the registrar and financial aid departments about unofficial withdrawals during the audit period.Federal regulations state that if the total amount of assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the institution?s determination that the student withdrew, the difference must be returned to the Title IV program.Additionally, federal regulations require that returns of Title IV funds be deposited or transferred into the Student Financial Aid account or that electronic fund transfers be initiated to the Department of Education or the appropriate lender as soon as possible, but no later than 45 days after the date the institution determines that the student withdrew.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.007 (Federal Supplemental Educational Opportunity Grants), 84.063 (Federal Pell Grant Program), and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should ensure responsible employees receive proper training. University management should also design and implement procedures that ensure timely communication between personnel responsible for the return to Title IV process so that funds are returned on a timely basis in accordance with federal compliance requirements.Agency Response: Winston-Salem State University agrees with the findings and the recommendations as it relates to errors in Return of Title IV Funds and will take corrective action steps to implement the OSA recommendation in order to ensure no future errors.See Schedule of Findings and Questioned Costs for footnote.

Ineffective Monitoring of Title I SpendingThe Department did not effectively monitor spending of the Title I, Part A subawards provided to local education agencies (LEA) and charter schools (collectively called subrecipients). During the audit period, the Department provided $434 million in subawards to the subrecipients.The Department has the responsibility to monitor subaward spending to ensure compliance with federal carryover limits and approve spending waivers as appropriate. The subrecipient must spend at least 85% of the award in the first 15 months. If more than 15% of an award remains at the beginning of the carryover period , the Department must grant a waiver to allow the excess carryover.The 2017 initial award period ended during the audit period. This award began on July 1, 2017, with the initial award period of 15 months ending on September 30, 2018, and the carryover period beginning October 1, 2018 and continuing through September 30, 2019.Auditors examined the Department?s monitoring tool for calculating subrecipient carryover amounts as of September 30, 2018. All expenditures that occurred during the 15-month period July 1, 2017 through September 30, 2018 were counted without determining if they were applicable to the award period. Federal award periods overlap creating the potential for expenditures to apply to any of three open awards.As a result of the monitoring tool errors, noncompliance with carryover limitations by two LEAs and one charter school were not addressed until revisions were prompted by the audit. Overall, ineffective monitoring puts LEA and charter school funding at risk of reversion if not spent within the federally required timeframes.According to Department management, the errors in the carryover calculation occurred because the Department?s accounting system does not clearly assign the award year to expenditure transactions. This increases the complexity of applying expenditures to the correct award when there are multiple awards with overlapping award periods. Further, there was a lack of monitoring of the subaward balances during the year.Uniform Guidance requires the Department 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. Such requirements include award carryover limitations at the subrecipient level.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Grants to Local Education Agencies); Federal Award Number (award period): S010A170033 (July 1, 2017 ? September 30, 2018).Recommendation: Department management should assess the feasibility of tracking expenditures by award year within their accounting records. If not feasible, Department management should develop additional tools to track or monitor subaward balances by award year.Agency Response: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. School Business within DPI has already taken several steps to address this deficiency in Fiscal Year 2020. After receiving guidance from the U.S. Department of Education, School Business developed a new tool for calculating Title I carryover amounts to ensure subrecipient compliance with applicable carryover limitations. In order to compensate for the fact that DPI?s accounting system does not clearly assign subrecipient expenditures to specific award years, the new Title I carryover calculation tool will allow DPI to carefully allocate program expenditures to the oldest award year to ensure an effective attribution of expenditures to a single award year when there are multiple award years open. DPI utilized the new tool to recalculate LEA Title I carryover amounts for DPI?s 2017 Title I award and identified the three additional subrecipients that failed to meet carryover requirements that were not previously identified. School Business sought and received approval from the U.S. Department of Education to issue retroactive waivers to the three subrecipients resulting in no impact. School Business will continue to evaluate its existing Title I carryover monitoring procedures to identify any changes needed to the tool or process.See Schedule of Findings and Questioned Costs for footnote.

Errors in Reported State Per Pupil ExpendituresThe Department submitted incomplete and inaccurate data in their 2018 annual National Public Education Financial Survey (Survey) to the National Center for Education Statistics. During the audit period, the Department reported $15.7 billion in federal, state, and local education expenditures.Auditors obtained the supporting data and recalculated amounts reported for the State Per Pupil Expenditure (SPPE) included in the Survey submitted in March 2019. The Department excluded $53.2 million in worker?s compensation paid on behalf of local education agencies and $25.2 million in residential school expenditures from total expenditures. Further, required exclusions from the total expenditures were overstated by $15.3 million.Inaccurate reporting of SPPE data could affect federal education funding allocated to the Department. The reported data is used by the U.S. Department of Education to make allocations under several Elementary and Secondary Education Act of 1965 (ESEA) Programs, including Title I, Part A, Grants to Local Education Agencies.According to Department management, errors in the report occurred for two reasons.First, management?s review process did not detect a keying error made by the preparer.Second, the Department did not recognize the need to reconcile reporting data with accounting records to ensure it was accurate and complete.Federal regulations require the Department to submit their average State per pupil expenditure (SPPE) data to the National Center for Education Statistics. Federal instructions for the report state that ?Total Expenditures? on the report should include all expenditures for public education including ?Direct Program Support,? defined as expenditures made by state education agencies for, or on behalf of, local education agencies.The instructions also direct states to include finance data for all publicly funded schools, including special service schools, such as schools for the deaf, blind, and mentally disabled.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Grants to Local Education Agencies); Federal Award Number (award period): S010A170033 (July 1, 2017 ? September 30, 2018).Recommendation: Department management should strengthen existing report review procedures to ensure keying errors are detected and corrected. Further, management should implement a reconciliation procedure to validate the accuracy and completeness of data used for reporting.Agency Response: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. School Business within DPI pursued additional guidance from the U.S. Department of Education and U.S. Census Bureau regarding inclusion of worker?s compensation and residential school expenditure data in the National Public Education Financial Survey?s (NPEFS) State Per Pupil Expenditure (SPPE) calculations. Once additional guidance is received, DPI will update the NPEFS?s SPPE calculation process to include the data, if required by the Federal government. Additional controls have already been implemented to enhance the review process for the NPEF?s SPPE calculations and identify any potential keying errors as part of the calculation process. The duplicated amounts were reported within `Net Current Expenditures? as $13.6654 billion. The correct amount was $13.6808 billion, a difference of $15.349 million or 0.112% of the `Net Current Expenditures?. Finally, DPI has already discussed the NPEFS?s SPPE calculation process and the estimated impact (for both the error and potential additions to the report) of less than $30 per pupil with the U.S. Department of Education. DPI has been advised that there will be no adverse implications or penalties to North Carolina?s Federal funding as a result of the reporting discrepancies.See Schedule of Findings and Questioned Costs for footnote.

Fiscal Monitoring Results Were Not Communicated TimelyThe Department did not timely communicate fiscal monitoring results of local school districts and charter schools, collectively referred to as subrecipients. Auditors noted deficiencies in three federal programs: Title I, Part A ; Title II, Part A ; and School Improvement Grants (SIG). In total the Department awarded approximately $486 million for these programs to 257 subrecipients during the fiscal year.The Department uses monitoring reports to communicate results of fiscal monitoring to the subrecipients. Auditors reviewed fiscal monitoring documentation for subrecipient site visits performed during the year and found the following:?For a sample of six out of 40 Title I, Part A site visits, five (83%) monitoring reports were issued between 15 to 137 days after the due date.?For a sample of six out of 37 Title II, Part A site visits, four (67%) monitoring reports were issued between 15 to 45 days after the due date.?For all three SIG site visits, two reports were issued 51 and 137 days after the due date, and the third report was never issued.All of the monitoring reports, which were due for issuance 60 days after the site visit, had identified deficiencies. Examples of subrecipient deficiencies noted in the reports included:?Missing support for time and effort records.?Written policies and procedures that did not include all components required by federal Uniform Guidance.?Noncompliance with federal cash management requirements.As a result, corrective actions by subrecipients may have been delayed, allowing noncompliance with federal program regulations, and possible misuse of funds, to continue.According to the Department, monitoring reports were not issued in accordance with established policy for two reasons.First, management did not timely identify key monitoring personnel duties that had fallen behind. Duties included overall tracking of the monitoring progress.Second, the monitoring plan in place for the year did not adequately use monitoring resources or tailor monitoring activities to efficiently respond to risk assessed for each subrecipient.In accordance with Uniform Guidance, the Department is required to ensure subrecipients take timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient as detected through audits, on-site reviews, and others means. The Uniform Guidance also states that subrecipient risk of noncompliance should be evaluated for the purpose of determining appropriate monitoring.Departmental written policy establishes internal control over fiscal monitoring activities to align with federal subrecipient monitoring requirements including:?Communication of fiscal monitoring results in a written report to subrecipients within 60 days of the final site visit day.?Maintenance of the fiscal monitoring log to track progress of each subrecipient?s monitoring visit, report, required response, and closure.?Development of a fiscal monitoring risk assessment.Federal Award Information:Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Grants to Local Education Agencies); Federal Award Number (award period): S010A180033 (July 1, 2018 - September 30, 2019).Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.367 (Title II, Supporting Effective Instruction); Federal Award Number (award period): S367A180032 (July 1, 218 - September 30, 2019).Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.377 (School Improvement Grants); Federal Award Number (award period): S377A160034 (July 1, 2016 ? September 30, 2021, as extended).Recommendation: The Department should implement management oversight procedures to operate throughout the year. The Department should also revise risk assessment procedures to clarify planning of the response to identified risks and prioritization of monitoring resources.Agency Response: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. School Business within DPI has taken several steps to address this deficiency in Fiscal Year 2020. The Assistant Director of for School Business now has direct responsibility for ensuring the monitoring reports are issued timely, which will enable proper managerial oversight of the monitoring report process.In addition, School Business developed a revised risk assessment to identify districts for monitoring during Fiscal Year 2020 and better prioritize monitoring resources. Finally, School Business will evaluate its existing monitoring procedures identifying changes needed to reporting timelines or templates to provide timely and actionable feedback for districts who have been subject to monitoring.See Schedule of Findings and Questioned Costs for footnote.

Inadequate Award CommunicationThe Department did not timely notify subrecipients of federal award information for three audited federal programs including Title I, Part A ; Title II, Part A ; and 21st Century Community Learning Centers (CCLC). In total, subrecipients of these programs received approximately $500 million during the fiscal year.Per federal guidance, award information includes, but is not limited to, award start and end dates, total amount of the award, and all requirements imposed on the subrecipient.Specifically, auditors found the following:?In a sample of 33 out of 216 Title I, Part A subrecipients, 21 (64%) were sent the award information one to seven months after they began spending the funds.?In a sample of 28 out of 185 Title II, Part A subrecipients, 14 (50%) were sent the award information one to two months after they began spending the funds.?In a sample of 31 of 94 21st CCLC subrecipients, 2 (6%) had no evidence of any award information being communicated.As a result, there is an increased risk that federal funds were not used in accordance with federal requirements.According to Department management, there was turnover in the administrative personnel that were responsible for sending the correspondence, but management did not timely reassign their duties.Federal regulations require the Department to clearly identify every subaward to the subrecipient and include specific federal award information at the time of the award.Federal Award Information:Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.010 (Title I Grants to Local Education Agencies); Federal Award Number (award period): S010A180033 (July 1, 2018 - September 30, 2019).Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.367 (Title II, Supporting Effective Instruction); Federal Award Number (award period): S367A180032 (July 1, 2018 - September 30, 2019).Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.287 (Twenty-First Century Community Learning Centers); Federal Award Number (award period): S287C180033 (July 1, 2018 - September 30, 2019).Recommendation: Department management should implement contingency planning, including timely reassignment of responsibilities, to reduce the risk that staff turnover could lead to delayed communication to subrecipients.Agency Response: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. The Federal Programs Monitoring and Support (FPMS) Division utilizes the approval within the application system (Continuous Comprehensive Improvement Program ? CCIP) as the authoritative approval for fund expenditures. A formal award letter was issued at a later date but did not hold or provide the authority to expend funds. The FPMS division will update and revise its protocol to ensure that all required information is provided to the subrecipients prior to expending funds.See Schedule of Findings and Questioned Costs for footnote.

Unallowable Award LiquidationThe Department improperly charged $18.3 million of expenditures to a Special Education ? Grants to States award that was no longer available for obligations. For the fiscal year, the Department spent $347.9 million to provide for the education of children with disabilities.The 2016 award obligation period ended during our audit year. This award began on July 1, 2016, and ended on September 30, 2018. The Department had 90 days to liquidate obligations made during the award period.Auditors found the Department had reclassified $18.3 million in Local Education Agency (LEA) and charter school expenditures charged to subsequent period awards to the expired 2016 award without evidence that the expenditures were obligated.As a result, the Department may be required to pay $18.3 million back to the United States Department of Education. Further, improper adjustments of expenses can skew data used to monitor and budget for program activities, putting funding that could be used for additional program activities at risk for reversion to the federal government.According to Department management, there have been multiple changes in financial, budget, and program personnel over the course of recent years. This has limited the number of staff who have knowledge and experience with the period of performance requirements. This has also delayed the monitoring of grant spending.Federal regulations require the Department to charge the federal award for allowable costs incurred during the period of performance (award period). The U.S. Department of Education specifies this period as the 27 months extending from July 1 of the fiscal year for which the funds were appropriated through September 30 of the second following year.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.027 (Special Education ? Grants to States); Federal Award Number (award period): H027A160092 (July 1, 2016 ? September 30, 2017).Recommendation: Department management should:?Ensure responsible staff receive proper training on the period of performance requirements.?Implement contingency planning in periods of vacancies to ensure that monitoring of grant spending is performed.Agency Response: The Department of Public Instruction (DPI) concurs with the Auditor?s finding and recommendation. After notification of the issue by the auditors, DPI management investigated further and learned that accounting adjustments had been utilized to carry the expiring funds forward into subsequent years? grants, with the entire amount now maintained as unallotted funding within DPI?s IDEA FY 2018 grant award balance. DPI is currently working with the U.S. Department of Education to determine how to address the unexpended funds. The management staff members that were involved in the oversight of this transaction are no longer employed with the Department.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $1.6 million in federal financial assistance to 459 students subject to this requirement. See finding 2019-005 for a description.

Financial Aid Policies Do Not Meet Federal RequirementsThe College?s policies do not contain the minimum elements required by federal regulations. During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students. See finding 2019-006 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students subject to this requirement. See finding 2019-007 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance to 1,462 students subject to this requirement. See finding 2019-008 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $2.5 million in federal financial assistance to 666 students subject to this requirement. See finding 2019-009 for a description.

Deficiencies in Cash ManagementThe University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements. See finding 2019-010 for a description.

Untimely Return of Title IV FundsThe University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $116.3 million in federal financial assistance to 11,231 students. See finding 2019-003 for a description.

Enrollment Status Reporting ErrorsThe College did not timely or accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $1.6 million in federal financial assistance funding to 459 students subject to this reporting requirement.Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed.Five (8%) students were not reported in accordance with federal compliance requirements. Specifically:?One (2%) student was not reported at all.?Two (3%) students were reported with incorrect statuses.?Two (3%) students were reported 80 to 101 days after the status change occurred.Failure to report student enrollment status changes to the NSLDS could impact student Pell eligibility.According to the College, the College relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. The College did not monitor the information reported to NSLDS to ensure its agreement with College records.Federal regulations require the College to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant funds. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for timely and accurate reporting.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should monitor the student enrollment data reported to the NSLDS for accuracy and timeliness.Agency Response: Halifax Community College agrees with the finding and recommendation that the College needs to monitor the student enrollment data reported to NSLDS for accuracy and timeliness. Based on the finding, the College is strengthening its current procedure to provide a timely review and reconciliation of the enrollment status changes reported. The College will ensure changes from the previously submitted report are active in the National Student Loan Database System prior to submitting a new report. It is imperative to ensure reporting between the two outside agencies is complete prior to submitting a new status report.See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV FundsThe College did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the College disbursed approximately $1.6 million in financial aid to 459 students. See finding 2019-004 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $1.6 million in federal financial assistance to 459 students subject to this requirement. See finding 2019-005 for a description.

Financial Aid Policies Do Not Meet Federal RequirementsThe College?s policies do not contain the minimum elements required by federal regulations. During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students. See finding 2019-006 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $1.4 million in federal financial assistance to 374 students subject to this requirement. See finding 2019-007 for a description.

Enrollment Status Reporting ErrorsThe College did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance funding to 1,462 students subject to this reporting requirement.Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed.Five (8%) students were not reported in accordance with federal compliance requirements. Specifically:?Three students were not reported at all.?One student was reported 92 days after the status change occurred.?One student was reported with an incorrect status.Failure to report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility.According to College management, it relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. The College did not monitor the information reported to NSLDS to ensure its agreement with College records.Federal regulations require the College to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for timely and accurate reporting.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should monitor submissions of student enrollment status changes submitted by the Clearinghouse to ensure they are reported timely and accurately to the NSLDS. College management should also implement monitoring procedures to ensure all students with status changes are identified and communicated to the appropriate parties.Agency Response: Nash Community College agrees with the finding that the College did not timely report enrollment status changes to the National Student Loan Data System. Based on this finding, the College is strengthening its current procedure to monitor enrollment status changes.The College acknowledges the importance of accurate enrollment reporting to the National Student Loan Data System. The errors in reporting occurred when students were approved for graduation after the end of the semester and after the initial graduate file had been sent. The Records Office will manually update students that are approved for graduation after the initial graduate file has been sent to the National Student Clearinghouse.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance to 1,462 students subject to this requirement. See finding 2019-008 for a description.

Enrollment Status Reporting ErrorsThe College did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $2.4 million in federal financial assistance to 664 students subject to this requirement.Auditors tested the enrollment status reporting for a sample of 120 students who received federal financial assistance and whose enrollment status changed. Ten (8%) students were reported with an incorrect status change.Failure to report student enrollment status changes to the NSLDS could impact student Pell eligibility.According to College management, the College relied upon the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. The College did not monitor the information reported to NSLDS to ensure its agreement with College records.Federal regulations require the College to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant funds. In addition, the NSLDS Enrollment Reporting Guide states that the College is ultimately responsible for timely and accurate reporting.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.063 (Federal Pell Grant Program); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should monitor submissions of student enrollment status changes submitted by the Clearinghouse to ensure they are reported accurately to the NSLDS.Agency Response: Rockingham Community College agrees with the finding and recommendation that the college management needs to monitor the student enrollment data reported to the National Student Loan Data System (NSLDS) for accuracy.To resolve the finding, the Records Office will notify NSLDS of a change in student status within 75 days and monitor the information reported from NSLDS to ensure its agreement with College records. Upon receipt of the National Student Clearinghouse (NSC) Degree Verify Report, the Records Office will correct all students with an error status. The Records Office will continue to submit enrollment reports and degree reports to the NSC based on the reporting requirements to meet federal regulations. A reconciliation of the NSLDS enrollment data will be completed by the Records Office and Financial Aid and Veterans Affairs Office every 60 days to ensure accurate reporting.The college's Registrar, in collaboration with the Director of Financial Aid and Veterans Affairs, is responsible for implementing this corrective action. The estimated date for completion of this implementation is February, 2020.See Schedule of Findings and Questioned Costs for footnote.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $2.5 million in federal financial assistance to 666 students subject to this requirement. See finding 2019-009 for a description.

Enrollment Status Reporting ErrorsThe University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $198 million in federal financial assistance funding to 12,223 students subject to this reporting requirement.Auditors tested the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed.Four (7%) students were not reported in accordance with federal compliance requirements. Specifically:?Three (5%) students were reported 82 to 84 days after the status change occurred.?One (2%) student was reported with an incorrect status change.Failure to report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility.According to University management, it relied on the National Student Clearinghouse (Clearinghouse), a third-party service provider, to ensure accurate and timely reporting of enrollment status changes. The University did not monitor the information reported to the NSLDS to ensure its agreement with University records.Federal regulations require the University to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for timely and accurate reporting.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should monitor submissions of student enrollment status changes submitted by the Clearinghouse to ensure they are reported timely and accurately to the NSLDS. University management should also implement monitoring procedures to ensure all students with enrollment status changes are identified and communicated to the appropriate parties.Agency Response: Like many institutions of higher education and as noted in the management letter, the University of North Carolina at Chapel Hill utilized the National Student Clearinghouse (Clearinghouse) to report enrollment changes on our behalf to NSLDS. The enrollment reporting requirement is intended to allow the federal government and loan servicers to appropriately cease or adjust payments and change the in-school status of borrowers to a new appropriate status based on NSLDS information. While we have instituted training and implemented procedures and monitoring of these students, we acknowledge the delay which ranged from 7 to 9 days beyond the required timeline for the three cases identified. We also acknowledge that the sample identified a student that separated from the institution with the incorrect separation type.Please note that the planning and implementation of a monitoring process with our third party service provider, National Student Clearinghouse, to review the data and status changes submitted on our behalf to the NSLDS began immediately upon receipt of the report and the University will continue to ensure accurate and timely reporting for this process. As recommended, we also are investing in federal regulations training for our staff to ensure compliance of current standards and safeguards. The Office of the University Registrar will work with both the Clearinghouse and UNC Information Technology Systems department on determining if the file needs to be submitted earlier, more often or both in order to rectify this finding. In response to the incorrect separation status, the corrective action to run reports for late graduation conferrals is under development. The Office of the University Registrar has also developed an internal process to identify and manually update the Clearinghouse.The Office of the University Registrar will also work to put additional safeguards in place to monitor the submissions of the enrollment files to the Clearinghouse to ensure the information is meeting the necessary timeline to address this finding. We will also schedule regular reviews of the error reports to ensure accurate reporting to NSLDS.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in Cash ManagementThe University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements. See finding 2019-010 for a description.

Enrollment Status Reporting ErrorsThe University did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $49.8 million in financial aid to 4,384 students subject to this requirement.Auditors reviewed the enrollment status reporting for a sample of 60 students who received federal financial assistance and whose enrollment status changed. Eight (13%) students were reported with an incorrect status change.Failure to report student enrollment status changes to the NSLDS could impact student Pell and Direct Loan eligibility.According to University management, there were two reasons why enrollment status changes were not reported.First, the University relied upon the information system (Banner) to accurately report status changes. During the audit period, the information system was not setup to identify all types of student enrollment status changes.Second, the University Registrar stated she was unaware that the University needed to monitor NSLDS for all types of enrollment status changes.Federal regulations require the University to notify NSLDS within 75 days of a change in student status for those students that received Pell Grant and Federal Direct Loan funds. In addition, the NSLDS Enrollment Reporting Guide states that the University is ultimately responsible for timely and accurate reporting.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should establish monitoring procedures to ensure that information systems are properly setup to identify all types of student enrollment status changes. University management should provide training or take other action to ensure that staff are aware of NSLDS requirements.Agency Response: Winston-Salem State University agrees with the findings and the recommendations as it relates to Enrollment Status Reporting Errors and will take corrective action steps to implement the OSA recommendation in order to ensure no future errors. Steps have been taken to ensure that the Registrar leadership team reviews federal aid policy changes annually to confirm that any relevant adjustments are made and all enrollment status types accounted for.See Schedule of Findings and Questioned Costs for footnote.

Errors in Return of Title IV FundsThe University incorrectly calculated how much money to return to the Title IV program (financial aid) after students supported by the program withdrew from school. Also, some funds were either not returned or were returned late. During the audit period, the University disbursed approximately $51.9 million in financial aid to 4,401 students. See finding 2019-011 for a description.

Deficiencies in Transfer MonitoringThe University did not obtain updated financial aid history through the National Student Loan Data System (NSLDS) for transfer students before disbursing Title IV aid. During the audit period, the University disbursed approximately $51.9 million in financial aid to 4,401 students.Auditors reviewed the financial aid history for 60 out of 406 students who received federal financial assistance and transferred to the University during the 2018-2019 award year. For nine (15%) students, the University failed to request updated information about each student before disbursing funds.Failure to obtain updated financial aid history for transfer students could result in the disbursement of Title IV funds to students who have reached their lifetime award limits and impact students? Pell and Direct Loan eligibility.According to University management, the University contracted with a consultant to review the NSLDS for transfer students. However, the University did not monitor the procedures performed by the consultant to ensure federal requirements were met. Prior to the audit, management was unaware that the consultant failed to properly add students to the transfer monitoring list and/or obtain updated financial aid history for transfer students during the audit period.Federal regulations require the University request updated information about transfer students so it can make certain required determinations before disbursing funds.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Numbers (titles): 84.063 (Federal Pell Grant Program) and 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: University management should implement monitoring procedures, such as a secondary review of procedures performed by the contracted consultant, to ensure federal compliance requirements are met for all transfer students.Agency Response: Winston-Salem State University agrees with the findings and the recommendations as it relates to Deficiencies in Transfer Monitoring and will take corrective action steps to implement the OSA recommendation in order to ensure no future errors. As part of the Compliance Calendar, the Associate Director for Compliance and Accounting will monitor each semester to ensure the proper transfer monitoring was performed. These transfer monitoring procedures will be completed at least monthly during the semester.See Schedule of Findings and Questioned Costs for footnote.

Untimely Return of Title IV FundsThe University did not timely return Title IV funds (financial aid) after students supported by the program withdrew from the school. During the audit period, the University disbursed approximately $116.3 million in federal financial assistance to 11,231 students. See finding 2019-003 for a description.

Enrollment Status Reporting ErrorsThe College did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance funding to 1,462 students subject to this reporting requirement. See finding 2019-029 for a description.

Information Security Program Does Not Meet Minimum Federal RequirementsThe College?s risk assessment over protecting students? financial aid information did not include all of the elements as required by federal regulations. During the audit period, the College disbursed approximately $7.2 million in federal financial assistance to 1,462 students subject to this requirement. See finding 2019-008 for a description.

Direct Loan Reconciliation ErrorsThe College did not reconcile Federal Direct Loan disbursements to students to the Department of Education records. During the audit period, the College disbursed $2.3 million in Federal Direct Loans to 421 students.Auditors tested all 12 of the monthly reconciliations during the audit period and found no evidence that the reconciliations were performed for five (42%) months.As a result, federal records could be inaccurate or incomplete. Failure to perform reconciliations could also result in students owing more or less money than was disbursed by the College.The College did not have procedures in place to ensure reconciliations were completed accurately and reviewed.Federal regulations require the College to reconcile the Student Account Statement (SAS) data file (received from the Department of Education) to the College?s disbursements records each month.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.268 (Federal Direct Student Loans); Award Period: July 1, 2018 ? June 30, 2019.Recommendation: College management should design and implement review and/or monitoring procedures over the reconciliations to ensure they are completed accurately.Agency Response: Nash Community College agrees with the finding that the College did not document Direct Loan Reconciliations each month. Based on this finding, the College has established the following procedure to ensure Direct Loan Reconciliations are completed.The Direct Loan Reconciliations will be completed by the Assistant Director of Financial Aid by the 15th of each month. Once the reports are reconciled, the Assistant Director of Financial Aid will submit the reports to the Director of Financial Aid for review. The Direct Loan Reconciliation files will be maintained in the office of the Assistant Director of Financial Aid. Corrective action for the reconciliation process was implemented as of September 30, 2019.See Schedule of Findings and Questioned Costs for footnote.

Enrollment Status Reporting ErrorsThe University did not timely report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $198 million in federal financial assistance funding to 12,223 students subject to this reporting requirement. See finding 2019-033 for a description.

Deficiencies in Cash ManagementThe University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements. See finding 2019-010 for a description.

Enrollment Status Reporting ErrorsThe University did not accurately report enrollment status changes to the National Student Loan Data System (NSLDS) for students who received federal financial assistance. During the audit period, the University disbursed approximately $49.8 million in financial aid to 4,384 students subject to this requirement. See finding 2019-035 for a description.

Errors in Return of Title IV FundsThe University incorrectly calculated how much money to return to the Title IV program (financial aid) after students supported by the program withdrew from school. Also, some funds were either not returned or were returned late. During the audit period, the University disbursed approximately $51.9 million in financial aid to 4,401 students. See finding 2019-011 for a description.

Deficiencies in Transfer MonitoringThe University did not obtain updated financial aid history through the National Student Loan Data System (NSLDS) for transfer students before disbursing Title IV aid. During the audit period, the University disbursed approximately $51.9 million in financial aid to 4,401 students. See finding 2019-037 for a description.

Incomplete Fiscal MonitoringThe Department did not adequately conduct its fiscal monitoring of subrecipients receiving $25.4 million in federal pass-through funding for the 21st Century Community Learning Centers (21st CCLC) program.During the audit period, the Department did not perform 12 of the 18 (67%) planned fiscal monitoring visits.Additionally, the Department did not communicate the results of any fiscal desk reviews performed during the audit period to the subrecipients. Auditors reviewed results of all 33 fiscal desk reviews that were performed and found that fiscal monitors had identified various issues in 31 of 33 (94%) reviews. Examples of issues identified in the desk reviews included:?Insufficient time sheet documentation for reimbursed payroll costs.?Individuals signing their own checks.?Double counting expenses in reimbursement requests.Inadequate fiscal monitoring increases the risk of undetected funding misuse and reduces the funding availability to effective 21st CCLC subrecipients.According to Department management, the new Director of Federal Program Monitoring and Support directed updates to the fiscal monitoring policies and procedures during the year but did not clearly assign duties and ensure timely implementation during the transition period.The procedural weaknesses occurred despite multiple Office of the State Auditor investigative reports citing the Department?s inadequate monitoring of 21st CCLC subrecipients over recent years.In accordance with federal Uniform Guidance regulations , the Department is required 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 regulations also require the Department to ensure ??the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award?detected through audits, on-site reviews, and other means.?Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.287 (Twenty-First Century Community Learning Centers); Federal Award Number (award period): S287C180033 (July 1, 2018 - September 30, 2019).Recommendation: Department management should clearly assign compliance responsibilities and monitor for timely performance of those responsibilities during periods of change.Agency Response: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. Fiscal monitoring of Twenty-First Century Community Learning Centers (21st CCLC) grantees has been an evolution of improvement over many years. Federal Programs Monitoring and Support (FPMS) previously contracted with an external vendor for fiscal monitoring reviews of 21st CCLC grantees. In Fiscal Year 2018, FPMS increased staffing to add a full-time Fiscal Monitor position, which allocated 1.5 FTEs to the monitoring of 21st CCLC.A new division reporting structure was adopted in Fiscal Year 2019 which has the 21st CCLC fiscal monitors reporting to the Section Chief and State Coordinator of the 21st CCLC program. This allowed the entire 21st CCLC team to work closely together in developing risk assessments and scheduling and conducting fiscal reviews. To strengthen the written procedures around all types of fiscal and programmatic monitoring, FPMS has revised and updated the 21st CCLC Subgrantee Monitoring Standard Operating Procedures Manual (SOP). This revised manual will detail roles and responsibilities, steps of both onsite and desk reviews, expectations for management review, and details for reporting review results to subrecipients.See Schedule of Findings and Questioned Costs for footnote.

Inadequate Award CommunicationThe Department did not timely notify subrecipients of federal award information for three audited federal programs including Title I, Part A; Title II, Part A; and 21st Century Community Learning Centers (CCLC). In total, subrecipients of these programs received approximately $500 million during the fiscal year. See finding 2019-015 for a description.

Fiscal Monitoring Results Were Not Communicated TimelyThe Department did not timely communicate fiscal monitoring results of local school districts and charter schools, collectively referred to as subrecipients. Auditors noted deficiencies in three federal programs: Title I, Part A; Title II, Part A; and School Improvement Grants (SIG). In total the Department awarded approximately $486 million for these programs to 257 subrecipients during the fiscal year. See finding 2019-014 for a description.

Inadequate Award CommunicationThe Department did not timely notify subrecipients of federal award information for three audited federal programs including Title I, Part A; Title II, Part A; and 21st Century Community Learning Centers (CCLC). In total, subrecipients of these programs received approximately $500 million during the fiscal year. See finding 2019-015 for a description.

Deficiencies in Cash Management ProceduresThe Department held $752,764 in federal funds that were not needed to immediately pay expenditures of the program. During the fiscal year ended June 30, 2019, the Department requested approximately $10.5 million in federal funds.Auditors reviewed the daily cash balances of federal funds for the program and determined that the Department began the fiscal year with $752,764 of federal cash on hand. To pay for expenditures incurred, additional federal funds were drawn routinely throughout the first two quarters of the fiscal year without consideration of the cash on hand.As a result, the Department diminished cash balances at the federal level that could have been available to pay for other states? programs for raising student achievement in their lowest performing schools.According to the Department, the staff responsible for monitoring the cash balances relied on the database tool used to calculate federal funds requests which was not designed to require use of cash on hand prior to requesting additional funds.Further, there are no written policies that outline specific procedures for federal cash on hand.The School Improvements Grant is subject to subpart B of the Treasury regulations in 31 CFR part 205, which dictate that a State should minimize the time between the drawdown of federal funds from the federal government and their disbursement for approved program purposes, keeping them as close as administratively feasible to the State?s actual cash outlay.Federal Award Information: Federal Awarding Agency: U.S. Department of Education; CFDA Number (title): 84.377 (School Improvement Grants); Federal Award Number (award period): S377A160034 (July 1, 2016 ? September 30, 2021, as extended).Recommendation: Department management should implement policies and procedures to define how to handle cash on hand before drawing down additional federal funds. Further, management should ensure that the database used to monitor cash balances is accurately taking cash on hand into consideration before drawing additional federal fund.Agency Response: The Department of Public Instruction concurs with the Auditor?s finding and recommendation. Financial Services within the Department of Public Instruction researched this transaction and found several issues. The initial transaction took place at the beginning of Fiscal Year 2019 as a result of the Local Educational Agencies? (LEAs) zero-out process when unused funds were returned for the month of June 2018. The ?in house? system used by the cash management team to assist with federal drawdowns was having technical issues at this time. DPI created this database program in 2010 to assist the cash management team in processing drawdowns, during the Fiscal Year 2019 year-end processing the system was not recognizing the ?cash on hand? funds. Thus, not including these funds for the purpose of the next draw. Cash management staff did not follow proper procedures to review the 208 report, which generates and tracks the available federal funds by federal program. Also, at the time this issue occurred, drawdowns were not being approved by a manager prior to processing.The following corrective actions have been taken in order to minimize errors moving forward.?The system issues were corrected shortly after the beginning of Fiscal Year 2019. Steps have been put in place to evaluate this system to ensure accuracy moving forward.?The 208 report is now being reviewed by both the cash management staff and the appropriate manager to ensure the correct federal grant year(s) and amounts are drawn. In addition, the cash management staff are being thoroughly trained to complete the drawdown calculation manually and ensure they are not solely dependent on the automated systems. This training will allow the staff to recognize system issues moving forward.?A new process will be put in place starting March 2020 to return unused federal funds as part of the monthly zero-out process with the LEAs. These returned funds will go back into the federal system and will be included in the available balance to be drawn down at a later date. This is a common practice with other state agencies, and it will streamline the process and eliminate ?cash on hand? for federal grants.?The Department has formed a grant section which consist of a Grant Accountant and two General Accountants. The major objective for this section is to monitor, review, approve and reconcile all federal fund draws.We believe implementation of these corrective actions will address the deficiencies noted. DPI and the State Board of Education have also submitted budget requests to add positions for both Financial Services and Internal Audit to strengthen those areas within the Department.

Fiscal Monitoring Results Were Not Communicated TimelyThe Department did not timely communicate fiscal monitoring results of local school districts and charter schools, collectively referred to as subrecipients. Auditors noted deficiencies in three federal programs: Title I, Part A; Title II, Part A; and School Improvement Grants (SIG). In total the Department awarded approximately $486 million for these programs to 257 subrecipients during the fiscal year. See finding 2019-014 for a description.

Deficiencies in Cash Management The University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements. See finding 2019-010 for a description.

Inadequate Monitoring of Program RecipientsThe Department did not monitor counties that received funds for family reunification services for the Promoting Safe and Stable Families grant. During the audit period, the Department provided $3.4 million dollars in family reunification service funds to counties.Inadequate monitoring increased the risk that the Department would not detect if funds intended to be spent reuniting separated families were not used in accordance with federal regulations. As a result, families otherwise eligible for assistance may not have been served.According to Department management, they did not recognize that they should perform on-site monitoring to ensure that subrecipients were managing the program in compliance with federal regulations. The Division of Social Services thought that the department-wide monitoring of administrative expenditures processed through the County Administrative Reimbursement System included monitoring of the family reunification expenditures.Federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulation, and the terms and conditions of the federal award.? Monitoring the funds sent to the counties would be an effective control over compliance.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA (title): 93.556 (Promoting Safe and Stable Families); Federal Award Numbers (award periods): G-1701NCFPSS (October 1, 2016 ? September 30, 2018); G-1801NCFPSS (October 1, 2017 ? September 30, 2019) and G-1901NCFPSS (October 1, 2018 ? September 30, 2020).Recommendation: The Department should ensure responsible staff understand what monitoring procedures occur during the department-wide monitoring of the County Administrative Reimbursement System and implement adequate monitoring procedures to ensure counties expend family reunification funds in accordance with federal regulations.Agency Response: The Department agrees with the finding. The Department is strengthening its monitoring procedures for county child welfare agency reunification services funded by the federal Promoting Safe and Stable Families grant.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the TANF Eligibility Determination ProcessThe Department paid $54,706 in Temporary Assistance for Needy Families (TANF) benefits to or on behalf of ineligible families due to inaccurate and inadequately documented eligibility determinations. When the errors found in the sample are projected to the entire population, the most likely error paid to or on behalf of ineligible families is $4.5 million . During the audit period, approximately 71 thousand families received $127 million in TANF benefits.The task of determining eligibility for the TANF program has been delegated to the county departments of social services (DSS) . However, the Department was responsible for ensuring compliance with the eligibility requirements.Auditors reviewed the client case files for a statistical sample of 601 families and found one or more errors in 92 (15.31%) cases. Specifically:?27 (4.49%) families were found to be ineligible for cash assistance during the coverage period. This was due to incomplete or noncompliance with the Mutual Responsibility Agreement (MRA) , as well as lack of verification of income and other non-financial eligibility requirements. Payments totaling $38,936 were paid to these ineligible families.?8 (1.50%) families were found to be ineligible for child care assistance during the coverage period due to inaccurate plan of care for TANF funding . Payments totaling $15,770 were paid on behalf of these ineligible families.?57 (9.48%) client files were missing some of the required eligibility documentation. Examples of missing information included child support referral documentation and online verification documentation. Further, some income calculations were inaccurate. However, when auditors redetermined eligibility using updated information, the family was eligible.As a result, the Department could have paid an estimated $4.5 million in benefits to or on behalf of ineligible families. These funds could have been used to provide benefits to other eligible families or reduce the overall costs of the program. In addition, the $54,706 that was paid to or on behalf of ineligible families is considered questioned costs .According to the Department the eligibility errors occurred because of defects in NC FAST and inaccurate interpretation and application of the established eligibility policies by the county DSS staff. The county DSS staff utilize NC FAST to input data and make eligibility determinations, however, the Department is responsible for establishing eligibility requirement policies, maintaining NC FAST, and training county DSS staff.Federal regulations state that recipients are only eligible if they meet the requirements of a financially needy family with children. Additionally, state eligibility manuals require adequate documentation to support eligibility determinations.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number: 93.558 (Temporary Assistance for Needy Families); Federal Award Number (award period): 1801NCTANF (October 1, 2017 to September 30, 2019) and 1901NCTANF (October 1, 2018 to September 30, 2020).Recommendation: Department management should correct the defects within NC FAST. In addition, the Department should provide adequate training or retraining when necessary to ensure that county DSS staff perform TANF eligibility determinations correctly.Agency Response: The Department agrees with this finding. The Department will continue to provide training, guidance, and monitoring through desk reviews and onsite visits to county departments of social services (DSS) and local purchasing agencies (LPAs), who determine eligibility, to ensure compliance with the eligibility determination process.Department?s Division of Social Services (cash assistance): The county department of social services that had errors cited will be required to complete a Program Improvement Plan (PIP). Follow-up will begin once county notification letters are received or July 1, 2020 whichever comes first. The Work First Compliance Consultant will conduct the follow-up 3-6 months from the implementation of the PIP.Department?s Division of Child Development and Early Education (DCDEE) (child care assistance): The benefit period that this audit covered was within one year of when the Subsidized Child Care Assistance Program transitioned to NC FAST from the legacy system. Since transitioning to NC FAST and since the policy change, DCDEE has conducted additional trainings with county eligibility workers. Additional training materials from NC FAST on exactly how to handle these cases has also been provided. The Division?s technical assistance staff have been providing more onsite policy guidance and technical assistance to help eligibility workers better understand the new policies as well as better understand how to use NC FAST. DCDEE monitors county DSS/LPAs for accuracy with eligibility determination and case management on a three-year cycle. Counties are expected to have a 95% or better accuracy rate or a corrective action plan is put in place with the county. As a result of this audit, the program compliance unit will begin incorporating fund source review into their regular monitoring.See Schedule of Findings and Questioned Costs for footnote.

Inaccurate TANF Data On Families Was Submitted To Federal GovernmentThe Department submitted inaccurate data in the Temporary Assistance for Needy Families (TANF) ACF-199 report to the Administration for Children and Families (ACF). During the state fiscal year, approximately 26,100 families received $33.9 million in cash assistance from the Federal TANF program.Auditors tested a random sample of 124 cases from the quarterly reports that were submitted for federal fiscal year ended September 30, 2018 and found 16 (13%) cases that had one or more errors in the following data elements:?Number of countable months the participant received assistance?Receives Subsidized child careIn addition, the Department over-reported the total number of families receiving assistance for federal fiscal year 2018 by approximately 1,000 (1%) families.The Department?s failure to submit accurate data could lead to penalties. A penalty of 4% of the adjusted State Family Assistance Grant (SFAG) can be imposed for each quarter the state fails to submit an accurate, complete, and timely report. Based on the federal fiscal year 2018 SFAG, the penalty could be up to $8.6 million.Additionally, inaccurate data could impact the state?s Work Participation Rate (WPR) calculation. The data collected in the ACF-199 quarterly performance report is used by ACF to determine whether the state met its WPR and other program purposes. Failure to achieve the WPR could also result in penalties.According to Division of Social Services (DSS) management, the ACF-199 reports submitted for federal fiscal year 2018 were not accurate due to ongoing issues with the transition to NC FAST, which occurred in state fiscal year 2015. DSS management is aware of these issues and has been working with DHHS NC FAST and IT staff to correct coding, criteria and conversion issues. However, they were unable to resolve all issues prior to the submission of the federal fiscal year 2018 reports.Federal regulations require each state to timely file the TANF Data Report. Specifically, regulations state:?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).?Furthermore, federal regulations require the reports to be accurate and complete. Specifically, regulations state:?We will assess fiscal penalties against States under circumstances defined in parts 261 through 265 of this chapter. The penalties are? A penalty of four percent of the adjusted SFAG for each quarter a State fails to submit an accurate, complete and timely required report.?Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.558 (Temporary Assistance for Needy Families); Federal Award Numbers (award periods): 1701NCTANF (October 1, 2016 ? September 30, 2018) and 1801NCTANF (October 1, 2017 ? September 30, 2019).Recommendation: Division management should continue working with DHHS NC FAST and IT staff to identify and correct unresolved coding, criteria and conversion issues to ensure that accurate reports are submitted.Agency Response: The Department is working diligently to resolve data inaccuracies with the ACF-199 Report, with priority placed on data elements that impact the work participation rates. A cross-divisional team made significant progress on correcting this coding and devoted significant resources to ensure the coding meets the standards and expectations of the Administration for Children and Families. Issues identified during the test and validation phases of this work resulted in the need for recoding of some data elements, impacting the timeline for completion. The Department will continue to devote resources from the Division of Social Services, the Information Technology Division, and the North Carolina Families Accessing Services through Technology (NC FAST) section to complete the work.See Schedule of Findings and Questioned Costs for footnote.

Subrecipient Monitoring Procedures Need ImprovementThe Department did not adequately monitor subrecipients of the Social Services Block Grant (SSBG). During the audit period, the Department provided $60.8 million in SSBG funds to subrecipients.The Department did not monitor all counties that were required to have a site-visit during the audit period. Fifty-one counties that received SSBG funds were scheduled to have a site visit during the audit period. Site visits were not performed for six (12%) of those counties.Additionally, auditors reviewed the subaward documentation of all 117 subrecipients that received a subaward during the audit period and noted that the subaward documentation for eight (7%) subrecipients were missing some or all of the following required federal award information:?Subrecipient?s Unique Entity Identifier?Federal Award Identification Number (FAIN)?Identification of whether the award is research and development?Indirect Cost Rate for the Federal Award?Federal Award Date?Federal Award Project Description?Name of Federal Awarding Agency?CFDA NumberInadequate monitoring procedures increased the risk that the Department would not detect if SSBG funding was not used in accordance with the federal requirements.According to the Department, the inadequate monitoring occurred for various reasons.The required site visits were not performed because:?For five counties, the Division of Social Services was understaffed. Significant turnover during the audit period reduced the number of staff available to carry out the monitoring efforts for the program.?For the remaining county, there was an oversight by the Division of Aging and Adult Services (DAAS). The county was scheduled for a site visit in June 2019; however, the visit did not occur until after the state fiscal year had ended.The required federal award information was not communicated because:?For seven subrecipients, the Division of Mental Health/Development Disabilities/Substance Abuse Services management did not know that the links provided in the subaward documentation did not include references to the omitted elements.?For the remaining subrecipient, new staff within the DAAS were unaware of the elements that were required to be included in the subaward documentation.Federal regulations require the Department to monitor the activities of its subrecipients as necessary to ensure that the subaward was used for authorized purposes, in compliance with the Federal statutes, regulations, and the terms and conditions of the subaward; and that performance goals are achieved.Further, federal regulations require the department to clearly identify the award as a subaward and include specific federal award information at the time of the subaward.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.667 (Social Services Block Grant); Federal Award Numbers (award periods): G-1801NCSOSR (October 1, 2017 ? September 30, 2019) and G-1901NCSOSR (October 1, 2018 ? September 30, 2020).Recommendation: Department management should ensure that adequate resources are provided and appropriate priority is placed on performing monitoring visits and communicating the required federal award information to subrecipients.Additionally, Department management should test the links in the contracts and allocation memorandums to ensure they include all required federal award information in their subrecipient subaward documentation.Agency Response: The Department agrees with the finding and will implement corrective action plans to ensure subrecipient monitoring processes are efficient and effective.See Schedule of Findings and Questioned Costs for footnote.

Errors in Medicaid Provider Billing and Payment ProcessThe Department made an estimated $71.4 million net overpayment to Medicaid providers during state fiscal year 2019. During that period, the Department processed more than 59 million payments for fee-for-service claims totaling $7.99 billion.Auditors reviewed a statistical sample of 694 fee-for-service payments totaling approximately $21.1 million and identified 20 (2.9%) payments that contained errors. Specifically:?Twelve (1.7%) claims contained medical coding errors which impacted the payment calculation. The result was a net overpayment of $17,125 (federal share $11,485).?Eight (1.2%) claims lacked documentation to support the services rendered by the provider. The result was a net overpayment of $7,246 (federal share $4,866).As a result of the errors identified, the Department could have overpaid providers an estimated $71.4 million in Medicaid funds that could have been used to provide additional services to other eligible beneficiaries or reduce overall program costs. Additionally, the federal share ($16,351) of the errors is considered questioned costs.According to the Department, the documentation and coding errors were due to clerical errors and inadequate documentation being kept by the health care providers.Federal regulations require costs to be adequately documented; authorized; necessary and reasonable; and be consistent with program regulations that apply to the federal award. Additionally, providers sign an agreement that requires them to maintain records disclosing the extent of services furnished to recipients and, on request, furnish the records to the Department.This finding was previously reported in the 2018 Statewide Single Audit as finding number 2018-025.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1705NC5MAP (October 1, 2017 to September 30, 2018) and 05-1805NC5MAP (October 1, 2018 to September 30, 2019).Recommendation: Department management should analyze each error and take immediate and appropriate corrective action including, but not limited to, education of providers and on-site or focused reviews.Identified over and underpaid claims should be followed-up for timely and appropriate collection or payment.Agency Response: The Department agrees with this finding. The Department is dedicated to claims payment accuracy and continues to work with providers to minimize errors in the claims payment process. We are pleased that the Department?s efforts have resulted in a .89% error rate , which is well below the Centers for Medicare and Medicaid Services Payment Error Rate Measurement (PERM) error rate goal for NC of 3.2%. The Department will analyze each error and take immediate and appropriate corrective action, including recouping any overpayments identified as questioned costs.See Schedule of Findings and Questioned Costs for footnote.

Medicaid Disproportionate Share Hospital Payment Made IncorrectlyThe Department made a $9.5 million federal Medicaid Disproportionate Share Hospital (DSH) payment to an ineligible facility. During state fiscal year 2019, the Department paid approximately $2.5 billion in Medicaid DSH payments to 110 facilities.Auditors tested 100% of the federal DSH payments made during the audit period. A state operated Alcohol and Drug Abuse Treatment Center (ADATC ) received a payment from the federal Medicaid DSH Institution for Mental Disease (IMD) allotment when it was not eligible.As a result, $9,510,150 ($6,429,812 federal share) was not available for allocation to other IMD facilities that were eligible to receive the federal funds. The federal share of the improper payment is considered questioned cost.According to the Department, the ineligible payment occurred due to a clerical error. The Division of Health Benefits (Division) prepares spreadsheets to calculate DSH payments and the allocation of the IMD DSH allotment to State facilities. The eligibility spreadsheet correctly noted that this ADATC was not eligible to receive a federal DSH payment. During the transfer of information from the eligibility spreadsheet to the IMD allocation spreadsheet (used to remit DSH payments to IMD facilities), this payment was inadvertently allocated to an ineligible IMD facility and management?s review did not detect it.Federal law allows states to spend some of their DSH funds on IMD Services. The North Carolina Medicaid State Plan limits these payments to IMD facilities that have an inpatient utilization rate of not less than 1%. The state operated ADATC that received the payment had an inpatient utilization rate of less than 1% and therefore was not eligible to receive the federal DSH payment.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Number (award period): 05-1805NC5MAP (October 1, 2017 to September 30, 2018).Recommendation: Department management should strengthen their review procedures over the payments to ensure that federal DSH payments are only made to eligible facilities.Agency Response: The Department agrees with this finding. As noted, the finding was due to a clerical error in processing the payments. The Department enhanced the payment calculation and review procedures to ensure federal DSH payments are only made to eligible facilities for the applicable year. Additionally, the Department invoiced and received the $9,510,151 in Federal Fiscal Year (FFY) 2018 State IMD DSH payments back from the ineligible State ADATC and reallocated all of it to the State IMD hospitals eligible to receive payment from the FFY2018 State IMD DSH allotment.See Schedule of Findings and Questioned Costs for footnote.

Lack of Quality Assurance Procedures Increased Risk of Undetected ErrorsThe Department does not have written monitoring procedures in place for some contractors who help ensure that Medicaid services, products and procedures are medically necessary.There are five contractors who help ensure that Medicaid services, products, and procedures provided to recipients are medically necessary. Auditors found that the Department does not have written quality assurance monitoring procedures for four of the contractors.Because the Department did not have written monitoring procedures they cannot ensure that these contractors are effectively monitored. This would include monitoring the contractors? process of reviewing documentation to support medical necessity. According to the Department, approximately $2.5 billion is paid annually for services that require prior approval. Without these monitoring procedures, there is an increased risk that errors (i.e. services rendered that would have been denied) could have occurred and remained undetected.According to the Department, they did not realize there was a need to develop written monitoring procedures for all of their prior approval contractors. Although the 2018 Single Audit reported that the Department did not have monitoring procedures for these four contractors, the report specifically named one contractor (finding 2018-026), so the Department worked on developing written monitoring procedures for only the one. Written procedures were not developed for the other prior approval contractors.In accordance with Session Law 2010-194, the NC Department of Administration has established rules and regulations which specify the manner in which State agencies shall monitor and enforce the terms of contracts. The State?s Contract and Procurement Office?s Contract Administration Guide (Guide) includes a Contract Monitoring Checklist which states that it is the responsibility of each agency to ensure all contractual obligations are met and that contract monitoring is documented which includes having written documented contract monitoring procedures and methodology.Furthermore, federal regulations require the Department to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulations, and the terms and conditions of the federal award.? Establishing written quality assurance monitoring procedures would be an effective control over compliance.Certain aspects of this finding were previously reported in the 2018 Statewide Single Audit as finding number 2018-026.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 to September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Recommendation: Department management should prioritize developing written quality assurance monitoring procedures for all contractors who help ensure that Medicaid services, products and procedures are medically necessary.Agency Response: The Department agrees with this finding. The opportunity exists to enhance documentation enumerating the monitoring procedures for contracted vendors which provide prior approval of Medicaid services. Documentation for two of the vendors is currently in place and contains the required monitoring plan language criteria. Documentation for the remaining three vendors contains much of the required monitoring language criteria but not all. The Department is formalizing the monitoring plans to ensure all missing criteria are added and enhancing the monitoring procedures where necessary. Despite the gaps in the documentation, monitoring activities for four of the five vendors were conducted during the state fiscal year. While it is not certain that lack of documentation had an impact on funds paid for prior authorized services, the updated monitoring plans will ensure the vendors are reviewing and approving prior authorizations in accordance with the Department's requirements.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in System AccessThe results of our audit disclosed security deficiencies considered reportable under generally accepted Government Auditing Standards. These deficiencies are reported to the Department by separate letter in accordance with these standards. These items should be kept confidential as provided by North Carolina General Statute 132-6.1(c).Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 - September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Agency Response: The Department agrees with the finding. The Department is committed to maintaining adequate information security and system access controls. The Department has designed and/or implemented corrective actions to address the risks identified in this audit. These corrective actions were detailed in a response separately submitted to the State Auditor. Security risks are given the highest priority by the Department and corrective actions will be monitored.

Deficiencies in the Medicaid Provider Enrollment and Termination ProcessThe Department did not adequately monitor the work of a contractor who ensures that providers are eligible to participate in the Medicaid program. The Department paid approximately $11.4 billion to 18,301 providers during the fiscal year ended June 30,2019.The Division of Health Benefits (DHB) has contracted with General Dynamics Information Technology (GDIT) to ensure that providers have the required licenses and are eligible to participate in the Medicaid program. An approved contract monitoring plan outlines specific GDIT activities that should be monitored by the Department and the established frequency.DHB did not monitor GDIT in accordance with the approved monitoring plan. Specifically:?For nine months, DHB reviewed two to four Licensing Board reports per month when the monitoring plan required them to review five.?For the month of September 2018, DHB reviewed 21 applications when the monitoring plan required 50 to be reviewed.?From July to December 2018, DHB did not perform the monthly reviews of the CMS logs .Without effective monitoring, there is an increased risk that the Department would not detect ineligible providers that are being paid for treating Medicaid recipients. In fact, due to the lack of monitoring, auditors found the following issues for enrolled providers:?One pharmacy provider failed to disclose sanctions related to unlawfully dispensing and shipping controlled substance prescriptions into other states without a permit. The sanctions were not properly evaluated to determine if the provider was still eligible to participate in the Medicaid program. The Department paid this provider $74,000 during the audit period.?Twelve providers with licenses, suspended, surrendered or revoked were not properly terminated in the Medicaid processing system. These providers did not receive any payments during the audit period.According to Department management, GDIT was not monitored in accordance with the approved monitoring plan because the DHB staff that were responsible for the monitoring became part of the Managed Care transition project team and the Department did not allocate additional resources to ensure that GDIT would continue to be adequately monitored.Federal regulations require the agency to ?establish and maintain effective internal control over the federal award that provides reasonable assurance that the Department is managing the program in compliance with federal statutes, regulation, and the terms and conditions of the federal award?. Following internally developed monitoring procedures would be an effective control over compliance.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 - September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Recommendation: Department management should allocate the necessary resources to DHB to ensure that GDIT is monitored in accordance with the approved monitoring plan.Agency Response: The Department agrees with this finding. The preparation for the transition to Managed Care required additional staffing resources that were not made available to the Department. As a result, Managed Care transformation activities were prioritized against daily operational tasks. In order to free up resources for Managed Care transition, the Department adjusted daily tasks such as reducing monitoring sample sizes, increasing staff workloads and suspending certain work efforts. Additionally, key supervisory staff were required to prioritize Manage Care activities over some daily, operational activities. As a result, supervisory monitoring of some daily operational activities, like the one identified in the audit finding, did not always occur in a timely or effective manner. When the work effort for Managed Care transformation slows (e.g. due to the temporary suspension), the Department adjusts staff priorities to address gaps created in daily operational tasks and takes necessary steps to ensure commitments are fulfilled.The Department reviewed the management monitoring plans noted in the finding and updated the plans to ensure monitoring requirements are clear and achievable with minimal staff.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in the Medicaid Eligibility Determination ProcessThe Department made $61,044 in Medical Assistance Program (Medicaid) payments to providers for ineligible beneficiaries based on inaccurate and inadequately documented eligibility determinations. During the audit period, approximately 2.1 million beneficiaries received $11.4 billion in Medicaid benefits.The task of determining eligibility for the Medicaid program has been delegated to the county departments of social services (DSS) . However, the Department was responsible for ensuring compliance with the eligibility requirements.Auditors reviewed the client case files for a statistical sample of 633 beneficiaries and found one or more errors in 13 (2.05%) cases. Specifically:?Four (0.63%) beneficiaries were found to be ineligible during the coverage period. This was due to inaccurate eligibility determination calculations, inaccurate eligibility category, and inaccurate patient medical liability. Payments totaling $60,910 (federal share $40,960) were paid on behalf of these ineligible beneficiaries.?One (0.16%) beneficiary was eligible during the coverage period, however an error was made in the determination of the patient medical liability amount for three months of the coverage period. The Department paid $134 (federal share $90) because of this error.?Eight (1.26%) client files were missing some of the required eligibility documentation. Examples of missing information included proof of residency, online verification documentation, and reasons for forced eligibility . Further, some income calculations were inaccurate. However, when auditors redetermined eligibility using updated information, the beneficiary was eligible.As a result, there is an increased cost for the Medicaid Program for both the State and federal government. The program is jointly financed by these two governments, and is administered by the State. In addition, the federal share of $41,050 that was paid on behalf of ineligible beneficiaries is considered questioned costs .Although $61,044 resulted from the errors identified, the amount of Medicaid funds paid on behalf of ineligible beneficiaries is likely greater. Self-attestation by applicants is accepted for certain elements of the Modified Adjusted Gross Income methodology of determining eligibility. Further verification or documentation is not required. Auditors tested participant eligibility using the documentation contained in the case files, which includes self-attested data that could not be verified by the auditors.According to the Department, the eligibility errors occurred because of inaccurate application of established policies by the county DSS staff. The county DSS staff utilize NC FAST to input data or make eligibility determinations, however, the Department is responsible for establishing the eligibility determination policies, maintain NC FAST, and training the county DSS staff.Federal regulations require that the Department, or its designee, determine client eligibility for all individuals applying for or receiving benefits in accordance with eligibility requirements defined in the approved State plan.Further, federal regulations require that documentation be obtained as needed to determine if a beneficiary meets specific income standards and documentation must be maintained to support eligibility determinations.This finding was previously reported in the 2018 Statewide Single Audit as finding number 2018-028.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 - September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Recommendation: Department management should provide adequate training and retraining as necessary to ensure that county DSS staff perform Medicaid eligibility determinations correctly.Agency Response: The Department agrees with this finding and is pleased that the 97.95% accuracy rate noted in this audit exceeds the established 96.8% accuracy standard set by the Department (in line with CMS standards ) for eligibility determinations. The Department is continuing to work with the county Departments of Social Services (DSS) to strengthen the accuracy of eligibility determinations. The Department recognizes the tremendous improvement in performance by the counties? staff.We also, recognize that there is still more work to be done. As part of ongoing efforts to improve oversight and collaboration with county DSS staff, the Department implemented the Recipient Eligibility Determination Audits (REDA) program in 2019 and in 2020 will implement the county staff certification program for NC FAST.While the audit sample included eligibility determinations from 89 of the 100 North Carolina counties, the 13 errors noted in the audit report occurred across only 10 counties. The Department will follow-up on each of the errors with the indicated counties and take appropriate corrective action.See Schedule of Findings and Questioned Costs for footnote.

Business Continuity and Disaster Recovery Plan Not TestedThe results of our audit disclosed security deficiencies considered reportable under generally accepted Government Auditing Standards. These deficiencies are reported to the Department by separate letter in accordance with these standards. These items should be kept confidential as provided by North Carolina General Statute 132-6.1(c).Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 ? September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Agency Response: The Department agrees with the finding. The Department is committed to maintaining adequate information security and system access controls. The Department has designed and/or implemented corrective actions to address the risks identified in this audit. These corrective actions were detailed in a response separately submitted to the State Auditor. Security risks are given the highest priority by the Department and corrective actions will be monitored.

Delayed Remediation of WeaknessesThe results of our audit disclosed security deficiencies considered reportable under generally accepted Government Auditing Standards. These deficiencies are reported to the Department by separate letter in accordance with these standards. These items should be kept confidential as provided by North Carolina General Statute 132-6.1(c).Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 ? September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Agency Response: The Department agrees with the finding. The Department is committed to maintaining adequate information security and system access controls. The Department has designed and/or implemented corrective actions to address the risks identified in this audit. These corrective actions were detailed in a response separately submitted to the State Auditor. Security risks are given the highest priority by the Department and corrective actions will be monitored.

Delayed Remediation of WeaknessesThe results of our audit disclosed security deficiencies considered reportable under generally accepted Government Auditing Standards. These deficiencies are reported to the Department by separate letter in accordance with these standards. These items should be kept confidential as provided by North Carolina General Statute 132-6.1(c).Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.778 (Medical Assistance Program (Medicaid; Title XIX)); Federal Award Numbers (award periods): 05-1805NC5MAP (October 1, 2017 ? September 30, 2018) and 05-1905NC5MAP (October 1, 2018 ? September 30, 2019).Agency Response: The Department agrees with the finding. The Department is committed to maintaining adequate information security and system access controls. The Department has designed and/or implemented corrective actions to address the risks identified in this audit. These corrective actions were detailed in a response separately submitted to the State Auditor. Security risks are given the highest priority by the Department and corrective actions will be monitored.

Subrecipient Monitoring Procedures Need ImprovementThe Department did not adequately monitor subrecipients of the Opioid State Targeted Response (Opioid) grant. During the audit period, the Department provided $25.5 million in Opioid funds to subrecipients.The Division of Mental Health/Development Disabilities/Substance Abuse Services (Division) did not review the supporting documentation for expenditures made from Opioid funding in the annual monitoring visits of the seven Local Management Entity-Managed Care Organizations (LME- MCO).Additionally, we reviewed the subaward documentation for all 12 subrecipients that received a subaward during the audit period and noted that the documentation for seven (58%) subrecipients did not include the following required federal award information:?Subrecipient?s Unique Entity Identifier?Federal Award Identification Number (FAIN)?Identification of whether the award is research and development?Indirect Cost Rate for the federal awardInadequate monitoring increased the risk that the Department would not detect if Opioid funds were not used in accordance with the federal requirements.According to the Department, they did not review the supporting documentation for Opioid expenditures during the annual monitoring visit because the LME-MCO site visit monitoring procedures were not updated. The Division received the first Opioid grant in state fiscal year 2017. However, they did not update their site visit monitoring procedures to include the Opioid program, which could have directed them to review the LME-MCO?s financial and programmatic records to support the Opioid funds received.Further, the Department did not communicate all of the required federal award information to its subrecipients because Division management did not know that the links provided in the subaward documents did not include references to the omitted elements.Federal regulations require the Department to monitor the activities of its subrecipients as necessary to ensure that the subaward was used for authorized purposes, in compliance with the Federal statutes, regulations, and the terms and conditions of the subaward; and that performance goals are achieved.Further, federal regulations require the department to clearly identify the award as a subaward and include specific federal award information at the time of the subaward.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.788 (Opioid State Targeted Response); Federal Award Numbers (award periods): TI080257 (May 1, 2017 ? January 31, 2020) and H79TI081710 (September 30, 2018 ? September 29, 2020).Recommendation: Department management should modify their subrecipient site visit monitoring procedures as necessary when new sources of funding are provided to their subrecipients.Additionally, Department management should test the links in the contracts and allocation memorandums to ensure they include all required federal award information in their subrecipient subaward documentation.Agency Response: The Department agrees with the finding. The Office of the State Auditor (OSA) is correct that the Opioid grant was not included in the LME/MCO Annual Systems Performance Review (ASPR) for SFY 2019. While the ASPR is an important part of DMH/DD/SAS?s grant oversight, it is not the only tool used. Specifically, the ASPR occurs annually and at a single point in time. However, throughout SFY 2019, DMH/DD/SAS engaged in ongoing, meaningful programmatic and budgetary monitoring of the Opioid grant funds. Nonetheless, the Department recognizes the need to include the Opioid grant in the ASPR cycle. Therefore, it will be included in the ASPR for state fiscal year 2020.Further, the Department has taken corrective actions as of September 1, 2019 to include all required federal award information and/or all grant-required data elements in the award letters to its subrecipients. The Department has updated processes to ensure this federal requirement is met.See Schedule of Findings and Questioned Costs for footnote.

Deficiencies in Cash ManagementThe University requested and received federal student financial aid funds that exceeded the immediate need of students, and held a balance of these excess funds in violation of federal requirements. During the fiscal year ended June 30, 2019, the University requested approximately $52.2 million in financial aid subject to the requirements. See finding 2019-010 for a description.

Subrecipient Monitoring Needs ImprovementThe Department did not adequately monitor subrecipients of the Block Grants for Prevention and Treatment of Substance Abuse (SABG). During the audit period, the Department provided $36.4 million in SABG funds to subrecipients.The Division of Mental Health/Development Disabilities/Substance Abuse Services (Division) did not perform timely settlement reviews at the seven Local Management Entity-Managed Care Organizations (LME-MCOs). The settlement reviews that were performed during the audit period were for SFY 2015 and 2016 instead of the state fiscal year that had most recently ended, which was 2018. Settlement reviews are required annually and gives the Division the opportunity to review supporting documentation of the prior state fiscal year (SFY) expenditures.Additionally, we reviewed the subaward documentation for all 17 subrecipients that received a subaward during the audit period and noted that the documentation for nine (53%) subrecipients were missing some or all of the following required federal award information:?Subrecipient?s Unique Entity Identifier?Federal Award Identification Number (FAIN)?Identification of whether the award is research and development?Indirect Cost Rate for the federal award?Federal Award Project Description?Name of the Federal Awarding Agency?CFDA Number and Name?Amount of Federal Funding obligated to the subrecipientInadequate monitoring increased the risk that the Department would not detect if SABG funds were not used in accordance with the federal requirements.According to the Department, settlement reviews were not timely because they did not have experienced and knowledgeable staff to perform the reviews. When the Division started performing the settlement reviews in SFY 2010, they were instructed to start with expenditures from SFY 2008 and 2009. The intent was to catch up to the most recent SFY. However, significant staff turnover and difficulties recruiting staff for this specialized work have delayed the Division?s plan to get caught up on these reviews.Further, the Department did not communicate all of the required federal award information to its subrecipients because Division management did not know that the links provided in the subaward documents did not include references to the omitted elements.Federal regulations require the Department to monitor the activities of its subrecipients as necessary to ensure that the subaward was used for authorized purposes, in compliance with the Federal statutes, regulations, and the terms and conditions of the subaward; and that performance goals are achieved.Further, federal regulations require the department to clearly identify the award as a subaward and include specific federal award information at the time of the subaward.Federal Award Information: Federal Awarding Agency: U.S. Department of Health and Human Services; CFDA Number (title): 93.959 (Block Grants for Prevention and Treatment of Substance Abuse); Federal Award Numbers (award periods): TI010032-17 (October 1, 2016 ? September 30, 2018) and B08TI010032-18 (October 1, 2017 ? September 30, 2019).Recommendation: Department management should employ multiple measures to ensure compliance. First, management should ensure that staff are properly trained to perform settlement reviews. Second, Department management should monitor the progress of the settlement reviews to ensure that, despite staffing issues, the reviews are performed as required to reduce the risk that federal funds may need to be refunded to the Federal awarding agency if non-compliance goes undetected.Additionally, Department management should test the links in the contracts and allocation memorandums to ensure they include all required federal award information in their subrecipient subaward documentation.Agency Response: The Department agrees with the finding. The Office of the State Auditor (OSA) is correct that DMH/DD/SAS had not completed the relevant settlement audit when this audit was underway. While the settlement audit is an important part of DMH/DD/SAS?s grant oversight, it is not the only tool used. Specifically, a final settlement audit occurs after a state fiscal year is over and at a single point in time. However, throughout SFY 2019, DMH/DD/SAS engaged in ongoing, meaningful programmatic, budgetary, and expense monitoring oversight for the Substance Abuse Block Grant (SABG).The Department is committed to administering federal grant awards in compliance with all applicable federal guidance. This finding was due to not having enough staff to perform timely annual settlement reviews at the Local Management Entity-Managed Care Organizations.Prior to OSA?s current audit of SABG subrecipient monitoring, the Department enhanced the established subrecipient monitoring plan and the settlement reviews process to ensure the reviews are performed timely. The plan is being implemented expeditiously. The SFY 2018 and SFY 2019 settlement audit cycles are scheduled to begin in early 2020, and the Department is on track to complete those by the end of the current state fiscal year. Also, as part of the review process, supporting documentation for expenditures will be reviewed to ensure federal compliance.The Department implemented corrective actions as of September 1, 2019 to ensure all required federal award information and/or all grant-required data elements are included in the award letters to its subrecipients. In addition, the Department updated processes to ensure this federal requirement is met.See Schedule of Findings and Questioned Costs for footnote.

Inadequate Subrecipient MonitoringThe Department of Public Safety (Department) did not adequately monitor $202 million in federal funds passed to state agencies, non-profits, and other organizations (collectively called subrecipients) for disaster relief assistance.Auditors reviewed a sample of 68 out of 764 payments to subrecipients and found that 11 of 68 (16%) payments were paid without supporting documentation.Auditors then required the Department to obtain the missing supporting documentation for those 11 payments from the subrecipients. Upon reviewing the support for these 11 payments, auditors discovered that documentation for 6 of the 11 payments did not support the amount paid. Payments totaling $3,015,348 are being questioned.In addition, auditors reviewed the monitoring process for all 18 subrecipients that were required to have an audit in accordance with the Uniform Guidance and found that the Department did not obtain or review the audit reports.As a result, the Department may be required to pay $3,015,348 back to the United States Department of Homeland Security. Furthermore, inadequate monitoring increased the risk that federal funds would not be used in accordance with federal requirements, which could have reduced the funding available for providing disaster relief assistance.According to Department management, during the period the errors occurred, there was an unusual high volume of payment requests from subrecipients which resulted in certain payments not being adequately reviewed. In addition, the Department experienced staff turnover during the year which reduced the number of staff who had knowledge and experience with the monitoring requirements.However, federal regulations required the Department 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.?Verify that every subrecipient is audited as required.Federal Award Information: Federal Awarding Agency: United States Department of Homeland Security; CFDA Number (title): 97.036 (Disaster Grants ? Public Assistance); Federal Award Number (award period): FEMA-4285-DR-NC (beginning October 10, 2016).Recommendation: Department management should monitor the volume of payment requests to ensure adequate review during periods of high volume.Additionally, Department management should implement contingency planning to reduce the risk that staff turnover could lead to oversight in monitoring.Agency Response: The Department acknowledges OSA's finding and notes most of these payments were transfers to the Department of Transportation (DOT) to repair roads damaged by Hurricane Matthew. Emergency Management included a process for issuing "Advance of Funds" payments in its 2017 Administrative Plan, which was approved by the Federal Emergency Management Agency (FEMA). The approved plan allows the division to make advance payments based on anticipated costs documented in a FEMA-obligated Project Worksheet. The plan also requires the subrecipient to repay any funds not supported by the final cost of the project, a requirement which would apply in any cases where advance payments were issued. The Department acknowledges, however, that Emergency Management did not obtain an "Advance of Funds Request" form from DOT, as required under the process described in the Administrative Plan.The Department also accepts the audit finding that it failed to obtain or review audit reports from subrecipients. Under the Uniform Guidance, a pass-through agency is required to verify that non-profit subrecipients expending more than $750,000 in federal funds during their fiscal year undergo a single audit. For the Department, this responsibility resided with a position in the Controller's Office, and staffing shortages in that office led to the deficiency noted in the audit. To ensure this responsibility is met going forward, the Department has transferred the position and the function to the Internal Audit Section, which is where it more commonly resides across state government. Establishing and filling this position is a priority for the Department.Moreover, the Department fully embraces the audit recommendation to implement contingency planning to reduce the risk of lapses in grant monitoring due to staff turnover. The Department is committed to building a robust internal control structure within the Internal Auditor's Office dedicated to federal grant compliance and oversight. The Department is also committed to enhancing the grant management staff by establishing additional grant management/oversight positions in each entity. The Department is working with its Human Resources section to appropriately classify these positions in order to attract and retain skilled staff for these important roles.See Schedule of Findings and Questioned Costs for footnote.

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