State of Texas C/O Comptroller of Public Accounts

2022-002 Eligibility Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Temporary Assistance for Needy Families (TANF) ALN: 93.558 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2201TXTANF, 2201TXTAN3, 2101TXTANF, 2101TXTAN3, 2001TXTANF, 2001TXTAN3 October 1, 2021 ? September 30, 2022, October 1, 2020 ? September 30, 2021 and October 1, 2019 ? September 30, 2020 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 45 CFR 263.2(b), An ?eligible family? as defined by the State, must: (1) Be comprised of citizens or non-citizens who: (i) Are eligible for TANF assistance; (ii) Would be eligible for TANF assistance, but for the time limit on the receipt of federally funded assistance; or (iii) Are lawfully present in the United States and would be eligible for assistance, but for the application of title IV of PRWORA; (2) Include a child living with a custodial parent or other adult caretaker relative (or consist of a pregnant individual); and (3) Be financially eligible according to the appropriate income and resource (when applicable) standards established by the State and contained in its TANF plan. Condition: According to the DFPS?s Child Protective Services Handbook 2720 Responding to the Eligibility Statements CPS June 2020, IMPACT automatically makes the EA Eligibility Application/Determination section available when the caseworker completes the Risk Assessment tool and the risk level is `high? or `very high.? The caseworker completes this section, which contains three statements that each require a response of `yes? or `no?. For one of 40 payments to program participants, we noted two of the three statements were not answered in IMPACT, resulting in a determination that the child does not meet the emergency assistance eligibility criteria. The DFPS?s sandbox database reflects a conclusion that the child does meet the emergency assistance eligibility criteria indicating that the three statements had a response of `yes `at the time of stage closure. However, we were unable to verify a response of `yes? for the three statements in IMPACT. According to the DFPS?s Child Protective Services Handbook 2714 Documentation CPS June 2020, the caseworker documents the following information in the contact narrative in IMPACT: ? The names of the people whose income the caseworker counted in the family?s total annual income. ? The information that the caseworker gathered to determine the family?s total annual income. ? The sources of information that the caseworker used (including the FCAA, if DFPS has removed a child). ? The family?s total annual income (before taxes and other similar deductions). For two of 40 payments to program participants, we noted the following exceptions in the documentation of the family's income: ? One participant had an annual family income range selected of $0 - $10,000. However, the investigation report had $20,640 as annual family income. ? One participant had an annual family income range selected of $10,000 - $20,000. No income information was documented in the investigation report. According to the DFPS?s TANF School Allowance Kinship Program, the Pandemic Emergency Assistance Fund (PEAF) awards are disbursed through two payments ? (1) a spring allocation of $250 and (2) a fall allocation of $250 to be used cover the cost of clothing and school supplies for the school year. The maximum number of disbursements to be made for each participant is two disbursements. For three of seven payments to program participants under the TANF PEAF, three payments were made rather than two, resulting in total overpayments of $750. Questioned costs: $9,119 Context: See ?Condition.? Cause: Exceptions related to missing statements in IMPACT were caused by system limitations. Exceptions related to documentation of family income were due to management oversight. Exceptions related to PEAF are a result of DFPS not having an existing process to disburse payments under the new grant. The individuals were mistakenly captured twice for the 2nd payment. Effect: Failure to review and maintain accurate information may result in payments made to ineligible participants or overpayments to eligible participants. Repeat Finding: No Recommendation: DFPS should strengthen its internal controls and remedy system limitations to ensure accurate data is maintained in IMPACT. EA Application/Determination Views of responsible officials: Although these questions can currently be answered by reviewing the Investigation Report for the participant to show that the participant was eligible. DFPS acknowledges and agrees with the finding two of the three EA questions regarding a participant do not show currently answered. DFPS acknowledges and agrees with the finding regarding the incorrect documentation of income for two of the participants. PEAF Views of responsible officials: This is not a regular DFPS payment, therefore there is not an existing automatic process to disburse payments. As a result, a process was developed by which qualifying children were captured and paid through a batch process. It appears that the subject children were mistakenly captured twice for the 75U payment. DFPS?s TANF School Allowance was a one-time allocation of COVID funding for the school allowance effort. The allocation allowed for two (2) disbursements of $250 per child in a kinship home. Because it is a one-time allocation, there currently is no future plan of a second TANF School Allowance allocation.

EA Application/Determination Corrective action plan: DFPS will ensure that INV/AR staff receive ongoing communication/training regarding EA and how to correctly document and record income within the IMPACT. DFPS will update the current EA policy and publishing a new resource guide for staff. DFPS staff will be provided training, tip sheets and ongoing support regarding the new policy and resource guide. The policy will be published by April 1, 2023. DFPS will continue to strengthen our internal quality assurance review of cases eligible for EA to ensure that INV/AR staff are complying with federal guidelines and internal policies. DFPS has submitted an IT ticket request to resolve the condition for the participant that had the incorrect income range of $0-$10,000 selected to the correct income range of $20,550 to $40,549 to align with the investigation report. The participant remains eligible for assistance regardless as the family unit makes less than $63,000. CPI will initiate a request for an IT project to conduct analysis of any limitations with verifying Emergency Assistance eligibility in the IMPACT system regarding why two of the three EA statements now show not answered. DFPS staff will be researching the issue to determine next steps by 2nd quarter FY 2024. Implementation date(s): Ongoing communication ? will vary, first communication by April 1, 2023; IMPACT research January 31, 2024. Responsible persons: Jerome Green PEAF Corrective action plan: DFPS uses an established recoupment process to address overpayments. A Kinship Development Worker writes a letter to the kinship caregiver regarding the overpayment and details the steps needed to return funds. This letter is also sent to accounting for follow up. DFPS maintains a proactive approach to strengthening/enhancing IMPACT limitations to ensure accurate data is maintained for accurate payments/disbursements through continuous program improvement. Implementation date(s): On January 13, 2023 ? staff initiated the above described recoupment process to recoup the second payment for the subject children. Responsible persons: Debbie Bouldin

2022-004 Period of Performance Federal Agency: U.S. Department of Homeland Security Federal Program Title: Homeland Security Grant Program (HSGP) ALN: 97.067 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 3708603, 3902402, 4164001 3/1/2020 ? 630/2022, 4/1/2020 ? 5/31/2022, 9/1/2020 ? 2/28/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.403(h) cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ? 200.308(e)(3). Condition: The Office of the Texas Governor (OOG) is the prime recipient of federal awards for the Homeland Security Grant Program. The Department of Public Safety (DPS) receives allocations of these funds for individual projects. A Statement of Grant Award (SOGA) is issued by OOG to DPS for each project with start, end, and liquidation dates. For projects with period of performance ending dates during the fiscal year, as stipulated by OOG, audit procedures included testing transactions posted to the general ledger during the last month and after the period of performance end date. We noted the following instances of noncompliance: ? For the twelve sampled transactions, totaling $1,240,691, five of the expenditures, totaling $78,749, were related to costs incurred after the period of performance end date or liquidated after the liquidation period end date. Questioned costs: $78,749 Context: See ?Condition.? Cause: Current controls are not at the correct precision level to detect costs charged outside of the period of performance or paid after the liquidation date as specified in the project grant agreement. Effect: Ineffective internal controls may result in questioned costs and noncompliance with the terms of the grant. Repeat Finding: No Recommendation: DPS should enhance and/or modify existing controls (both manual and automated) to ensure that costs are not charged to a project unless (1) the service dates fall within the period of performance stated in the SOGA, and (2) the costs have been paid prior to the liquidation period end date. Views of responsible officials: The Department of Public Safety acknowledges and agrees with the findings. Through analysis of the exceptions identified in the audit, the Department of Public Safety will work to develop and implement corrective action to further improve the processes.

Corrective action plan: DPS will update the profile setup process in CAPPS to ensure the Service/Receipt Date Indicator box is checked in CAPPS on all profile setups relating to Grants. DPS Grants staff will receive training on how to fill out a Profile Setup Form to ensure the Service/Receipt Date Indicator Box is checked at the time the project is setup in CAPPS. The Grants staff will run a monthly report from CAPPS to see if all active projects have the service date indicator box checked. Implementation date(s): March 1, 2023 Responsible persons: Grants Manager, Deputy Administrator, Financial Reporting

2022-007 Period of Performance Federal Agency: U.S. Department of the Treasury Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2021-CS-21027 3/3/2021 ? 1/1/2023 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per section 602(g)(1) of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021, Pub. L. No. 117-2 and Treasury?s Interim Final Rule and Final Rule at 31 CFR section 35.5(a), State and Local Fiscal Recovery Funds (SLFRF) may only be used for costs incurred within a specific time period, beginning March 3, 2021, with all funds obligated by December 31, 2024 and all funds spent by December 31, 2026. Condition: The Department of State Health Service received a grant award for SLFRF funds on February 28, 2022. Audit procedures performed included a sample of ten transactions totaling $817,008 posted to the general ledger with service dates prior to April 2, 2021. For three samples, we noted expenditures totaling $348,874 that were incurred prior to March 3, 2021. Questioned costs: $348,874 Context: See ?Condition.? Cause: As the grant was awarded subsequent to the beginning of the period of performance, DSHS transferred expenditures previously paid for with state funds to the federal award based on the invoice date. However, the underlying services were partially incurred prior to March 3, 2021. Effect: Failure to review expenditures at a detail level could result in unallowable costs or expenditures claimed outside of the award?s period of performance. Repeat Finding: No Recommendation: We recommend DSHS add an additional process to review the underlying service dates for invoices near the beginning and end dates of the period of performance to ensure costs incurred outside of this period are not charged to the federal award. Views of responsible officials: During the COVID-19 pandemic, there was a surge of COVID-19 cases in hospitals throughout the State of Texas and an immediate and emergent need to serve Texans. DSHS previously identified the need to ensure costs are allowable and align with required parameters. To strengthen requirements, DSHS will address through policy revision.

Corrective action plan: To strengthen requirements related to unique disaster funding, DSHS will amend DSHS Policy AA-3301: Monitoring and Management of the Operating Budget to establish roles and responsibilities for ensuring expenditures are reviewed and within grant parameters. We anticipate policy revisions to be drafted by July 31, 2023. Implementation date(s): July 31, 2023 Responsible persons: Chief Financial Officer

2022-011 Earmarking Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Temporary Assistance for Needy Families (TANF) ALN: 93.558 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2201TXTANF, 2201TXTAN3, 2101TXTANF, and 2101TXTAN3 October 1, 2021 ? September 30, 2022 and October 1, 2020 ? September 30, 2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Pursuant to 45 CFR 264.1(a), (b), and (c): (a) (1) Subject to the exceptions in this section, no State may use any of its Federal TANF funds to provide assistance (as defined in ? 260.31 of this chapter) to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). (2) The provision in paragraph (a)(1) of this section also applies to a family that includes a pregnant minor head-of-household, minor parent head-of-household, or spouse of such a head-of-household who has received Federal assistance for a total of five years. (3) Notwithstanding the provisions of paragraphs (a)(1) and (a)(2) of this section, a State may provide assistance under WtW, pursuant to section 403(a)(5) of the Act, to a family that is ineligible for TANF solely because it has reached the five-year time limit. (b) (1) States must not count toward the five-year limit: (i) Any month of receipt of assistance by an individual who is not the head-of-household or married to the head-of-household; (ii) Any month of receipt of assistance by an adult while living in Indian country (as defined in section 1151 of title 18, United States Code) or a Native Alaskan Village where at least 50 percent of the adults were not employed; and (iii) Any month for which an individual receives only noncash assistance provided under WtW, pursuant to section 403(a)(5) of the Act. (2) Only months of assistance that are paid for with Federal TANF funds (in whole or in part) count towards the five-year time limit. (c) States have the option to extend assistance paid for by Federal TANF funds beyond the five-year limit for up to 20 percent of the average monthly number of families receiving assistance during the fiscal year or the immediately preceding fiscal year, whichever the State elects. States are permitted to extend assistance to families only on the basis of: (1) Hardship, as defined by the State; or (2) The fact that the family includes someone who has been battered, or subject to extreme cruelty based on the fact that the individual has been subjected to: (i) Physical acts that resulted in, or threatened to result in, physical injury to the individual; (ii) Sexual abuse; (iii) Sexual activity involving a dependent child; (iv) Being forced as the caretaker relative of a dependent child to engage in nonconsensual sexual acts or activities; (v) Threats of, or attempts at, physical or sexual abuse; (vi) Mental abuse; or (vii) Neglect or deprivation of medical care. Condition: In order to monitor the earmarking requirement, the Health and Human Service Commission?s (HHSC) Data Analytics and Performance (DAP) Department maintains a tracking worksheet that is updated monthly, which contains relevant data derived from the TIERS benefit payment query and other source files. Key data used in the calculation include the following: ? Report month ? Number of clients who received their 60th monthly benefit payment in the report month ? Number of clients who received a hardship exemption in the report month ? Total number of clients receiving benefit payments as of the report month ? Total number of clients with a hardship exemption as of the report month The final monthly calculation takes the total number of clients with a hardship exemption as of the report month (i.e. those families that have received more than 60 months of benefit payments) divided by the total number of clients receiving benefit payments as of the report month. Audit procedures included a sample of five clients who received their 60th monthly benefit payment and a hardship exemption in a given month during the fiscal year. Individual monthly benefit payments noted per the results of the TIERS benefit payments query were compared to the TANF Time Limit screens which show each monthly benefit payment made. For all five sampled clients, there were discrepancies noted between the two data sets as to which months were counted as payments. Questioned costs: None Context: See ?Condition.? Cause: The TIERS benefit payment query is not configured to pull accurate data for purposes of monitoring the earmarking requirement. Effect: Inaccurate inputs used for monitoring earmarking requirements could result in noncompliance with federal requirements. Repeat Finding: No Recommendation: We recommend that HHSC update the parameters used in the TIERS benefit payment query to ensure it is pulling the accurate benefit payment fields in TIERS in order to assess compliance with earmarking requirements. Views of responsible officials: We agree with this finding and appreciate the audit team bringing this issue to our attention. This issue was discovered and communicated to us late in the audit process. As such, we have not had enough time to ensure we understand the root cause of the errors and have no assurance the cause lies in the query being used.

Corrective action plan: The Office of Data Analytics and Performance (DAP) will continue to work with IT - Social Services Applications (IT SSA) to determine the root cause of the errors. Once that has been established, corrective action will be implemented to correct that root cause. After corrections are made, DAP will continue to work with IT SSA to ensure the corrective action has eliminated the errors. Implementation date(s): August 31, 2024 Responsible persons: Director, Strategic Decision Support Director, DAP Aging & Disability

2022-014 Special Tests and Provisions ? Provider Eligibility ? Lack of Documentation Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Medicaid Cluster ALN: 93.775, 93.777, 93.778 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2105TX5ADM, 2105TX5MAP, 2105TXIMPL, 2105TXINCT; 2205TX5ADM, 2205TX5MAP, 2205TXIMPL, 2205TXINCT October 1, 2020 ? September 30, 2021, October 1, 2021 ? September 30, 2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria or specific requirement: Per 2 CFR 200.303, Health and Human Services Commission (HHSC) must establish and maintain effective internal controls over federal awards that provide reasonable assurance they are managing federal awards in compliance with federal statutes, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Per 2 CFR 200.334, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. In order to comply with federal provider eligibility requirements, HHSC must adhere to various subsections of 42 CFR Section 455 including but not limited to: ? 455.104 ? HHSC must require that disclosing entities, fiscal agents, and managed care entities provide the following disclosures: ? The name and address of any person (individual or corporation) with an ownership or control interest in the disclosing entity, fiscal agent, or managed care entity. The address for corporate entities must include as applicable primary business address, every business location, and P.O. Box address. ? Date of birth and Social Security Number (in the case of an individual) ? Other tax identification number (in the case of a corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) or in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest. ? Whether the person (individual or corporation) with an ownership or control interest in the disclosing entity (or fiscal agent or managed care entity) is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling; or whether the person (individual or corporation) with an ownership or control interest in any subcontractor in which the disclosing entity (or fiscal agent or managed care entity) has a 5 percent or more interest is related to another person with ownership or control interest in the disclosing entity as a spouse, parent, child, or sibling. ? The name of any other disclosing entity (or fiscal agent or managed care entity) in which an owner of the disclosing entity (or fiscal agent or managed care entity) has an ownership or control interest. ? The name, address, date of birth, and Social Security Number of any managing employee of the disclosing entity (or fiscal agent or managed care entity). ? 455.105 ? HHSC must enter into an agreement with each provider under which the provider agrees to furnish to it the following information related to business transactions within 35 days of request: ? The ownership of any subcontractor with whom the provider has had business transactions totaling more than $25,000 during the 12-month period ending on the date of the request; and ? Any significant business transactions between the provider and any wholly owned supplier, or between the provider and any subcontractor, during the 5-year period ending on the date of the request. ? 455.106 ? Before HHSC enters into or renews a provider agreement, or at any time upon written request by HHSC, the provider must disclose to HHSC the identity of any person who: ? Has ownership or control interest in the provider, or is an agent or managing employee of the provider; and ? Has been convicted of a criminal offense related to that person's involvement in any program under Medicare, Medicaid, or the title XX services program since the inception of those programs. ? 455.410 ? HHSC must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers. ? 455.412 ? HHSC must: ? Have a method for verifying that any provider purporting to be licensed in accordance with the laws of any State is licensed by such State ? Confirm that the provider's license has not expired and that there are no current limitations on the provider's license ? 455.414 ? HHSC must revalidate the enrollment of all providers regardless of provider type at least every five years. ? 455.432 ? HHSC must: ? Conduct pre-enrollment and post-enrollment site visits of providers who are designated as ?moderate? or ?high? categorical risks to the Medicaid program. ? Require any enrolled provider to permit CMS, its agents, its designated contractors, or HHSC to conduct unannounced on-site inspections of any and all provider locations. ? 455.434 ? HHSC must: ? Require providers to consent to criminal background checks including fingerprinting when required to do so under State law or by the level of screening based on risk of fraud, waste or abuse as determined for that category of provider.? Establish categorical risk levels for providers and provider categories who pose an increased financial risk of fraud, waste or abuse to the Medicaid program. ? Upon HHSC determining that a provider, or a person with a 5 percent or more direct or indirect ownership interest in the provider, meets HHSC's criteria hereunder for criminal background checks as a ?high? risk to the Medicaid program, HHSC will require that each such provider or person submit fingerprints, in a form and manner to be determined by HHSC, within 30 days upon request from CMS or HHSC. ? 455.436 ? HHSC 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. Upon enrollment and reenrollment, HHSC must check the Social Security Administration's Death Master File (SSADMF), the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. During the period the provider is enrolled, HHSC must check the LEIE and EPLS no less frequently than monthly. ? 455.434 ? HHSC must screen all initial applications, including applications for a new practice location, and any applications received in response to a re-enrollment or revalidation of enrollment request based on a categorical risk level of ?limited,? ?moderate,? or ?high.? If a provider could fit within more than one risk level described in this section, the highest level of screening is applicable. Condition: Various departments within and contractors of HHSC are responsible for ensuring medical providers are properly licensed, screened, and enrolled in the Medicaid Program including Contract Administration and Provider Monitoring (CAPM), Access and Eligibility Services (AES), Procurement and Contracting Services, and the Texas Medicaid and Healthcare Partnership. Audit procedures included a review of 40 long-term care providers, which resulted in the following: ? For 11 samples, a copy of the completed Medicaid application was not included in the file. ? For 12 samples, enrollment of the provider was not completed within the last 5 years. ? For 20 samples, verification of the provider?s license was not included in the file. ? For 15 samples, required information on ownership and control was not disclosed. ? For 20 samples, supporting documentation was not included in the file indicating the SSADMF database was checked at the time of the most recent enrollment. ? For 16 samples, supporting documentation was not included in the file indicating the NPPES database was checked at the time of the most recent enrollment. ? For 11 samples, supporting documentation was not included in the file indicating the LEIE database was checked at the time of the most recent enrollment. ? For 14 samples, supporting documentation was not included in the file indicating the EPLS database was checked at the time of the most recent enrollment. ? For 20 samples, supporting documentation was not included in the file indicating the LEIE and EPLS databases were checked at least monthly during the enrollment period. ? For 20 samples, supporting documentation was not included in the file indicating the provider was categorized during screening as limited, moderate, or high risk. ? For 19 samples, a copy of the provider agreement was not included in the files. ? For 20 samples, supporting documentation was not included indicating a pre- or post-enrollment site visit was conducted as required for providers designated as moderate or high risk. ? For 11 samples, supporting documentation was not included indicating the provider disclosed the identity of any person who had been convicted of a criminal offense related to that person's involvement in any program under Medicare, Medicaid, or the Title XX services program since the inception of those programs. Questioned costs: NoneContext: See ?Condition.? Cause: HHSC does not have adequate procedures in place to ensure required documentation is obtained and maintained to comply with federal provider eligibility requirements. Effect: Failure to obtain and maintain adequate documentation during the provider screening and enrollment process may result in otherwise ineligible or fraudulent providers receiving Medicaid funds. Repeat Finding: 2021-008 Recommendation: HHSC should implement controls to ensure: ? Documentation is maintained for at least the length of the providers? current enrollment period or three years, whichever is greater in accordance with 2 CFR 200.334. ? Provider licenses are verified during enrollment. ? Providers are re-enrolled at least once every five years. ? Provider agreements are obtained, and the proper disclosures are made. ? Providers are categorized according to risk level and pre- and post-enrollment site visits are conducted as required for those deemed moderate or high risk. ? Relevant federal databases are checked during initial enrollment and at least monthly for all providers currently enrolled in Medicaid. Views of responsible officials: Agree.

Corrective action plan: In December 2021, HHSC implemented the Texas Medicaid & Healthcare Partnership (TMHP) Provider Enrollment Management System (PEMS), an automated system that is the single tool for provider enrollment, re-enrollment, revalidation, and maintenance requests (maintaining and updating provider enrollment record information). HHSC is confident that as the LTC providers are enrolled and re-validated through PEMS, the errors for documentation will be corrected. The LTC process will mirror the sampled acute care providers which were found to be 100 percent compliant during this review, further supporting that the process is working. Implementation date(s): December 2021 Responsible persons: Deputy Associate Commissioner, Operations Management

2021-008

2022-015 Special Tests and Provisions ? Medical Loss Ratio (MLR) ? Missing Data Elements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Medicaid Cluster ALN: 93.775, 93.777, 93.778 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2105TX5ADM, 2105TX5MAP, 2105TXIMPL, 2105TXINCT; 2205TX5ADM, 2205TX5MAP, 2205TXIMPL, 2205TXINCT October 1, 2020 ? September 30, 2021, October 1, 2021 ? September 30, 2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: For all contracts, the state must ensure that each MCO, PIHP, and PAHP submits a report with the data elements specified in 42 CFR sections 438.8(k) and 438.8(n). The report should contain the required 13 data elements in the regulation, reflect the correct reporting years, and contain an attestation of accuracy regarding the calculation of the MLR. The state should have a policy and procedure to indicate when the report(s) are due from plans and should not accept multiple submissions from plans unless the capitation payments are revised retroactively. Per 2 CFR 200.303, Health and Human Services Commission (HHSC) must establish and maintain effective internal controls over federal awards that provide reasonable assurance they are managing federal awards in compliance with federal statutes, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its federal programs. Per 42 CFR section 438.8(k) - The State, through its contracts, must require each MCO, PIHP, or PAHP to submit a report to the State that includes at least the following information for each Medical Loss Ratio (MLR) reporting year: (i) Total incurred claims. (ii) Expenditures on quality improving activities. (iii) Fraud prevention activities as defined in paragraph (e)(4) of this section. (iv) Non-claims costs. (v) Premium revenue. (vi) Taxes, licensing and regulatory fees. (vii) Methodology(ies) for allocation of expenditures. (viii) Any credibility adjustment applied. (ix) The calculated MLR. (x) Any remittance owed to the State, if applicable. (xi) A comparison of the information reported in this paragraph with the audited financial report required under ? 438.3(m). (xii) A description of the aggregation method used under paragraph (i) of this section. (xiii) The number of member months. Condition: The Financial Reporting and Audit Coordination (FRAC) group at HHSC receives and reviews the MLR reports to verify the reports contain the required data elements. The MLR report template that is used by MCOs for this requirement is created and maintained by FRAC. Audit procedures included a review of six MLR reports submitted to FRAC during the fiscal year. Six of six (6) reports did not contain three of the thirteen required elements as follows: ? Methodology(ies) for allocation of expenditures ? A comparison of the information reported in this paragraph with the audited financial report required under ? 438.3(m). ? A description of the aggregation method used under paragraph (i) of this section Questioned costs: None Context: See ?Condition.? Cause: The current MLR report template provided to MCOs does not contain all thirteen (13) of the required data elements. Effect: Failure to obtain required information from MCOs pertinent to a federal award may result in noncompliance with grant terms and conditions. Repeat Finding: 2021-010 Recommendation: The FRAC should update the MLR report template to reflect all required elements as per 42 CFR 438.8(k). Views of responsible officials: HHSC agrees with the finding. It should be noted that the missing elements describe how the report was developed and do not impact the accuracy of the report or the Medical Loss Ratio (MLR) percentage.

Corrective action plan: HHSC ? Medicaid and CHIP Services - FRAC identified the missing requirements and updated the MLR report template and instructions in August 2022. Unfortunately, work was not completed in time for the Managed Care Organizations (MCO) to use the new template for reports submitted in August 2022. MCOs will use the new template with reports submitted in August 2023. Implementation date(s): Fully implemented August 2022. Responsible persons: Director, Medicaid and CHIP Services ? FRAC

2021-010

2022-019 Period of Performance Federal Agency: Environmental Protection Agency Federal Program Title: Drinking Water State Revolving Fund (DWSRF) Cluster ALN: 66.468, 66.483 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Numbers and Periods: 582-22-30745 9/1/2021 ? 8/31/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During our testing of the Texas Commission on Environmental Quality?s (TCEQ) controls over the period of performance, we noted that the fiscal year 2022 grant ended on August 31, 2022. The closeout period for this grant ended on December 31, 2022, at which time all PCAs associated with that grant should have been closed in USAS in order to prevent costs being charged outside of the period of performance in accordance with TCEQ?s policies and procedures. However, we noted that PCAs were still open subsequent December 31, 2022. Questioned Costs: None Context: ?See Condition? Cause: TCEQ personnel misinterpreted policies and procedures in place over period of performance requirements. Effect: Failure to enforce internal controls over period of performance requirements may result in expenditures charged to the grant outside of the period of performance resulting in noncompliance and questioned costs. Repeat Finding: No Recommendation: We recommend TCEQ document its internal controls over period of performance requirements and clearly define roles and responsibilities within those policies. Additionally, we recommend TCEQ perform periodic reviews to verify that those controls are operating effectively. Views of responsible officials: The Federal Funds Section of the Budget and Planning Division maintains a Federal Funds Instruction Guide which outlines Close Out Items in Chapter 14. Those items are required when closing out a grant. This chapter does not specifically reference when Program Cost Accounts (PCAs) should be inactivated.

Corrective action plan: The Federal Funds Instruction Guide will be revised to require that PCAs associated with closed grants are inactivated by the end of the approved close-out period. Budget and Planning management will discuss the revised guidance with staff to ensure proper implementation. TCEQ will implement the Centralized Accounting and Payroll/Personnel System (CAPPS) in September of 2023; grant numbers will include beginning and ending dates at the time the grant is created and will not require inactivation. TCEQ will ensure thorough documentation of its internal controls and the associated staff roles and responsibilities and will conduct periodic reviews of its controls. Implementation date(s): April 11. 2023 for update of the Federal Funds Instruction Guide and training staff. CAPPS: September 1, 2023. Responsible Persons: TBD, Federal Funds Section Manager; Stephanie Robinson, Assistant Deputy Director of Budget and Planning Division; Jene Bearse, Deputy Director of Budget and Planning Division

2022-022 Eligibility Federal Agency: U.S. Department of the Treasury Federal Program Title: Emergency Rental Assistance Program ALN: 21.023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 1505-0266 ? 2021, 1505-0270 ? 2021. January 6, 2022 ? December 29, 2022 and May 5, 2021 ? September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: According to Treasury?s Emergency Rental Assistance (ERA) Frequently Asked Questions (FAQs) Revised August 25, 2021, in ERA1, grantees must make reasonable efforts to obtain the cooperation of landlords and utility providers to accept payments from the ERA program. Outreach will be considered complete if (i) a request for participation is sent in writing, by mail, to the landlord or utility provider, and the addressee does not respond to the request within seven calendar days after mailing; (ii) the grantee has made at least three attempts by phone, text, or e-mail over a five calendar-day period to request the landlord or utility provider?s participation; or (iii) a landlord confirms in writing that the landlord does not wish to participate. The final outreach attempt or notice to the landlord must be documented. According to Treasury?s ERA Frequently Asked Questions (FAQs) Revised August 25, 2021, Grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. If a household does not have a signed lease, documentation of residence may include evidence of paying utilities for the residential unit, an attestation by a landlord who can be identified as the verified owner or management agent of the unit, or other reasonable documentation as determined by the grantee. In the absence of a signed lease, evidence of the amount of a rental payment may include bank statements, check stubs, or other documentation that reasonably establishes a pattern of paying rent, a written attestation by a landlord who can be verified as the legitimate owner or management agent of the unit, or other reasonable documentation as defined by the grantee in its policies and procedures. According to the Texas Rent Relief Program Policies effective June 21, 2021, a household can request and receive rent assistance up to the total amount of monthly contracted rent listed on the lease. In the rare cases in which a tenant is applying without landlord cooperation, AND a lease does not exist, the tenant will be required to provide receipts for their 3 most recent rent payments in order to establish a pattern. According to Treasury?s ERA Frequently Asked Questions (FAQs) Revised August 25, 2021, all payments for utilities and home energy costs should be supported by a bill, invoice, or evidence of payment to the provider of the utility or home energy service. According to the Texas Rent Relief Program Policies Version I, Assistance payments for arrears and current month utilities will be based on actual bills. Condition: During our testing of 60 individual payments to program participants, we noted the following the following instances of noncompliance: ? The landlord outreach was not completed for two ERA 1 tenant payments, totaling $7,116. ? The monthly rent paid did not agree to the monthly rent on the lease for two tenant payments resulting in a total overpayment of $3,390. ? The monthly rent paid did not agree to the payment receipt for one tenant payment resulting in an overpayment of $900. ? The monthly rent paid did not agree to the tenant ledger for one tenant payment resulting in an overpayment of $6,739. ? The date and amount on the electricity bill for one tenant was not supported by adequate documentation as the bill was illegible. Total payment for electricity was $510. Questioned costs: $11,916 Context: See "Condition" Cause: Exceptions were due to management oversight. The processing vendor miscalculated the rental assistance. The reviewer neglected to complete and electronically sign the Landlord Application Review. Effect: Failure to accurately calculate and review rental assistance under the program may result in overpayments to tenants or payments to ineligible tenants. Repeat Finding: 2021-012 Recommendation: We recommend management to perform a thorough review of the documentation submitted to the Texas Rent Relief Program and pay according to the current lease or other verification of rental expense. Additionally, we recommend management ensure that appropriate documentation related to review of applications is maintained in the files. Views of responsible officials: Management agrees with the finding and recommendation

Corrective action plan: To prevent similar errors from occurring until program closure, TRR management shared these findings with the external application review vendor on January 26, 2023, reiterating the processes for reviewing and approving rental assistance according to all program policies and procedures and ensuring that appropriate documentation related to review of applications is maintained in the files. Eligibility errors are expected in all programs, and TRR has developed different processes to address errors when identified. For these particular cases, TRR management requested the vendor take corrective action for each case as applicable (e.g., by requesting a return of funds for overpayment or by requesting additional information from applicants). Implementation date(s): January 26, 2023 Responsible persons: Danny Shea, TRR Senior Program Manager

2021-012

2022-025 Special Tests and Provisions Testing ? ERA Funds Reallocation Federal Agency: U.S. Department of the Treasury Federal Program Title: Emergency Rental Assistance Program ALN: 21.023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 1505-0266 ? 2021 January 6, 2022 ? December 29, 2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to Treasury?s ERA 1 Reallocation Guidance Updated March 30, 2022, Treasury will begin accepting requests from Grantees for reallocated funds, on a form to be published by Treasury, on October 15, 2021. As the ERA 1 statute requires, reallocated funds will only be available to Grantees that have obligated at least 65% of their own initial ERA 1 allocations. Each funding request will be required to indicate the amount requested and confirm the need for such funds in the Grantee?s jurisdiction. Condition: TDHCA submitted two allocation requests during fiscal year 2022. For 2 of 2 reallocation requests tested, the Department was unable to provide supporting documentation to validate the information that informed Treasury of the obligation amounts for the reallocation requests submitted on January 13, 2022, and June 10, 2022. Questioned costs: None Context: See "Condition" Cause: Failure to maintain adequate documentation was caused by management oversight. Effect: Failure to maintain adequate documentation to support submissions to the federal agency may result in inaccurate information being submitted inhibiting the federal agency from making make key decisions. Repeat Finding: Yes Recommendation: We recommend management adopt policies and procedures to ensure supporting documentation for federal submissions are maintained, including any reconciling calculations or adjustments to support information. Views of responsible officials: Management agrees with the finding and recommendation.

Corrective action plan: Program management adopted policies and procedures to ensure supporting documentation for federal submissions are maintained, including any reconciling calculations or adjustments to support information. Implementation date(s): Implemented as of February 8, 2023 Responsible persons: Mariana Salazar, Texas Rent Relief Director

2022-029 Special Tests and Provisions ? Fraud Detection and Repayment Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care Development Fund (CCDF) Cluster ALN: 93.489, 93.575, 93.596 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Numbers and Periods: 2201TXCCDF, 2201TXCCDD, 2101TXCCC5, 2101TXCSC6, 2101TXCDC6, 2101TXCCDF, 2001TXCCC3, 2001TXCCDF, 2001TXCCDM, 2001TXCCDD, 1901TXCCDD, 1901TXCCDM, 1901CCDF October 1, 2021 ? September 2024, December 27, 202 ? September 30, 2023, October 1, 2020 ? September 30, 2023, March 27, 2020 ? September 30, 2023, October 1, 2019 ? September 30, 2022, and October 1, 2018 ? September 30, 2021 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 45 CFR 98.60(i), Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud. Additionally, pursuant to TWC?s Childcare Services Guide (April 2022), section G.600: Recovery of Improper Payments, Local Workforce Development Boards (Boards) must attempt recovery of all improper payments. The Texas Workforce Commission (TWC) must not pay for improper payments. Board recovery of improper payments must be managed in accordance with TWC policies and procedures. Condition: When an improper payment is identified by a Board, the Board must issue a notice of determination (RID-58) that notifies the participant that they were found to be ineligible to receive assistance for the time period and amount in question as well as the reason for ineligibility. If the improper payment is caused by fraud, the Board issues a 1st collection letter (RID-64) to attempt to recoup the ineligible amount. If amounts are not collected or on an active payment plan, the Board issues a final collection letter (RID-65) and refers the participant to TWC for warrant hold, which will bar future services to the individual until the recoupment is collected. Letters issued by the Board are maintained in the Program Integrity Reporting Tracking System (PIRTS), the tool for Board use in reporting and tracking childcare fact-finding, fraud determinations, and recoupments. TWC monitors the Boards? compliance with the recovery of improper payments through its subrecipient monitoring procedures. However, we noted that TWC is not consistently adhering to the guidelines for monitoring the policies and procedures issued to the Boards. We noted the following exceptions in the 40 cases selected for testing: ? Determination letters were not maintained in PIRTS for nine of the 40 cases tested. ? 1st collection letters were not maintained in PIRTS for 12 of the 40 cases tested. ? Final collection letters were not maintained in PIRTS for 11 of the 40 cases tested. Improper payments for which the determination letter, 1st collection letter and/ or final collection letter were not retained totaled $79,339 of the total improper payments of $188,299 tested. Recoupment efforts were still in process for the cases noted above. Questioned costs: None Context: ?See Condition? Cause: Management is not adhering to the subrecipient monitoring procedures to ensure determination letters, 1st collection letters and final collection letters are obtained by the Boards and maintained in PIRTS. Effect: Failure to obtain documentation of collection efforts may result in improper payments not being recouped. Repeat Finding: No Recommendation: We recommend management implement a process to ensure subrecipient reviews follow its subrecipient monitoring policies to verify that Boards are maintaining the appropriate documentation in PIRTS as required by TWC?s Childcare Services Guide (April 2022). Views of responsible officials: The Texas Workforce Commission (TWC) acknowledges and agrees with the finding and concurs with the recommendation. The TWC?s Division of Fraud Deterrence and Compliance Monitoring?s Office of Investigation (FDCM/OI) oversees all matters related to fraud, waste, and abuse with respect to Federal programs the TWC passes to its subrecipients, primarily the 28 local workforce development boards (Board). This includes the subsidized childcare program provided for in the above-cited Federal awards. FDCM/OI has historically maintained rigorous internal controls to address fraud in all programs. However, during the COVID-19 pandemic, FDCM/OI was inundated with unprecedented ID fraud claims investigations associated to the CARES Act unemployment compensation (UC) programs. During the scope of this audit, the majority of FDCM/OI?s investigator resources were deployed to address UC ID fraud matters. FDCM/OI relied on the TWC?s Subrecipient Monitoring Department (SRM) to test Board compliance with respect to childcare improper payment reporting and recoupment. Historically, this is an area in which SRM monitors are not subject-matter experts. FDCM/OI is now in a position to devote more investigator resources to this area.

Corrective action plan: FDCM/OI investigators will review PIRTS reports on a regularly scheduled basis to ensure that Boards are uploading all required documentation related to childcare improper payments and taking collection efforts. The PIRTS system is in the process of being updated and is currently undergoing User Acceptance Testing. The updated system should allow for more robust reporting and controls. Additionally, FDCM/OI will provide more robust training and retraining to Boards that fall out of compliance. FDCM/OI will also develop an escalation policy in cases where Boards are not responsive to investigators? requests for status updates or document uploads into PIRTS. FDCM/OI investigators will ensure that SRM monitors are fully briefed on childcare improper payment cases at a Board as part of SRM?s annual monitoring review of the Board. Finally, FDCM/OI will ensure that all relevant controlling documents, e.g. Workforce Development Letter 21-16, Change 3 and its attached Child Care Fact-Finder?s Desk Aid; and the TWC?s Child Care Services Guide are updated to incorporate these new procedures. Implementation date(s): June 1, 2023 Responsible Persons: Jason Stalinsky, Deputy Division Director, Division of Fraud Deterrence and Compliance Monitoring

2021 ? 012 Eligibility Federal Agency: U.S. Department of Treasury Federal Program Title: Emergency Rental Assistance Program ALN: 21.023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 1505 ? 0266 01/06/2021 ? 12/31/2021 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR ?200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Under the ERA1 program, payment shall be used to provide financial assistance to eligible households, including the payment of (i) rent; (ii) rental arrears; (iii) utilities and home energy costs; (iv) utilities and home energy costs arrears; and (v) other expenses related to housing incurred due, directly or indirectly, to the novel corona virus disease (COVID-19) outbreak, as defined by the Secretary. According to the U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions Revised August 25, 2021, for ERA funds used for rent and rental arrears, grantees must obtain, if available, a current lease, signed by the applicant and the landlord or sublessor, that identifies the unit where the applicant resides and establishes the rental payment amount. According to the Texas Rent Relief Program Policies (Effective 04/21/21), eligible rent expenses can be verified through any of the following: ? Current lease, signed by both applicant and landlord/sublessor, ? Lease dates, monthly rent amount, and past due rent provided by the landlord in the landlord application, or ? Evidence of the three most recent payments of rent: bank statements or check stubs, or rent receipt from landlord. According to the Texas Rent Relief Program Policies Version I (03/29/21), an application for assistance is initiated by either a landlord or a tenant. Payment will not be made on behalf of an applicant until an applicant certification, landlord certification (if participating) and utility certification (if participating) have been received. A tenant Reviewer Checklist and Landlord Application Review, as applicable, are completed based on information in the Tenant Application, Landlord Application, as applicable, and documentation submitted to the Texas Rent Relief Program. Each checklist is electronically signed by the reviewer. During our testing of payments to participants, we noted the following: ? For one of the 60 payments (Tenant Case ID 527731), TDHCA made an overpayment of $144 to the landlord for rent assistance and rental arrears. The total payment was $4,356 for four months at $1,089 per month. However, the lease calls for a monthly amount of $1,053, resulting in an overpayment for each month of $36. ? For one of the 60 payments (Tenant Case ID 512404), the Landlord Application Review was not completed nor electronically signed. However, TDHCA made a payment to the landlord for rental assistance in the amount of $4,200. Questioned Costs: $144 Cause: Management oversight. The processing vendor miscalculated the rental assistance. The reviewer neglected to complete and electronically sign the Landlord Application Review. Effect: Failure to accurately calculate and review rental assistance under the program may result in overpayments to tenants or payments to ineligible tenants. Repeat Finding: No Recommendation: We recommend management to perform a thorough review of the documentation submitted to the Texas Rent Relief Program and pay according to the current lease or other verification of rental expense. We recommend management ensure that appropriate documentation related to review of applications is maintained in the files. Views of responsible officials: Management agrees with the finding and recommendation.

Corrective action plan: To prevent similar errors from occurring until program closure, TRR management shared these findings with the external application review vendor on February 10, 2022, reiterating the processes for reviewing and approving rental assistance according to all program policies and procedures and ensuring that appropriate documentation related to review of applications is maintained in the files. Implementation date: February 10, 2022 Responsible Persons: Danny Shea, TRR Senior Program Manager

2021 ? 018 Eligibility, Special Tests and Provisions ? UI Program Integrity ? Overpayments ? Improper Payment of Benefits Federal Agency: U.S. Department of Labor Federal Program Title: Unemployment Insurance ALN: 17.225 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Numbers and Periods: UI-34193-20-55-A-48, UI-35733-21-55-A-48 10/01/2019 ? 9/30/2020, 10/01/2020 ? 09/30/2021 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: 20 CFR ?618.720 Qualifying requirements for Basic Trade Readjustment Allowances (TRA). To qualify for Basic TRA for a week of unemployment, an AAW must meet each of the requirements in paragraphs (a) through (g) of this section: (g) Participation in approved training. (1) As a condition for receiving Basic TRA, except as provided for in ?618.730, the AAW, after a total or partial separation from the adversely affected employment within the certification period, and by the applicable deadlines in ?618.725 must: (i) Be enrolled in training, as defined in subpart A of this part; (ii) Be participating in approved training (as defined in ?618.705); or (iii) Have a waiver granted under ?618.735 in effect. (2) An AAW who has not met the requirements in paragraph (g)(1) of this section may, if otherwise eligible, receive Basic TRA before expiration of the applicable training enrollment deadline in ?618.725. Once the training enrollment deadline is reached, the training requirements in paragraph (g)(1) of this section must be met. Basic TRA payments must cease beginning the first week for which the requirements in paragraph (g)(1) of this section were required but not met. (3) The requirements in paragraph (g)(1) of this section do not apply to an AAW with respect to claims for Basic TRA for weeks of unemployment beginning before the filing of an initial claim for TRA after publication of the certification of the appropriate worker group as provided in ?618.715(a), nor for any week that begins before the AAW is notified that he or she is covered by a certification and is fully informed of the requirements of this section. (4) An AAW who meets the participation in approved training requirement in paragraph (g)(1) of this section by the applicable deadlines in ?618.725 may continue to receive Basic TRA after the AAW has completed training, even if such participation in training was on a part-time basis, provided that the worker meets all other eligibility requirements for Basic TRA. Condition: During our testing, we noted that one out of 60 claimants tested for UI eligibility requirements was not enrolled in an approved training to be eligible to receive TRA benefits. The claimant had a denial of payment decision placed on their record in the UI system, based on the fact that the claimant graduated from an approved training program. A TWC analyst removed the denial in error, allowing the system to process two weeks of TRA benefit payments of $378 per week to the individual. Additionally, as this amount was not identified as an overpayment by TWC, it was not included in the overpayments listing as of August 31, 2021. Questioned Costs: $756 Cause: A denial of payment decision is manually entered when a claimant is no longer eligible for TRA benefits. A TWC employee, unfamiliar with the TRA eligibility requirements, erroneously removed the payment decision in the UI system as all weeks of TRA benefits had not been paid to the claimant. This allowed the payment to be processed by the UI system in error. Effect: Due to the volume of claims, a lack of familiarity with eligibility requirements by employees making eligibility determinations could lead to payment of ineligible claims and material noncompliance. Repeat Finding: No Recommendation: We recommend that TWC provide additional training over eligibility requirements to individuals with access to make eligibility determinations in the UI system. Views of responsible officials: The Texas Workforce Commission (TWC) acknowledges and agrees with the cause noted. TWC did take action and provided additional training as recommended.

Corrective action plan: TWC has provided additional training as recommended. Implementation date: October 2022 Responsible Persons: Eric Holen, Unemployment Insurance Administration & Operational Support Director

2021 ? 019 Eligibility, Special Tests and Provisions ? UI Program Integrity ? Overpayments ? Improper Payment of Benefits Federal Agency: U.S. Department of Labor U.S. Department of Homeland Security Federal Program Title: Unemployment Insurance Presidential Declared Disaster Assistance to Individuals and Households ? Other Needs ALN: 17.225 97.050 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Numbers and Periods: Unemployment Insurance Various Various Presidential Declared Disaster Assistance to Individuals and Households 4485DRTXSPLW 07/25/2020 ? 03/27/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria or specific requirement: Per 2 CFR ?200 Appendix XI, State responsibilities include: (1) establishing specific, detailed policies and operating procedures which comply with the requirements of federal laws and regulations; (2) determining the state UI tax structure; (3) collecting state UI contributions from employers (commonly called ?unemployment taxes?); (4) determining claimant eligibility and disqualification provisions; (5) making payment of UI benefits to claimants; (6) managing the program?s revenue and benefit administrative functions; (7) administering the programs in accordance with established policies and procedures; and (8) enacting state UC law that conforms with federal UC law and that state law and operations substantially comply with federal law. UIPL 16-21 - When a state obtains information through automated systems or other sources that question whether the name and/or SSN used to file a claim belong to the individual who is filing the claim, the state must act quickly to: i) provide the individual with proper notice and an opportunity to provide information to resolve the issue; ii) decide whether or not sufficient information has been provided to verify the individual?s ID; and iii) issue a written determination. When such issues arise, states must act promptly to verify an individual?s ID in order to meet the requirement of section 301(a)(1), SSA, that the state have methods of administration reasonably calculated to ensure full payment of UI when due. For new claims, payment ?when due? means that qualified and eligible individuals receive their first benefit payments as soon as administratively feasible. UIPL No. 04-01 interprets the ?when due? requirement to also require states to ensure that payment of benefits is not made when payment is not due. Investigations of fraudulent imposter claims involving claimants, employers, and/or state staff are necessary for the proper administration of the UI program. States must have processes in place to ensure benefits are only paid to the individual whose identity has been verified. However, once a claim has been established and payments have been issued, there is a presumption of eligibility (refer to UIPL 04-01). Therefore, there must be evidence on the record that substantiates a reasonable basis for stopping payments once a determination of eligibility has been made and payments have been issued. Internal Control ? Per 2 CFR ?200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: On March 27, 2020, the President signed the CARES Act that authorized additional funding under the unemployment insurance program. This pandemic-related funding was significant and expanded the eligible individuals to support changes in employment status caused by COVID-19. These benefits extended into 2021. Additionally, on August 21, 2020, the Federal Emergency Management Agency (FEMA) provided supplemental payments for lost wages funds to enable TWC to provide $300 weekly supplemental payments to individuals unemployed due to COVID-19 pursuant to FEMA-DR-4485-TX. There was a priority on distributing funds under self-attestation strategy with limited verification to expedite disbursement of funds and support individuals in greatest need. However, several states experienced significant fraudulent claims. The U.S. Department of Labor and TWC have partnered to investigate the extent and methods used to perpetrate the fraud. For TWC, given the extent and circumstances, eligibility determinations made by the management were following the existing policies and procedures for this pandemic funding; however, to meet Federal and State expectations regarding the quick payment of federal pandemic benefits, the policies and procedures were not adequate to completely prevent fraudulent claims related to stolen identities (e.g., identity theft). Condition (Continued): TWC?s detective control did identify abnormal claim activity, however, not before payments were made. During our testing of 60 claims for supplemental payments for lost wages, we identified five claims that were considered potential identity theft as the claimants had not identified themselves through the identity verification process. The claims included benefit payments under UI, Disaster Unemployment Assistance (DUA), Pandemic Unemployment Assistance (PUA), Federal Pandemic Unemployment Compensation - ARPA and CARES (FPUC), and/ or Lost Wage Assistance (LWA). While these claims have been placed in an open period ineligibility status through a contact request to stop any future payments until TWC can speak with the claimant and resolve the potential ID theft issue, benefits in the amount of $55,224 were paid to these five claimants without appropriate identity verification. Per United States Department of Labor (USDOL) guidance through Unemployment Insurance Program Letter 16- 21, ?While an individual?s failure to respond is sufficient to prevent additional benefits from being paid until the individual responds, failure to respond in and of itself is not sufficient to establish an overpayment. The state must consider the evidence supporting suspicious activity, in addition to the individual?s failure to respond to the state?s attempt to verify identity, and determine if, under state law, the evidence in the record is sufficient to establish an overpayment.? TWC has stopped claims that it deems suspicious and potential ID theft, however, did not establish an overpayment as there was no corroboration from the claimant or an employer that actual ID theft occurred. Questioned Costs: Undetermined and under investigation by both federal and local authorities Cause: TWC experienced unprecedented claims volume with increased funding and additional program requirements with a priority for efficient distribution from both the U.S. Department of Labor and State officials. TWC?s existing identity verification protocols and vendor services were not adequate to timely identify and stop the onslaught of imposter claims caused by identity theft. Effect: A lack of internal controls over eligibility determinations may make the programs more vulnerable to fraudulent claims. Repeat Finding: No Recommendation: We recommend that TWC continue to review, monitor, and enhance eligibility procedures to detect and/or prevent fraudulent claimants from receiving benefits. Also, TWC should continue to enhance its assessment of risk related to the eligibility process and implement internal controls to help mitigate future identify theft frauds. Views of responsible officials: The Texas Workforce Commission (TWC) acknowledges and agrees with the finding and concurs with the recommendation. TWC has historically maintained strong internal controls to address fraud and identity theft in the Regular program as well as the long-established Federal programs (Unemployment Compensation for Ex-Service Members; Unemployment Compensation for Federal Employees; DUA, etc.). TWC has implemented all required and recommended data crossmatches from the U.S. Department of Labor and was an early adopter of the fraud-fighting services, protocols, and best practices of the National Association of State Workforce Agencies? UI Integrity Center. TWC was inundated with unprecedented claims volumes associated to the CARES Act programs. In addition to the sheer volume, the Pandemic Unemployment Assistance (PUA) program exacerbated the scourge of fraudulent imposter claims. Unlike true unemployment insurance programs such as Regular State benefits and Pandemic Emergency Unemployment Compensation, PUA was designed primarily to provide for payments to individuals who were not eligible for traditional unemployment compensation, e.g., individuals who were selfemployed or who had very limited work history. Congress mirrored the PUA program on the existing Disaster Unemployment Assistance (DUA) program. Like DUA, the PUA program was an emergency program activated in response to a crisis and designed to provide benefits to certain individuals who were ineligible for regular unemployment compensation or extended benefits. By its very nature, the PUA program bypassed core internal controls in the Regular program designed to ensure integrity in the system. Because PUA addressed the selfemployed or recently employed, it did not generally rely on past wages that exist in states? unemployment insurance systems as employer-reported quarterly employee wage records. Likewise, PUA eligibility was predicated on criteria related to the COVID-19 pandemic (UIPL 16-20 ?4(a)) rather than a traditional jobseparation analysis based on a claim response from an employer. The employer claim notice and response control is vital to a bona fide unemployment insurance system because it serves, in part, as verification of the worker?s identity and past employment with the employer. It is not unexpected, then, that of the 60 claims tested as part of this audit, the 5 which were identified as potentially ID theft imposter claims were each PUA claims. While acknowledging that some amount of fraudulent ID theft claims were paid, TWC in general was successful in identifying and stopping the large majority of these claims prior to payment. Since the beginning of the pandemic in March 2020, approximately 5 million total unemployment benefit claims were filed and $54 billion in total net benefits were paid. Of that population, more than 159,000 claims have been confirmed as ID theft. Of that, a little over 10,000 claimants were paid benefits in the amount of approximately $56 million, or 0.1 percent of all benefit payouts. TWC protocols prevented an estimated $827 million in payouts to confirmed ID theft claims. Additionally, TWC claim-verification processes identified roughly 627,000 potential ID theft claims that had no benefits paid at all. Regarding these claims, TWC estimates that approximately $3.5 billion in potentially fraudulent benefits were prevented from paying out. All told, TWC stopped nearly $4.3 billion in potential ID theft payments. In summary, TWC is committed to the integrity of the unemployment compensation program and continues to commit significant resources to the on-going effort to eliminate fraud, waste, and abuse in the program.

Corrective action plan: TWC is continuing the work it began in FFY2020 to enhance and augment internal controls related to benefit fraud and ID theft fraud detection and prevention. That work includes aggressive data analytics analysis and leveraging tools available in-house and through vendors to accurately prevent fraudulent claims as early in the claims-filing process as possible. This work will be documented through divisional policy and program letters intended to clearly establish TWC?s risk assessment processes and stipulate the appropriate internal controls to address the risk. TWC is also continuing to analyze and investigate all claims deemed to be suspicious and to appropriately assess overpayments in accordance with USDOL directives. Implementation date: Ongoing Responsible Persons: Chuck Ross, Director, Division of Fraud Deterrence and Compliance Monitoring

2021 ? 020 Special Tests and Provisions ? UI Program Integrity ? Overpayments ? Lack of Data Collection Federal Agency: U.S. Department of Labor U.S. Department of Homeland Security Federal Program Title: Unemployment Insurance Presidential Declared Disaster Assistance to Individuals and Households ? Other Needs ALN: 17.225 97.050 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Numbers and Periods: Unemployment Insurance Various Various Presidential Declared Disaster Assistance to Individuals and Households 4485DRTXSPLW 07/25/2020 ? 03/27/2022 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria or specific requirement: Sections UIPL 15-20 and UIPL 16-20, Recovery Provisions, require a State agency to properly identify, handle and recover amounts overpaid to claimants. State agencies must have systems in place to capture overpayment data in order for recovery procedures to be conducted. SEC. 262. Lost Wages Assistance Recoupment Fairness. (b) Waiver Authority For State Liability. In the case of any individual who has received amounts of covered assistance to which the individual is not entitled, the State shall require the individual to repay the amounts of such assistance to the State agency, except that the State agency may waive such repayment if the State agency determines that (1) the payment of such covered assistance was without fault on the part of the individual; and (2) such repayment would be contrary to equity and good conscience. Condition: Under the CARES Act and amidst the COVID-19 pandemic, TWC administered a number of unemployment insurance programs to provide unemployment benefits for persons impacted by COVID-19. Among these programs were the PUA, FPUC, and LWA programs that provided the following benefits: See Schedule of Findings and Questioned Costs for chart/table During these weeks, TWC processed an unprecedented number of claims in order to provide benefits to claimants impacted by COVID-19 in a timely manner. During these weeks, we noted that TWC did not implement overpayment data collection procedures in its UI system for these programs. As a result, potential overpayments were not being calculated during this time period. Overpayments were retroactively calculated for the PUA and FPUC programs in May 2021 and December 2021, respectively. However, overpayments have not been calculated for the LWA program as of the fiscal year end. Questioned Costs: Undetermined Cause: TWC experienced unprecedented claims volume with increased funding and additional program requirements with a priority for efficient distribution from both the U.S. Department of Labor and State officials. Due to the volume of claims and the expectation to meet demand, TWC did not implement adequate program changes to its system to calculate potential overpayments for the new program. Effect: The passage of time diminishes TWC's ability to recover overpaid amounts. Additionally, overpaid balances for the Lost Wages Assistance are not properly accounted for as they are not captured in TWC's financial statements. Repeat Finding: No Recommendation: We recommend that TWC develop a plan to capture and collect overpayment data. Views of responsible officials: The Texas Workforce Commission (TWC) acknowledges and agrees with the finding of not programming overpayments associated with the Lost Wage Assistance (LWA) program. TWC has implemented overpayment tracking to capture and collect Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC) overpayments, however programming for Lost Wage Assistance (LWA) is still pending.

Corrective action plan: The TWC implemented PUA and FPUC overpayment programming in May 2021 (waivers only) and December 2021 and communicated this to the Department of Labor January 3, 2022. TWC is trying to introduce programming for LWA overpayments prior to the FEMA close out period. Implementation date: May 2021 for PUA waivers; December 2021 for FPUC and TBD for LWA Responsible Persons: Clay Cole, Unemployment Insurance Division Director

2021 ? 021 Period of Performance ? Application of Program Income Federal Agency: U.S. Department of Education Federal Program Title: Rehabilitation Services - Vocational Rehabilitation Grants to States ALN: 84.126 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: H126A210092 10/01/2020 ? 09/30/2021 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR ?200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: TWC applies expenditures to program income on a weekly basis in order to spend program income prior to drawing down additional federal funds. Management queries a report from WRAPS (Workforce, Reporting, Accounting and Purchasing System) to retrieve all program expenditures by accounting period. Program expenditures for the current accounting period, up to the amount of program income is applied to program income. We noted that the accounting period per the WRAPS report used by management does not coincide with the underlying service date of the expenditures. We tested 25 out of 17,218 expenditures that were expended during the first month of the grant award period, or September 24, 2020 through October 31, 2020. Six out of 25 samples tested were entries to apply expenditures to program income based on the process described above. Upon review of the underlying expenditures, we noted that $1,481,904 out of $6,141,146 in expenditures had services dates in September 2020, prior to the grant period of performance and were incorrectly charged to the grant. Management corrected the error and reclassified the expenditures. Questioned Costs: None. Cause: The systematic approach in which management applied program income was incorrect as it used the accounting date rather than the service date of the expenditures. Effect: Reliance on internal controls that are not designed properly may result in errors and questioned costs. Repeat Finding: No Recommendation: We recommend TWC update its process to apply expenditures to program income to use the service date of the expenditure rather than the WRAPS accounting date. Views of responsible officials: The Texas Workforce Commission acknowledges and agrees with the findings. Through analysis of the exceptions identified in the audit, the Texas Workforce Commission has developed and implemented corrective action to address this finding.

Corrective action plan: The Texas Workforce Commission has already implemented necessary process enhancements in this area. The procedure for spending program income has been updated to include the service dates when collecting expenditure data to be transferred. Implementation date: July 15, 2021 Responsible Persons: Teri Goodwin, Financial Reporting Grant Accountant

2021 ? 101 Equipment and Real Property Management Federal Program Title: Research and Development Cluster Federal Agencies: U.S. Department of Defense, U.S. Department of Health and Human Services, National Science Foundation Award years: See below Award numbers: See below Statistically valid sample: No and not intended to be a statistically valid sample Type of finding: Significant Deficiency and Non-Compliance Questioned Costs: $0 Repeat Finding: No A recipient?s property records for equipment acquired with federal funds must be maintained accurately and include all of the following: a description of the equipment; serial number or other identification number; the source of funding for the equipment, including the federal award identification number; who holds the title; acquisition date and cost of the equipment; the percentage of federal participation in the cost of the equipment; the location, use, and condition of the equipment; and ultimate disposition data, including the date of disposal and sale price (Title 2, Code of Federal Regulations (CFR), Section 200.313(d)(1)). A control system must be developed to ensure that adequate safeguards are in place to prevent loss, damage, or theft of the equipment. Any loss, damage, or theft must be investigated (Title 2, CFR, Section 200.313(d)(3)). Texas A&M University (University) did not maintain accurate and complete property records for 4 (6 percent) of 65 equipment items tested. Specifically: ? For three items, the property record contained an incorrect location. For one item, the location was not updated before it was deployed to an off-campus location. For the second item, the location in the property record did not match the location where the item was currently in use. That item is mobile; however, the location was not updated in the property record when the item was moved. For the third item, the property record did not reflect the location where the item was stored until it could be installed. ? For one other item, the University did not follow its policy to affix an inventory tag before the item was transferred to an off-campus location. That item also did not have a serial number noted in the property record. While there was not a specific serial number located on the item, there was another number that could have been entered into the property record to help identify the item. In addition, the University was unable to locate 1 (2 percent) of 62 equipment items selected for physical inspection. The University did not identify that the item was missing and file a missing property report until auditors selected that item for testing. Not maintaining accurate and complete property records and not adequately safeguarding equipment increases the risk that equipment may be misused, lost, or stolen. The following awards were affected by the equipment issues discussed above: See Schedule of Findings and Questioned Costs for chart/table Recommendations: The University should strengthen controls to ensure that it: ? Maintains accurate and complete property records for all equipment acquired with federal funds. ? Adequately safeguards its equipment to prevent loss or theft of equipment. Views of Responsible Officials: The University acknowledges and agrees with the finding. Texas A&M University will work to develop and implement corrective action.

Corrective Action Plan: Texas A&M University Property Management will remind departments of the importance of updating location information, documenting serial numbers or other identifying information, affixing inventory tags, and promptly reporting missing assets. The reminder will include specific policy recommendations or examples of situations that need additional attention. The Property Management office will also work with those departments that had exceptions identified in the audit to increase compliance with 2 CFR 200. Property Management will continue the annual spot audit process to verify the accuracy of the location and serial number of federally funded assets. Implementation Date: January 2022 Responsible Person: Todd Gregory

2021 ? 103 Equipment and Real Property Management Federal Program Title: Research and Development Cluster Federal Agencies: U.S. Department of Defense, National Science Foundation, U.S. Department of Energy, U.S. Department of Education, U.S. Department of Health and Human Services Award years: See below Award numbers: See below Statistically valid sample: No and not intended to be a statistically valid sample Type of finding: Significant Deficiency and Non-Compliance Questioned Costs: $0 Repeat Finding: 2018-109, 2015-134, 2014-155, 2013-176, 13-161, and 12-170 Equipment Property Records A recipient?s property records for equipment acquired with federal funds must be maintained accurately and include all of the following: a description of the equipment; serial number or other identification number; the source of funding for the equipment, including the federal award identification number; who holds the title; acquisition date and cost of the equipment; the percentage of federal participation in the cost of the equipment; the location, use, and condition of the equipment; and ultimate disposition data, including the date of disposal and sale price (Title 2, Code of Federal Regulations (CFR), Section 200.313(d)(1)). The University of Texas at Austin (University) did not maintain accurate and complete property records for 6 (9 percent) of 64 equipment items tested. Specifically, for each of those items, the property record was inaccurate or did not contain one of the following elements: serial number or other identification number, cost of equipment, item location, or disposition information. The University relies on unit administrators within each University department to provide the required information in the equipment property records. Those errors occurred because the University either (1) did not enter property records accurately and completely into its asset management system or (2) did not always follow its policies and procedures to update property records as needed. Not maintaining accurate and complete property records increases the risk that equipment may be misused, lost, or stolen. The following awards were affected by the equipment issues discussed above: See Schedule of Findings and Questioned Costs for chart/table Physical Inventory A recipient must conduct a physical inventory of equipment and reconcile the results with its property records at least once every two years. A control system also must be developed to ensure that adequate safeguards are in place to prevent loss, damage, or theft of equipment. Any loss, damage, or theft of equipment must be investigated (Title 2, CFR, Section 200.313(d)(2) and (3)). The University?s Handbook of Business Procedures (Handbook) states that an annual physical inventory will be conducted and that when a unit administrator becomes aware that an item of equipment is missing, a diligent search must be performed until the equipment is found or until it is established that it has been lost or stolen. The University conducted a physical inventory of equipment during fiscal year 2021; however, 28 (8 percent) of 332 departments did not complete the physical inventory as required. Specifically: ? For 25 departments, documentation was provided to explain why the physical inventory was not completed, which was generally attributable to the COVID-19 pandemic. ? For three departments, no documentation was provided to explain why the physical inventory was not completed. Not requiring all departments to complete an annual inventory increases the risk that equipment purchased with federal funds may be lost, stolen, or improperly disposed. Recommendations: The University should strengthen controls to ensure that it: ? Maintains accurate and complete property records for all equipment acquired with federal funds. ? Requires departments to conduct an annual physical inventory of equipment. Views of Responsible Officials: The University concurs with the findings.

Corrective Action Plan: The University has implemented significant process enhancements in the areas noted in the findings. Inventory compliance has been emphasized to all departments through one-on-one trainings and frequent communications from inventory services. The Hand Book of Business Policy (HBP) will be revised to include detailed procedures to ensure that the University is in compliance with the requirements. Implementation Date: August 2022 Responsible Person: Lori Peterson

2021 ? 107 Equipment and Real Property Management Federal Program Title: Research and Development Cluster Federal Agencies: U.S. Department of Defense, U.S. Department of Veterans Affairs, U.S. Department of Health and Human Services Award years: See below Award numbers: See below Statistically valid sample: No and not intended to be a statistically valid sample Type of finding: Significant Deficiency and Non-Compliance Questioned Costs: $0 Repeat Finding: 2018-119 A recipient?s property records for equipment acquired with federal funds must be maintained accurately and include all of the following: a description of the equipment; serial number or other identification number; the source of funding for the equipment, including the federal award identification number; who holds the title; acquisition date and cost of the equipment; the percentage of federal participation in the cost of the equipment; the location, use, and condition of the equipment; and ultimate disposition data, including the date of disposal and sale price (Title 2, Code of Federal Regulations (CFR), Section 200.313(d)(1)). A control system must be developed to ensure that adequate safeguards are in place to prevent loss, damage, or theft of the equipment. Any loss, damage, or theft must be investigated (Title 2, CFR, Section 200.313(d)(3)). The University of Texas M.D. Anderson Cancer Center (Cancer Center) did not maintain accurate and complete property records for 22 (36 percent) of 61 equipment items tested. Specifically: ? For 17 items, the property record contained an incorrect location. The Cancer Center relies on its annual inventory process to verify that the property record accurately reflects the location of equipment items. Due to the COVID-19 pandemic, the Cancer Center did not complete the fiscal year 2020 inventory and was in the process of performing the fiscal year 2021 inventory at the time of the audit. As a result, the property records were not updated to reflect the items? current locations. ? For two items, the property record indicated that the items were in-service; however, those items were no longer in use. After auditors selected those items for testing, the Cancer Center submitted a request for disposal. ? For two items, the property record did not contain the item?s serial number or the serial number was recorded incorrectly. ? For one item, the property record did not contain the item?s serial number and the location of the item was also incorrect. In addition, the Cancer Center was unable to locate 1 (2 percent) of 61 equipment items selected for inspection. The Cancer Center did not file a missing property report until auditors selected that item for testing. The errors discussed above occurred because the Cancer Center (1) did not enter information accurately or completely when creating the property records or (2) did not update the property records when changes to the items were made. Not maintaining accurate and complete property records and not adequately safeguarding equipment increases the risk that equipment may be misused, lost, or stolen. The following awards were affected by the equipment issues discussed above: See Schedule of Findings and Questioned Costs for chart/table Recommendations: The Cancer Center should strengthen controls to ensure that it: ? Maintains accurate and complete property records for all equipment acquired with federal funds. ? Adequately safeguards its equipment to prevent loss, or theft of equipment. Views of Responsible Officials: MD Anderson Cancer Center (MDACC) acknowledges and agrees with the finding. Through analysis of the exceptions identified in the audit, MDACC will work to develop and implement a corrective action to further improve the processes.

Corrective Action Plan: ? The Cancer Center will emphasize bi-annually via communication to Property Officers and Administrators the importance on capturing correct and timely asset information. This includes keeping accurate and timely information on the location, serial number and disposition of assets. ? The Cancer Center will communicate during the annual inventory process the importance of validating current data in the system and request updates via the Asset Control team. Implementation Date: Ongoing throughout FY 2022 Responsible Person: Freddy Garcia