The Navajo NationTribal Government

2020-003-Eligibility-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 93.237 U.S. Department of Health and Human H1D1HS0199 01/15/2016- Services -- Special Diabetes Program for 12/31/2020 Indians Diabetes Prevention and Treatment Projects Criteria: In accordance with 42 CFR ? 136.12, eligibility requirements for services under the Indian Health Services program state that ?services will be made available, as medically indicated, to persons of Indian descent belonging to the Indian community served by the local facilities and programs. Generally, an individual may be regarded as within the scope of the Indian health and medical service program if he/she is regarded as an Indian by the community in which he/she lives as evidenced by such factors as tribal membership, enrollment, residence on tax-exempt land, ownership of restricted property, active participation in tribal affairs, or other relevant factors in keeping with general Bureau of Indian Affairs practices in the jurisdiction.? Condition/Context: Using a random sampling methodology, we selected 25 out of 8,500 participant files to verify eligibility in accordance with 42 CFR ? 136.12 and found that in 15 of the 25 participants selected, the participant file did not contain all documentation required to determine eligibility, such as Tribal enrollment status and residency verification. Cause: The Nation has concerns related to confidentially of the information needed to determine eligibility and therefore has not required individuals to provide this information in order to participate in the program. Additionally, the Nation has not established formal policies and procedures over participant eligibility and has not maintained the proper support to ensure individuals are eligible to participate in the program. Effect: Without strong internal controls over participant eligibility, ineligible participants may benefit from federally funded programs. Additionally, serving ineligible individuals may lead to unallowable questioned costs by the funding agency. Questioned costs: The Special Diabetes program is a prevention program that focuses on providing preventative diabetes and nutrition education. Since benefits are not paid out directly to the individuals, there were no reportable instances of questioned costs. Repeat finding: This finding is not a repeat finding. Auditor?s recommendation: The Nation should implement policies and procedures over participant eligibility, including ensuring that eligibility documentation is retained in participant files for all individuals. Additionally, eligibility determinations should be reviewed and approved to ensure all individuals are eligible to participate in the program. Views of responsible officials and planned corrective action: The Navajo Special Diabetes Program (NSDP) shall implement the following internal control procedures to resolve the finding: Action Type Duties Responsible Persons Policy and Development of written policies and procedures on Program Manager Procedure participant eligibility and include eligibility and Supervisors Development documentation are filed at each location. Policy and Development of written policies and procedures for staff Program Manager Procedure to review and approve participation of individuals in the and Supervisors Development program. Approval of Policy The policy and procedures will be presented to Health, Program Manager and Procedures Education and Human Services Committee for approval. Implement Policy The approved policy and procedures will be All Staff and Procedures implemented across all locations. Compliance with 42 A written directive shall be issued to all NSDP field staff Program Manager CFR ? 136.12 on eligibility and residency requirements pursuit to 42 CFR ? 136.12. The Executive Director of the Navajo Nation Department of Health is responsible to ensure the planned corrective action is fully achieved by September 30, 2021. Furthermore, the Executive Director of the Navajo Department of Health shall ensure the development and implementation of policies and procedures regarding participant eligibility according to 42 CFR ? 136.12 by February 17, 2022.

2020-004-Eligibility (Dual Participation)-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 10.567 U.S. Department of Agriculture - Food 7AZ430NA4 10/1/19 - 9/30/20 Distribution Program on Indian Reservations Criteria: In accordance with 7 CFR ? 253.7, prohibition on dual participation, no household shall be allowed to participate simultaneously in the Food Stamp Program and Food Distribution Program (FDP). The programs shall inform each applicant household of this prohibition and shall develop a method to detect dual participation. The method developed by the programs shall, at a minimum, employ lists of currently certified households provided by and provided to the appropriate food stamp agency on a monthly basis. The program may also employ computer checks, address checks, and telephone calls to prevent dual participation. The program shall coordinate with the appropriate food stamp agency or agencies in developing controls for dual participation. Additionally, 2 CFR ? 200.303 requires the recipient of federal funds to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 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/Context: We obtained a list of participants in the program for each food distribution warehouse operated by the Nation. The total participants in the program were 9,132 and we selected a sample of 40 for testing. Although the program staff received participant reports to detect dual participation, for the 40 participants we reviewed, the FDP staff do not have a method in place to monitor dual participation at least on a monthly basis as required by 7 CFR 253.7. For all households certified prior to the final month of the fiscal year, no evidence of monthly monitoring for dual participation existed. Cause: The Nation has met with the federal officials in Arizona, New Mexico, and Utah and has been unable to properly share data to ensure compliance with these federal requirements. The Nation has concerns sharing protected personal information between the local food stamp agency or agencies and the Nation. Therefore, the program has not established a process between the program and local food stamp agency or agencies to check for dual participation on a monthly basis during the fiscal year 2020. Effect: The program is not preventing duplicate benefits of the program participants, and therefore, is not in compliance with the eligibility requirements. Questioned costs: Questioned costs were not determinable as we were not able to determine whether or not participants received dual benefits. Repeat finding: This finding is a repeat of findings 2019-003 and 2018-002 from the prior year schedules of findings and questioned costs. Auditor?s recommendation: We recommend that the program implement a process to employ lists of currently certified households and provide them to state agencies within the states of New Mexico, Arizona, and Utah in order to detect dual participation on a monthly basis. The program should also implement internal controls to ensure that these lists are provided to the states at least monthly. Further, the program should maintain documented evidence of the details used to generate these reports and also document the review of such reports for all enrolled participants throughout the year. Views of responsible officials and planned corrective action: The Navajo Food Distribution Program (NFDP) shall implement the following planned corrective action to resolve the finding: Action Type Duties Responsible Persons Discuss the Coordinate a call with the State of New Mexico, Arizona, Program Manager Process to Employ and Utah to discuss a process to share certified Lists household information to detect dual participation. Develop a Process NFDP and States to agree on a method to share certified Program Manager to Employ Lists household information to detect dual participation. Submitting list of Each location will submit a list of clients to the Staff clients office. Aggregating list of Central office will aggregate on a monthly basis. Central Office clients Documenting Document transactions via secure file transfer or other Central Office Submissions methods to the state offices Review Enrolled Staff will review enrolled participants and select a Supervisors Participants random sample. The Executive Director of the Navajo Department of Health is responsible to ensure the planned corrective action is fully achieved by September 30, 2021. Furthermore, the Executive Director of the Navajo Department of Health shall ensure the development and implementation of policies and procedures regarding participant eligibility according to 42 CFR ? 136.12 by February 17, 2022.

2020-005-Eligibility-Material Weakness in Internal Controls Over Compliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 15.020 U.S. Department of the Interior - Aid to A19AV00373 01/01/2019 - Tribal Governments 12/31/2021 Criteria: In accordance with the Navajo Nation COVID-19 Burial Assistance Guidelines and the Navajo Nation Division of Social Services? Protocol for Financial Services (Policy), the determination of eligibility is a continuous process, which includes all activities, related to an application, from the applicant's first request to receive financial assistance to closure of services. The eligibility determination process is completed for each applicant to determine that all the specific eligibility criteria provided in requested contracted service is met. To be eligible the applicant must fully meet each of the eligibility conditions in this policy. Condition/Context: Using a random sample methodology, we selected a sample of 20 from 142 participant files to verify eligibility and recalculate benefits in accordance with the policy. We found that in two of the 20 participants selections, although the participant file contained all documentation to verify eligibility and recalculate benefits in accordance with the policy, the approval did not occur until after financial assistance was provided to the individual and the transaction was recorded in the accounting system. Cause: The Nation does not have sufficient controls implemented to appropriately review and monitor eligibility controls and compliance requirements and ensure amounts were properly recorded in the general ledger. Effect: Without strong internal controls over participant eligibility, ineligible participants may benefit from federally funded programs. Despite the lack of internal controls over eligibility, no participants were found to be ineligible in our audit. Questioned costs: As an internal control finding there were no reportable instances of questioned costs. Repeat finding: This finding is not a repeat finding. Auditor?s recommendation: Participant files should be properly maintained and eligibility determinations, made in accordance with the policy, should be reviewed and approved to ensure all participants are eligible and benefits paid were appropriate. Views of responsible officials and planned corrective action: The Division of Human Resources (DHR) and the Navajo Division of Social Services (NDSS) shall implement the following to resolve the finding: NOVRI Goal and Activity The Navajo Office of Vital Records and Identification (NOVRI) / DHR will review applications or similar documents and return documents which are not approved by signature by the proper approval authority at the NDSS or any other program receiving funds managed by NOVRI. As a crosscutting finding, NOVRI will coordinate with programs receiving funds to clarify the process on who is the proper approval authority and to review where approval signatures are located on applications. Further, NOVRI will communicate on adhering to other program?s procedures and requirements on how to properly prepare financial documents and applications. NDSS Goal and Activity The NDSS established an internal control system for separation of duties and responsibilities. One staff prepares the financial packets and two other staff review for completeness and accuracy to ensure approval signatures are obtained prior to submitting the documents for payment. The Division Directors for DHR and NDSS are responsible to ensure the planned corrective action is fully achieved by September 30, 2021.

2020-006-Earmarking-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 93.575 U.S. Department of Health and Human G-18PGAZCCDF 10/01/2017 - Services - CCDF Cluster 09/30/2020 93.596 G-19PGAZCCDF 10/01/2018 - 09/30/2021 Criteria: In accordance with 45 CFR ?98.83 (a), administrative earmarking requirements for the Child Care and Development Fund, ?not more than 15 percent of the aggregate CCDF funds expended by the Tribal Lead Agency from each fiscal year?s shall be expended for administrative activities.? Per 45 CFR ?98.54 these activities may include, ?salaries and related cost of the staff of the Lead Agency or other agencies engaged in the administration and implementation of the program,? including ?indirect costs as determined by an indirect cost agreement or cost allocation plan.? In addition, in accordance with 45 CFR ?98.83 (g), ?of the aggregated amount of funds expended, not less than eight percent in fiscal year 2020 [?] shall be used for activities designed to improve the quality of child care services and increase parental options for, and access to high-quality child care? and ?no less than three percent in fiscal year 2019 and each succeeding fiscal year shall be used to carry out activities at ?98.53 (a)(4) as such activities relate to the quality of care for infants and toddlers.? Condition/Context: During our review of the total expenditures for the CCDF Cluster to ensure compliance with the earmarking requirements, we found the following based on our calculations: ? For the 15% administrative cap earmarking requirement for fiscal year 2020 o Grant G-18PGAZCCDF exceeded the administrative cap by $1,010,768 (Total administrative expenditures incurred of $2,542,377 exceeded the administrative cap of $1,531,609) o Grant G-19PGAZCCDF exceeded the administrative cap by $761,282 (Total administrative expenditures incurred of $2,200,909 exceeded the administrative cap of $1,439,627) ? For the 8% quality of care earmarking requirement, grant G-19PGAZCCDF did not meet the requirement by $226,314 (Minimum qualify of care expenditures of $767,801 were required to be met but the program only spent $541,488) ? In order to meet the 3% quality of care for infants and toddlers earmarking requirement o Grant G-18PGAZCCDF did not meet the requirement by $277,609 (Minimum qualify of care for infants and toddlers? expenditures of $306,322 were required to be met but the program only spent $28,713) o Grant G-19PGAZCCDF did not meet the requirement by $258,052 (Minimum qualify of care for infants and toddlers? expenditures of $287,925 were required to be met but the program only spent $29,873) Questioned costs: Although the quality of care and quality of care for infants and toddlers earmarking requirements did not result in an overcharge or questioned costs for the program, the program exceeded its 15% administrative by $1,772,050 resulting in questioned costs of September 30, 2020. Cause: The Nation was following a long-established policy to apply the full approved indirect cost rate percentage to the program. However, the 2020 indirect cost rate increased by approximately 2% to 18.7% from the 2018 and 2019 percentages of 15.5% and 15.85%, respectively. This caused the Nation to significantly exceed the administrative earmark for the program. Effect: The Nation did not meet its targeted earmarking requirements for the program. Repeat finding: This finding is not a repeat finding. Auditor?s recommendation: We recommend the Nation develop and implement a system for tracking earmarking compliance requirements for the CCDF Cluster. The program?s compliance with the earmarking requirements should be reviewed on at least an annual basis and if it appears the earmarking requirements will not be met, apply for a waiver from the funding agency. Views of responsible officials and planned corrective action: The Navajo Division of Social Services (NDSS), Department of Child Care and Development (DCCD) shall implement the following planned corrective action to resolve the finding: Tasks Responsible Person Timeline 1. Schedule a meeting with the Region iX Child Care NDSS Executvie Director August 31, 2021 Finance Specialist to address the 15% administrative cap Department Manager III requirement. Office of the Controller 2. Meet with assigned Accountant from the Navajo Nation NDSS Executive Director August 31, 2021 Contract Accounting Section to develop a system for Department Manager III tracking earmarking requirements. 3. Request supplemental appropriation in the amount of NDSS Executive Director September 30,2021 $1,772,049 for exceeding the administrative cap. Department Manager III 4. DCCD initiated dialouge with the funding source the in NDSS Executive Director July 2, 2021 June 2021. A draft letter was submitted to the Region IX Department Manager III * Approval letter Program Specialists for review. Finalized letter was was received 8/6/2021 signed by President Nez and sent to funding agency July 13, 2021. 5. Develop and implement a process to code expenditures NDSS Executive Director August 31, 2021 to ensure proper use and tracking of quality and infant Department Manager III toddler funds. Office of the Controller The Division Director of NDSS is responsible to ensure the planned corrective action is fully achieved by September 30, 2021.

2020-007-Eligibility-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 15.025 U.S. Department of the Interior - Services A16AV00385 01/01/2016 - to Indian Children, Elderly, and Families 12/31/2020 Criteria: In accordance with the Navajo Nation Division of Social Services? Protocol for Financial Services (the ?Policy?), the determination of eligibility is a continuous process, which includes all activities, related to an application, from the applicant's first request to receive financial assistance to closure of services. The eligibility determination process is completed for each applicant to determine that all the specific eligibility criteria provided in requested contracted service is met. To be eligible the applicant must fully meet each of the eligibility conditions in this Policy. Condition/Context: We randomly selected 40 participant files to verify eligibility and recalculate benefits in accordance with the policy and found the following: ? The Guardianship Agreements and/or the Application for Department of Family Services in three participant files were not reviewed and approved by the NDSS Supervisor to determine the individual was eligible to receive services and benefits for the selected check date. ? The benefits paid to five individuals were unable to be recalculated using the approved Family Foster Home Care Rates and Fees Schedule. ? The Guardianship Agreement and/or the Application for Department of Family Services for one participant had expired prior to the check date of the benefit to the participant. The Nation was unable to provide any additional agreements or recertifications that would be in effect for the check date. ? A Guardianship Agreement and/or an Application for Department of Family Services for one participant was not completed. Cause: The Nation did not maintain proper support to ensure participant benefits were calculated properly. Effect: The participant may be ineligible for the program or their benefits may be calculated inappropriately. Questioned costs: Likely questioned costs of $318,260 (based on known questioned costs of $3,269 divided by our total sample for foster care benefits of $24,988; that percentage is then multiplied against the population of foster care benefit expenditures of $2,432,824). Repeat finding: This finding is a repeat of finding 2019-007 from the prior year schedule of findings and questioned costs. Auditor?s recommendation: Participant files should be properly maintained, and eligibility should be determined continuously in accordance with the Policy to ensure all participants are eligible and benefits paid were appropriate. Views of responsible officials and planned corrective action: The Navajo Division of Social Services (NDSS), Department of Family Services (DFS) shall implement the following planned corrective action to resolve the finding: Goal: DFS will complete at least 60 foster care and Title IV-E combined case reviews per month. Activity: Department field supervisors will coordinate with caseworkers to ensure cases are up to date by conducting monthly case reviews. This will be a continuation of the monthly case reviews that was implemented effective April 2021. The Division Director for NDSS is responsible to ensure the planned corrective action is fully achieved by September 30, 2021.

2020-008-Special Tests and provision (Prevailing Wage Rates)-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 15.037 U.S. Department of the Interior - Water A12AV01292 1/1/2015 - Resources on Indian Lands A12AV01296 12/31/2019 A13AV00193 A15AV00083 2/27/2019 - A16AV00710 12/31/2024 A17AV00180 A18AV00338 Criteria: The Davis-Bacon Act (the ?Act?) and related regulations require that federal grantees include certain construction contracts a requirement that the contractor or subcontractors comply with the requirement of the Act and related Department of Labor (DOL) regulations to pay employees based on the DOL?s published prevailing wages. In addition, grantees must monitor contractors? compliance with the Act, including obtaining copies of certified payroll reports, to verify that the required prevailing wage rates were paid to workers. Condition/Context: For one contractor reviewed that entered into two construction contracts with the program, the two contracts did not include language requiring the contractor to comply with the Act?s prevailing wage requirement. Although the program received payroll reports from the contractor at the end of the projects, there was no evidence that the program adequately reviewed and approved the submitted certified payrolls timely during the course of the projects to ensure the contractor was in compliance with the Act. Cause: The program does not appear to have controls in place to ensure the Act requirement was adhered to by the contractor. Effect: For one contractor, their two construction contracts with the program did not include the required language to ensure compliance with the Act. As a result, the program is not in compliance with these federal requirements. Without proper monitoring, there is a risk that contractors may not be following prevailing wage requirements. Questioned costs: Questioned costs were not determinable. Repeat finding: This is not a repeat finding. Auditor?s recommendation: Provide training to staff to understand the key federal requirements of the grant and to ensure contractors are properly monitored for compliance. The Nation should implement and enforce policies requiring the review of certified weekly payroll reports on a timely basis for all applicable contractors. Views of responsible officials and planned corrective action: The Department of Water Resources (DWR) of Division of Water Resources (DNR) shall implement the following planned corrective action to resolve the finding: 1. By August 31, 2021, the DWR will identify any existing open construction contracts paid for by Public Law 93-638 Subpart J Contract funds and DWR management will identify the staff responsible for monitoring the subcontract. Any open construction contracts paid for by Public Law 93-638 Subpart J Contract funds will have certified payrolls reviewed on a bi-weekly basis by DWR management. 2. By September 30, 2021, any open construction contracts paid for by Public Law 93-638 Subpart J Contract funds will have an amendment put into the 164 Review process that states the subcontractor will use of wages at not less than those prevailing on similar construction in the locality, as determined by the Government of Labor in accordance with Davis-Bacon Act of March 3, 1931 (46 Stat. 1494), as amended. 3. Any new Subpart J construction subcontracts will be reviewed by DWR management and DNR Division Director as ensure the subcontract include language on use of wages not less than those prevailing on similar construction and such verified during the 164 Review process. 4. The DWR will identify training on Public Law 93-638 Subpart J Construction Contract training by September 30, 202 and DWR staff attend such. The Division Director of the Division of Natural Resources is responsible to ensure the planned corrective action is fully achieved by September 30, 2021.

2020-009-Allowable Costs-Material Weakness in Internal Controls Over Compliance and Instance of Material Noncompliance CFDA Federal Agency/Pass-through Entity- Number Program Name Award Number Award Year 21.019 U.S. Department of Treasury- SocSec Act 2020 Coronavirus Relief Fund S601(a) S5001 CARES Criteria: CARES Act, Pub. L. No. 116-136, Division A, Title V (2020) requires that the Coronavirus Relief Fund monies must be used to cover costs that are: 1. Necessary expenditures incurred due to the public health emergency with respect to COVID-19; 2. Not accounted for in the governments? most recently approved as of March 27, 2020; and 3. Incurred during the period that begins on March 1, 2020 and ends on December 30, 2020. Additionally, 2 CFR ? 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition/Context: The Nation?s Payroll Support Program paid out of the Coronavirus Relief Program Funds were used to charge employee time related to the public health emergency and for payroll costs incurred for employees who were unable to work as a result of the Nation?s stay at home order. We randomly selected 40 employees receiving pay from the Nation?s Payroll Support Program to verify that the employee?s time was related to the public health emergency or for employees who were unable to work. We found that one employee?s holiday pay was charged to the program although the employee was working. Cause: The Nation did not properly allocate costs to the grant for allowable payroll costs. During the Nation?s review process of costs to charge to the program, management evaluated the costs on a department level rather than the employee level. Specifically, management took into consideration the departments that were considered essential and which departments were subject to stay at home orders and therefore, made the determination to charge holiday pay to the grants based on this analysis. Effect: The federal program was overcharged. Questioned costs: Likely questioned costs of $141,187 (based on known questioned costs of $167 divided by our total sample for the program of $49,488; that percentage is then multiplied against the population for the Payroll Support Program expenditures of $41,748,472.) Repeat finding: This finding is not a repeat finding. Auditor?s recommendation: We recommend the Nation ensure that costs charged to grant are allowable and in accordance with grant requirements. Views of responsible officials and planned corrective action: The Office of the Controller (OOC), Payroll Section, did not make the determinations as to which department would stay home or determine which employee would be deemed essential personnel during the start of the pandemic. These factors were decided at the departmental level. An analysis was performed by the Payroll Section to evaluate the administrative pay and associated benefits that would be charged to the payroll support program within the CARES Act. Payroll expense was reviewed for the period of time the Nation was closed, which was March 2020 through August 2020, and the identified expense was charged to the payroll support program. In addition, holiday pay for those individuals on administrative pay was evaluated. For any employee that had a significant amount of administrative pay, the holiday pay was also charged to the payroll support program. The Payroll Section's review did not take into account each payroll cycle; instead, it encompassed the review of the total period. The review performed was deemed appropriate by management based on the process of determining essential personnel at the departmental level. The allocated CARES Act funds for the payroll support program was exhausted as of September 30, 2020. The OOC will continue to evaluate expenses in accordance with Section 601(d) of the Social Security Act, as added by section 5001 of the CARES Act. The Controller of the Nation?s Office of the Controller is responsible to ensure the planned corrective action is fully achieved by September 30, 2021.