State of Alaska

Finding No. 2025-010 Federal Awarding Agency: General Services Administration (GSA) Impact: Significant Deficiency AL Number and Title: 39.003 Donation of Federal Surplus Personal Property Federal Award Number: Not Applicable Applicable Compliance Requirement: Eligibility Condition: Internal controls to ensure applicants were eligible to receive donations of federal surplus personal property were not consistently applied. Context: Testing a random sample of seven out of 35 donee applications received during FY 25 identified two for which Alaska State Agency for Surplus Property (AKSASP) staff did not follow established application approval procedures. The approval procedures required one employee process and review an application with a different employee responsible for secondary review and approval, both signing the application accordingly. One of the errored applications was not signed by AKSASP staff. The other errored application was signed by the AKSASP secondary reviewer; however, the secondary reviewer’s signature and the approval letter issued to the applicant were both dated prior to the signature of the initial AKSASP application processor and reviewer. Cause: The audit found a lack of AKSASP training regarding the importance of implementing and following internal control processes for managing the Donation of Federal Surplus Personal Property program. Criteria: Title 41 CFR 102-37.385 gives AKSASP the responsibility for determining applicant eligibility to participate in the program. Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. These internal controls should be in compliance with guidance in “Standards for Internal Control in 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). Effect: Without proper controls, ineligible applicants may be approved to participate in the program and receive federal surplus property. Questioned Costs: None Recommendation: DOA’s State Property Manager should provide training to AKSASP staff regarding the importance of, and requirements for, maintaining a proper system of internal control over processing applications for program eligibility. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-011 Federal Awarding Agency: GSA Impact: Significant Deficiency AL Number and Title: 39.003 Donation of Federal Surplus Personal Property Federal Award Number: Not Applicable Applicable Compliance Requirement: Reporting Condition: AKSASP lacked internal controls for the preparation and submission of the quarterly GSA 3040 State Agency Monthly Donation Report of Surplus Personal Property. Context: The GSA 3040 report is required to be submitted on a quarterly basis reporting federal receipts and donated surplus property amounts. The report provides information on what types of donees received federal surplus property. The reporting process implemented by AKSASP is completed by a single individual with no oversight or secondary review to ensure accurate reporting. Cause: AKSASP staff had not received training on the requirements to implement effective internal controls over federal program operations to ensure compliance with program requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. These internal controls should be in compliance with guidance in “Standards for Internal Control in Federal Government,” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by COSO. Effect: Without adequate internal controls, inaccurate reports may be submitted thereby reducing the federal oversight agency’s ability to adequately manage the program. Questioned Costs: None Recommendation: DOA’s State Property Manager should develop and implement internal controls over the preparation and submission of GSA 3040 reports. Furthermore, management should provide training to AKSASP staff on the importance of, and requirements for, maintaining a proper system of internal control over federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-012 Federal Awarding Agency: GSA Impact: Material Weakness, Material Noncompliance AL Number and Title: 39.003 Donation of Federal Surplus Personal Property Federal Award Number: Not Applicable Applicable Compliance Requirement: Special Tests and Provisions Condition: AKSASP staff did not conduct an annual inventory of federal surplus personal property. Context: Completing an inventory is necessary to ensure accurate records of surplus inventory. Cause: According to the agency, the state property warehouse experienced staffing shortages and prioritized available staff resources for receiving and distributing property, which delayed completion of an annual inventory in FY 25. In addition, there were no significant internal controls implemented to ensure an annual inventory was conducted in accordance with the State Plan of Operation. Criteria: AKSASP must have a State Plan of Operation approved by the GSA to comply with Title 41 CFR 102-37.135. Alaska’s State Plan of Operation includes a requirement to conduct at least one complete inventory each fiscal year of all material in possession of the AKSASP. Effect: Failure to conduct an inventory at least annually increases risk for inventory mismanagement, improper record keeping, and theft of surplus property. In addition, unrecorded inventory may not be made available to eligible recipients for donation. Questioned Costs: None Recommendation: DOA’s State Property Manager should allocate sufficient resources to conduct an inventory of federal surplus property and implement internal controls to ensure an inventory is completed at least annually. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-013 Federal Awarding Agency: GSA Impact: Material Weakness, Material Noncompliance AL Number and Title: 39.003 Donation of Federal Surplus Personal Property Federal Award Number: Not Applicable Applicable Compliance Requirement: Special Tests and Provisions Condition: In FY 25, AKSASP did not consistently conduct required utilization reviews for donated property to ensure the property was being used in compliance with the terms and conditions of the donation. Context: Testing a random sample of 24 donated items requiring a utilization review identified five items were not reviewed, or not reviewed timely, and one item was not put into service by the donee and AKSASP staff did not take action to resolve donee noncompliance. Cause: AKSASP staff did not receive training on the requirements to implement effective internal controls over federal program operations to ensure compliance with program requirements. Additionally, there were no significant internal controls implemented to ensure utilization reviews were conducted in accordance with the State Plan of Operation. Criteria: AKSASP must have a State Plan of Operation approved by the GSA in accordance with 41 CFR 102-37.135. Alaska’s State Plan of Operation includes a requirement to conduct utilization reviews of all donated assets with a federal acquisition value of $5,000 or greater. Effect: Failure to conduct utilization reviews in accordance with the State Plan may result in the misuse of federal assets, or abuse of the donation program going undetected. Questioned Costs: None Recommendation: DOA’s State Property Manager should develop and implement procedures and improve staff training to ensure compliance with performance of property utilization reviews. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-023 Federal Awarding Agency U.S. Department of Education Impact: Significant Deficiency AL Number and Title: 84.027, 84.173 Special Education Cluster Federal Award Number: H173A240019, H027A240016 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: The Coordinated Early Intervening Services (CEIS) budgets for two Local Education Agencies (LEA) exceeded the allowable federal limit. Context: The federal Individuals with Disabilities Education Act allows LEAs to use Special Education Cluster funds to provide CEIS services to K-12 students to reduce the need for special education services. LEAs identified by DEED as having significant disproportionality in the identification, placement, or discipline of students with disabilities are required to reserve the maximum allowable amount of funds to provide CEIS services to address factors contributing to the significant disproportionality. The maximum allowable amount for CEIS services is 15 percent of the Special Education allocation. In accordance with Title 34 CFR 300.646, DEED staff conducts an annual review of LEA data to determine whether significant disproportionality exists. Two LEAs were identified as having significant disproportionality in FY 25. DEED management has implemented budgetary controls in the Grant Management System (GMS) to ensure compliance with Special Education Cluster earmarking requirements. DEED program staff perform an initial review of the LEA’s requested CEIS amounts. A separate individual performs a final review and approves the LEA budget in GMS. LEA reimbursement requests are approved by DEED grant staff based on the budget established in GMS. The audit found that both LEAs with significant disproportionality in FY 25 had GMS budgets that exceeded 15 percent of the Special Education allocation; one by $876 and one by $34,358. Cause: For the two LEAs in question, DEED grant staff incorrectly used FY 24 budget data to calculate the FY 25 CEIS budget 15 percent limit which caused the CEIS budgets in GMS to exceed the maximum allowable amounts. DEED management’s review procedures over the setup of LEA CEIS budgets were not sufficient to prevent or detect the errors. Criteria: Title 34 CFR 300.226 requires an LEA to reserve no more than 15 percent of their Special Education Cluster allocation to provide CEIS services. Per 2 CFR 200.303(a), the State is required to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per 34 CFR 300.646(d) the State shall require any LEA identified with significant disproportionality to reserve the maximum amount of funds to provide CEIS services to address factors contributing to the significant disproportionality. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable due to LEAs exceeding the federally set CEIS limit, or may result in LEAs identified as having significant disproportionality to budget for the wrong CEIS amount. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action including adding reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DEED's Innovation and Education Excellence director should update procedures to ensure LEA CEIS budgets comply with federal earmarking requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-026 Federal Awarding Agency: U.S. Department of Treasury (US Treasury) Impact: Significant Deficiency AL Number and Title: 21.029 Coronavirus Capital Projects Fund (CCPF) – COVID-19 Federal Award Number: CPFFN0180 Applicable Compliance Requirement: Reporting Condition: During FY 25, DCCED did not have procedures for the preparation and submission of reports under the Federal Funding Accountability and Transparency Act (FFATA) for CCPF subrecipients. Context: FFATA mandates that information on federal awards be publicly accessible through a single, searchable website: www.usaspending.gov. The reporting process implemented by DCCED was completed by a single individual without procedures to ensure accurate reporting. Cause: DCCED staff were unsure as to why procedures were not created for FFATA reporting and stated that staff turnover was a contributing factor. Criteria: Per 2 CFR 200.303(a), the State is required to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Without procedures, inaccurate reports may be submitted thereby reducing the federal oversight agency’s ability to adequately manage the program. Questioned Costs: None Recommendation: DCCED’s Division of Community and Regional Affairs (DCRA) director should develop and implement procedures for the preparation and submission of FFATA reports. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-027 Federal Awarding Agency: US Treasury Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.029 CCPF – COVID-19 Federal Award Number: CPFFN0180 Applicable Compliance Requirement: Reporting Condition: For two of two CCPF 2025 Quarterly Obligations and Expenditure Reports reviewed, key line items for current period obligation and current period expenditures were inaccurate, and actual square footage of completed projects was unsupported. Context: CCPF reporting requirements mandate that subrecipients submit Quarterly Obligations and Expenditure Reports. These reports must be supported by adequate documentation. Support was not available for the reported actual square footage of completed projects on both quarterly reports. In addition, current period obligations and current period expenditures were inaccurate for multiple projects on both quarterly reports. Cause: Due to human error and staff turnover, DCCED lacked written procedures on CCPF reporting and documentation requirements. Criteria: Per 31 CFR 35.4, recipients must provide periodic reports to the Secretary or her delegate detailing the use of funds and other requested information necessary for program administration. Per 2 CFR 200.303(a), the State is required to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Inaccurate reporting may reduce the federal oversight agency’s ability to adequately manage the program. Questioned Costs: None Recommendation: DCRA’s director should implement procedures to ensure the accurate reporting of Quarterly Obligations and Expenditure Reports and submit corrected reports. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-028 Federal Awarding Agency: U.S. Environmental Protection Agency (EPA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 66.202 Congressionally Mandated Projects (CMP) Federal Award Number: 02J80201 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: One of 10 employee timesheets tested did not support the charges billed to the CMP program. Context: DCCED staff log work hours on timesheets, which includes coding personal service costs to the Rural Utility Business Advisor (RUBA) program . Of the 10 timesheets tested, one timesheet indicated that only a portion of time worked was chargeable to RUBA; however, 100 percent of the employee's time was erroneously charged to the program. Cause: According to DCCED management, the unsupported charges were due to a data entry error. The data entry error was not detected by payroll processing staff due to insufficient review procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 200.430(g)(1) states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; and support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Effect: Insufficient payroll processing controls increase the risk of noncompliance and unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including reducing/terminating federal funding. Questioned Costs: $2,273 Recommendation: DCCED’s DCRA director should strengthen timesheet processing, review, and approval procedures to ensure personal service costs charged to CMP are accurate and allowable. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-030 Prior Audit Finding: 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disaster) (Disaster Grants) 97.036 Disaster Grants – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4672DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 17 FY 25 Disaster Grants payments found that 15 payments (88 percent) lacked adequate supporting documentation. Context: FEMA provides public assistance funding to states for federally declared disaster mitigation and response. To be allowable under the Disaster Grants program, costs must be directly tied to the performance of eligible work, adequately documented, and necessary and reasonable to accomplish the work properly and efficiently. DMVA issues subawards to eligible applicants, including not-for-profits and local governments, and transfers funds to other State departments for disaster response. The State (DMVA) and Disaster Grants subrecipients may contract for services but must meet state and federal procurement requirements when doing so. Contracts must include the procurement provisions detailed in Title 2 CFR 200.327. Furthermore, contractors’ performance must be monitored to ensure compliance with the contract conditions. According to management within DMVA’s Division of Homeland Security and Emergency Management (DHSEM), due to the high number of State disasters and a lack of staff resources, DMVA hired contractors to help oversee the federal disaster projects by performing administrative duties typically conducted by DHSEM staff, including reviewing and approving subrecipient applications for funding, obtaining the required documents to ensure projects were administered in accordance with FEMA requirements, and processing subrecipient payment requests. There were 327 Disaster Grants payments totaling $325,318,285 during FY 25. The audit tested 17 Disaster Grant payments totaling $188,888,098, of which 15 were inadequately unsupported. Specifically, 11 payments were partially supported by procurement contracts that did not include all federal requirements and four were not fully supported by complete or signed contracts. Other errors included: one payment contained amounts for an unrelated project; five payments were not fully supported by invoices; one payment included a markup on a subcontractor’s work; one included an advance payment that lacked required supporting documentation; one payment included a completion bonus; and several payments were not identified as allowable costs in the approved project worksheets. Cause: Due to competing priorities and inadequate supervisory review procedures, DHSEM staff and contractors did not verify that the contracts issued by subrecipients included federal requirements and that documentation for the reimbursement of subrecipient costs was received. Furthermore, contracts for interagency projects were not obtained by DMVA staff or contractors to verify that the costs were within the contract scope or that the contracts included all federal requirements. The audit noted that Department of Health and Social Services (DHSS) submitted a signed Contract/Procurement Review Waiver declining to submit documentation to DMVA for review with the understanding that DHSS would assume all responsibility for the procurement and contracts. DHSEM contractors accepted the waiver and did no monitoring to ensure contracts complied with appropriate procurement processes and included all federally required clauses. Lack of adequate review of the payment requests and supporting documentation, including supervisory review, resulted in payments without adequate invoices or other source documentation. Lack of adequate project oversight resulted in a subrecipient not providing supporting documentation within the 60-day timeline for advance payments. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), which requires Disaster Grants contracts to include the procurement related provisions of Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses. PAPPG also requires costs to be adequately documented and directly tied to the performance of eligible work. Further, the PAPPG states that FEMA does not reimburse costs incurred under a cost plus a percent of cost contract. Annually, DHSEM management updates the State Administrative Plan for the federal disaster assistance program, which is a required document in each federally approved FEMA-State Agreement for presidentially declared disasters. The purpose of the plan is to identify the State’s roles, responsibilities, processes and procedures for administering FEMA’s Disaster Grants program. The plan requires DHSEM staff to obtain documentation to support all costs claimed and to perform a thorough review to ensure compliance with programmatic and eligibility requirements. The plan also outlines the requirements for advancing FEMA funds to a subrecipient; specifically, the subrecipient must report on the status of advance funds within 30 days of receipt and has up to 60 days to provide the appropriate summary forms and support cost documentation, i.e, invoices, timesheets, etc. If the summary forms and supporting documentation are not received within the time limits, the Plan requires that the State de-obligate remaining funds, recoup advance funds, and close the subrecipient’s project file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DMVA’s DHSEM director should strengthen written procedures to ensure Disaster Grants contracts are obtained and reviewed for compliance with federal requirements. Furthermore, supervisory review procedures should be strengthened to ensure DHSEM staff and contractors obtain and review cost documentation to ensure subrecipient payment requests are allowable for the project and adequately supported. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-031 Prior Audit Finding: 2024-037 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants 97.036 Disaster Grants – COVID-19 Federal Award Number: 4533DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of 21 FY 25 Disaster Grants subrecipient obligating award documents (OAD) found that three did not include an accurate unique entity identifier (UEI) that matched the subrecipient’s name and one did not provide a UEI. Context: DMVA enters into awards with subrecipients using the OAD as the subgrant agreement. The subrecipient’s name and UEI are recorded on the OAD. An assurances and agreement form accompanies the OAD that includes additional federal requirements not included in the OAD. Subrecipients sign the OAD and the assurances and agreement forms certifying and agreeing to the federal requirements. According to DHSEM management, due to the high number of State disasters and a lack of staff resources, contractors were hired to help evaluate applicant eligibility, make subawards, conduct risk assessments, and monitor accordingly. The audit reviewed a random sample of 20 of 100 subrecipient OADs and one judgmentally selected OAD, including assurances and agreement forms, and found two OADs for one subrecipient in which the subrecipient’s name did not match the name associated with the UEI number provided; one OAD reported a UEI number that did not match the name and address when verified with the federal reporting website; and one OAD did not include a UEI number. Cause: According to DHSEM management, due to competing priorities and inadequate supervisory review procedures, DHSEM staff and contractors did not ensure subrecipient’s OADs included a UEI number or an accurate UEI number. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 200.332 requires pass-through entities ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required information at the time of the subaward. Required information includes the subrecipient’s name, which must match the name associated with the subrecipient’s UEI. Effect: Not providing the UEI number or correct UEI number hampers subaward reporting and may impact federal oversight of the Disaster Grants program. Questioned Costs: None Recommendation: DMVA’s DHSEM director should strengthen review procedures to adequately monitor contractors to ensure subrecipient information in award documents is accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-032 Prior Audit Finding: 2024-038 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants Federal Award Number: 4413DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one Disaster Grants subrecipient’s single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the findings. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipients single audit contained a finding and DMVA management did not issue a management decision. The finding related to a subrecipient lacking evidence that a secondary review was conducted by an individual other than the preparer for required reports. Cause: DMVA had controls to ensure a management decision was issued on a subrecipient's single audit finding. However, DMVA’s procedures were insufficient to identify subrecipient’s findings requiring follow-up. DMVA staff stated that information reported on the Summary of Items for Follow-up document, provided by the Department of Administration, Division of Finance, did not specify that DMVA should follow up on the finding; therefore, no management decision was issued. However, the audit determined DMVA misinterpreted the information provided by the Division of Finance. Criteria: Title 2 CFR 200.521 requires the State to issue a management decision for audit findings that affect subawards it issues to subrecipients under a federal award. Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Effect: The lack of a management decision may result in a subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s DAS director should strengthen procedures to ensure findings requiring follow-up are identified and management decisions are issued within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-033 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants 97.036 Disaster Grants – COVID-19 Federal Award Number: 4533DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA staff did not document a risk assessment for two Disaster Grants subrecipients. Context: DMVA receives funding applications from state, local, tribal, and private not-for-profit entities once a disaster has been presidentially declared. Prior to entering into an agreement with an applicant, DHSEM staff perform a risk assessment of the applicant to determine the extent of subrecipient monitoring. DHSEM staff evaluate the applicant by completing a risk assessment checklist, and apply safeguards if the subrecipient is considered high risk. DHSEM staff also complete a payment request checklist, prior to making subrecipient payments to confirm that risk assessments have been performed. According to DHSEM management, due to the high number of State disasters and a lack of staff resources, contractors were hired to help evaluate applicant eligibility, make subawards, conduct risk assessments, and monitor accordingly. The audit reviewed a random sample of eight of 47 subrecipients. One of the eight subrecipients did not have a risk assessment. During allowable cost testing, one additional subrecipient was identified that did not have risk assessment performed. Cause: Due to competing priorities and inadequate supervisory review procedures, DHSEM staff and contractors did not consistently obtain risk assessments and DHSEM management did not adequately monitor contractors to ensure risk assessments were performed. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 200.332(c) requires the State to assess each subrecipient’s risk of noncompliance to determine the appropriate subrecipient monitoring. Effect: The lack of risk assessments may lead to inadequate monitoring of subrecipients increasing the risk of unallowable use of federal funds. Questioned Costs: None Recommendation: DMVA’s DHSEM director should strengthen supervisory review procedures to adequately monitor contractors and ensure risk assessments are performed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-034 Prior Audit Finding 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants 97.036 Disaster Grants – COVID-19 Federal Award Number: 4351DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Three of seven randomly selected FY 25 Disaster Grants SF-425 reports tested had the following errors: one reported incorrect recipient share required and two reported incorrect federal share of expenditures and incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting on the financial status of federal grant awards. During FY 25, 16 disasters required quarterly SF-425 reports for a total of 64 reports filed. Seven of the 64 were selected for testing. The federal share and matching amounts for two reports were overstated and one understated total recipient share required as shown below. Cause: During FY 25, FEMA transitioned to a new grants management system. According to DMVA management, DMVA staff followed procedures to use the data in the old FEMA management system without performing any follow-up on discrepancies in previously reported amounts. Furthermore, DMVA reporting procedures were not updated to incorporate FEMA’s new grants management system for preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's DAS director should update written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-035 Prior Audit Finding: 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants Federal Award Number: 4585DRAKP00000001, 4646DRAK000000001, 4672DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Eight of 70 FY 25 subawards tested were not filed timely in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System . An additional 32 subawards requiring FFATA reporting were not filed. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA reporting tool is available for federal awardees, such as the State of Alaska, to report first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants management obtain subawardee information from the OAD. The OAD is sent to DAS staff for data entry into the FFATA reporting tool. There were 70 Disaster Grants subawards totaling $54,169,139 that were subject to FFATA reporting during FY 25. The audit reviewed eight randomly selected subawards, totaling $1,813,371, for compliance and internal controls testing of FFATA reporting requirements. FFATA reports for all eight subawards were not filed timely. Further, the audit reviewed all 70 subawards and found 32 totaling $28,396,662 were not reported at all Cause: Staff turnover and vacancies contributed to the untimely filing of reports and reports not being filed. Supervisory review procedures were inadequate to ensure reports were filed as required. Criteria: Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made and include information about each obligating action in accordance with submission instructions. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's DAS director should allocate the resources necessary to comply with FFATA reporting requirements and strengthen supervisory review procedures. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-041 Federal Awarding Agency: U.S. Department of Commerce (USDOC) Impact: Significant Deficiency, Noncompliance AL Number and Title: 11.438 Pacific Coast Salmon Recovery Pacific Salmon Treaty (PCSRT) Federal Award Number: NA24NMFX438G0026 Applicable Compliance Requirement: Reporting Condition: One of six PCSRT Federal Funding Accountability and Transparency Act (FFATA) reports tested was not submitted timely. Context: FFATA requires information on federal awards to be made available to the public through USASpending.gov. The FFATA reporting tool is available for federal awardees, such as the State of Alaska, to report subaward and executive compensation data for first-tier subawards. In FY 25 there were 19 PCSRT subawards totaling $11,782,618 that were subject to FFATA reporting of which the audit tested six totaling $7,978,619. The FFATA report for one subaward totaling $5,079,825 was reported 24 days late. Cause: Competing priorities and a backlog of subawards requiring FFATA reporting resulted in the subaward not being filed timely. Supervisory review and submission procedures were insufficient to ensure FFATA reports were filed timely. Criteria: Title 2 CFR Part 170 requires federal award recipients to report subawards of $30,000 or more to SAM.gov by the end of the month following the subaward obligation. Title 2 CFR 200.303(a) requires the State to establish, document, and maintain effective internal controls over Federal awards that provide reasonable assurance that the State is managing Federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DFG’s Division of Administrative Services (DAS) director should strengthen FFATA reporting review and submission procedures to ensure required reports are filed timely. Views of Responsible Officials: Alaska Department of Fish & Game (ADFG) disagrees with this finding. The FFATA report for the FY2025 NOAA subaward was submitted one month late due to resource constraints while our team was actively implementing a corrective action plan (CAP) for a prior Office of Inspector General (OIG) federal audit finding related to FFATA reporting timeliness. During this period, we prioritized fulfilling the CAP requirements, which included a comprehensive reconciliation of all subawards across federal programs to ensure accuracy and compliance. This intensive remediation effort temporarily impacted our ability to meet standard reporting timelines. The delay was not the result of a new or separate control failure, but rather a timing issue directly tied to the corrective work already underway. Importantly:  The NOAA FFATA report was completed accurately as part of the same remediation workflow.  The delay occurred while addressing the previously identified issue and was resolved within the corrective action period established with the OIG.  The root cause was the same issue identified in the existing finding, and not a new or systemic breakdown.  Updated internal controls and revised procedures were implemented during this period and now apply uniformly across all programs, including NOAA.  These corrective actions have resulted in timely, comprehensive, and fully implemented processes designed to prevent recurrence. Given that the late NOAA FFATA report occurred within the active corrective action window and was resolved through the same documented process, we view this as part of the previously identified issue rather than a separate instance of noncompliance. The corrective actions were completed as planned and have strengthened our reporting controls to ensure ongoing compliance. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DFG management is responsible for complying with federal reporting requirements. We reaffirm the finding.

Finding No. 2025-042 Federal Awarding Agency: USDOC Impact: Significant Deficiency, Noncompliance AL Number and Title: 11.438 PCSRT Federal Award Number: NA24NMF4380259, NA24NMFX438G0056 Applicable Compliance Requirement: Reporting Condition: Two of four randomly selected FY 25 PCSRT SF-425 federal financial reports tested did not include the recipient share of expenditures. Context: The SF-425 is a required semi-annual federal financial form used for reporting on the financial status of federal grant awards. Recipients of PCSRT grants must submit semi-annual SF-425 reports for all active federal awards. During FY 25, 20 grant awards were subject to SF-425 submission for a total of 37 required reports filed. Four reports were selected for testing. The audit identified that the recipient share of expenditures (line 10j) reported for two federal awards was not completed. Cause: The errors were due to DFG staff misunderstanding instructions for completing SF-425 reports. Federal guidance on whether the State must report the recipient share of expenditures changed prior to the fiscal year. DFG report preparation and review procedures were insufficient to identify the revised reporting requirements. Criteria: Per Title 2 CFR 200.328(c), the State must submit financial reports as required by the federal award. Title 2 CFR 200.303(a) requires the State to establish, document, and maintain effective internal controls over Federal awards that provide reasonable assurance that the State is managing Federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect: Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DFG’s DAS director should strengthen procedures for the preparation and review of the SF-425 report to ensure submitted reports are accurate. Furthermore, the DAS director should work with the federal oversight agency to revise the incomplete SF-425 reports, as needed. Views of Responsible Officials: ADFG respectfully disagrees with the audit finding regarding SF-425 reporting and recipient share. During the audit period, the federal awarding agency transitioned to a new reporting system but did not issue updated written instructions, revised award terms, or formal guidance clarifying new SF-425 fields or reporting expectations. Under 2 CFR §200.328, recipients are required to submit financial reports as specified in the Federal award, and agencies may require only OMB-approved, government-wide data elements. No updated award terms or instructions were provided to ADFG during this transition. System behavior clearly indicated that certain fields were not applicable. In Grants Online, the fields were grayed out, signaling they were not required. In contrast, eRA Commons left these fields open without any explanation or guidance. NOAA now requires these fields, but this requirement was not communicated at the time of the transition. This inconsistency demonstrates that the agency had not finalized or communicated enforceable requirements for these fields during the reporting period. DFG acted reasonably and consistently based on the information available. It would be inappropriate to penalize DFG for continuing to report under prior requirements or omitting data in fields that were not previously required. The Uniform Guidance places responsibility on awarding agencies to provide clear written guidance, transition timelines, and clarification on new reporting requirements before they become enforceable. For these reasons, DFG requests that this finding be reconsidered. Our reporting complied with the award terms and the system instructions available at the time, and any changes introduced by the agency were not formally communicated or incorporated into our award during the relevant reporting period. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DFG management reports that the federal agency did not provide updated written instructions or reporting requirements when the federal awarding agency transitioned to a new reporting system. However, DFG management is responsible for complying with federal reporting requirements. We reaffirm the finding.

Finding No. 2025-043 Federal Awarding Agency: USDOC Impact: Significant Deficiency, Noncompliance AL Number and Title: 11.438 PCSRT Federal Award Number: NA24NMFX438G0056 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of six FY 25 PCSRT subrecipients’ subaward agreements found that one did not include an accurate unique entity identifier (UEI) that matched the subrecipient’s name. Context: All federal award recipients are required to have a UEI. DFG enters into awards with subrecipients using a subaward agreement. The subaward agreement lists the federal requirements that pertain to the subaward and must identify the subrecipient’s UEI. The audit reviewed six subaward agreements, and found that one contained an incorrect UEI. Cause: The finding was caused by human error. In preparing the subaward agreement, staff copied and pasted the UEI from a different subrecipient’s information. Supervisory review procedures were insufficient to detect and correct the error. Criteria: Title 2 CFR 200.332 requires pass-through entities to ensure that every subaward includes the required information at the time of the subaward. Required information includes the subrecipient’s name, which must match the name associated with the subrecipient’s UEI. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Not providing the correct UEI number hampers subaward reporting and may limit federal oversight of the PCSRT program. Questioned Costs: None Recommendation: DFG’s Commercial Fisheries Division director should strengthen supervisory review procedures to ensure federally required information is accurately identified in PCSRT subaward agreements. Views of Responsible Officials: ADFG disagrees with this finding. During the audit, it was noted that the UEI listed in the subaward agreement contained a copy-and-paste error. This discrepancy was promptly corrected once identified. Under 2 CFR 170, the official compliance requirement for subaward reporting is the Federal Funding Accountability and Transparency Act (FFATA) submission through SAM.gov. In this case:  The correct UEI was verified in SAM.gov.  The FFATA report contained the correct UEI and was submitted timely.  The correct subrecipient was paid, and supporting documentation confirmed the subrecipient’ s identity. These facts demonstrate that the federal reporting requirement was met and that the error was limited to the internal agreement. The issue did not result in improper payments, misreporting to federal systems, or a breakdown in internal controls. This was an isolated clerical error that was promptly corrected during the audit. It does not represent a significant deficiency or material weakness. This seems more appropriately categorized as a minor observation or management comment regarding document review processes. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DFG management asserts the unique entity identifier number incorrectly recorded in the subaward agreement was correctly reported to sam.gov. However, the reporting of the subaward to sam.gov is a reporting requirement. DFG management is responsible for complying with federalsubrecipient monitoring requirements. We reaffirm the finding.

Finding No. 2025-044 Prior Year Finding: 2024-044 Federal Awarding Agency: U.S. Department of the Interior Impact: Material Weakness AL Number and Title: 15.605, 15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. DFG began efforts in FY 25 to address equipment and real property management weaknesses found in the prior year audit. However, at the end of FY 25, corrective action was incomplete. In FY 25, DFG did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increased the risk that FWC funded assets were not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increased the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should continue efforts to ensure procedures are developed and training is implemented so that FWC funded equipment, real property, and capital improvements are fully identified and are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-047 Prior Year Finding: 2024-053 Federal Awarding Agency: U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 Supplemental Nutrition Assistance Program (SNAP) Cluster Federal Award Number: 25AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 25 SNAP benefits reported to USDA as issued by the State’s Electronic Benefits Transfer (EBT) contractor, Fidelity National Information Services (FIS), was $1,235,577 more than the amount of authorized benefits reported in data from the Division of Public Assistance’s (DPA) Eligibility Information System (EIS). Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on its legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations, and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 25, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the issuance amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy eligibility system and the lack of daily reconciliations (see Finding No. 2025-049) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermine confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system controls increase the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $1,235,577 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. The Division of Public Assistance completes reconciliations between FIS daily transaction records and EBT Account Management Agent (AMA) data to ensure issuance accuracy. Auditor’s Concluding Remarks: Management concurs with the finding, but not the questioned costs. Questioned costs are defined by Title 2 CFR 200.1, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding:  Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds;  Where the costs, at the time of the audit, are not supported by adequate documentation; or  Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on Uniform Guidance, the SNAP benefits issued that were not supported by eligibility determinations were reported as questioned costs.

Finding No. 2025-048 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 25AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 72 FY 25 SNAP EBT issuances found two automated EIS benefit calculations that did not consider an increase in unearned income related to Alaska’s Senior Benefits Program. Context: SNAP benefits are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure the SNAP system accurately and completely processes and stores all case file information for eligibility determinations and benefit calculations, automatically cuts off households at the end of a certification period unless recertified, and provides the data necessary to meet federal issuance and reconciliation reporting requirements. SNAP recipients aged 65 or older with low to moderate income are eligible to receive monthly payments from the Senior Benefits Program. Senior benefit amounts are based on available state funding and the number of eligible applicants. Beginning August 1, 2024, monthly benefits increased from $49 to $125. For SNAP purposes, senior benefits are classified as unearned income and the increase should have been incorporated into all SNAP recipient benefit calculations completed after August 1, 2024. Between September 2024 and June 2025, on average, 6,277 SNAP households included at least one member aged 65 or older. The EIS benefit calculation errors were systematic and potentially impacted all SNAP households that include a senior member. Likely questioned costs exceed $25,000. Cause: Management stated that the system change implemented to increase senior benefits in EIS failed to adequately include the increase on prospective SNAP benefit calculations. DPA’s information system change management and monitoring procedures were insufficient to prevent or detect the processing flaw. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 274.1(a) requires the State to establish issuance and accountability systems which ensure that only certified eligible households receive benefits; that program benefits are timely distributed in the correct amounts; and that benefit issuance and reconciliation activities are properly conducted and accurately reported to USDA Food and Nutrition Service (FNS). Effect: Inadequate SNAP automated data processing controls increases the risk of incorrect or ineligible benefits. Errors in SNAP benefit determinations could result in federal sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $660 Recommendation: DPA’s director should strengthen SNAP automated data processing controls to ensure EIS system changes are adequately evaluated prior to implementation. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-049 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 25AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DOH’s information technology staff did not properly limit user access to EIS during FY 25. Context: EIS is used to determine eligibility for SNAP. The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: The control weakness was attributed to human error and competing priorities. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. State of Alaska Information Security Policies provide specific criteria related to the identified deficiency. Effect: The internal control weakness increases the risk of unauthorized system use, including risk of data manipulation, which may result in ineligible benefit recipients or unallowable costs. Questioned Costs: None Recommendation: DOH’s Division of Finance and Management Services director should strengthen monitoring procedures to address the control weakness. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-050 Prior Year Finding: 2024-055 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 25AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 25. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 25, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to inadequate procedures, staff turnover, and the lack of trained staff. Implementation of corrective action was also delayed due to inadequate system access for new staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and the FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-051 Prior Year Finding: 2024-056 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2501AKTANF, 2401AKTANF Applicable Compliance Requirement: Eligibility Condition: Five of sixty TANF recipient case files tested lacked adequate documentation to indicate that the participant met all eligibility criteria. The following errors were noted: • One case had the monthly benefit the individual calculated incorrectly causing an underpayment to the individual. • One case lacked documentation to verify if an 18 year old was attending high school and expected graduation date. • Three cases did not contain a child support cooperation form that assigns to the State the rights the family member may have for support from any other person. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, IEVS, unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into the Eligibility Information System (EIS). EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Per 42 U.S.C. § 608(a)(3), a state shall require that, as a condition of providing assistance, a member of the family assign to the state the rights the family member may have for support from any other person. This assignment may not exceed the amount of assistance provided. Per 42 U.S.C. § 608(a)(4), a state may not provide assistance to an individual who is under age 18, is unmarried, has a minor child at least twelve weeks old, and has not successfully completed high school or its equivalent unless the individual either participates in education activities directed toward attainment of a high school diploma or its equivalent, or participates in an alternative education or training program approved by the state. Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: $ 3,702 (known questioned costs); $ 759,673 (likely questioned costs) Recommendation: DOH should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-052 Prior Year Finding: 2024-059 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Tests and Provisions Condition: Sixteen of the sixty cases tested had insufficient documentation to verify work hours which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. In a statistically valid sample, sixteen of sixty cases tested lacked adequate documentation to indicate if all components of the Work Verification Plan were gathered and processed correctly. Of the deficient cases (note, some cases had multiple deficiencies): • Thirteen of sixty cases tested contained insufficient work participation data and supporting documentation. • Thirteen of sixty cases contained insufficient documentation to report the amount of work hours counted and verified. • Eight of sixty cases contained insufficient documentation determining if the individual on the case was work eligible. • Sixteen of sixty cases overall lacked documentation to confirm that the case determination in EIS was appropriately documented and that the client case files contains evidence that the determinations were made in accordance with the requirements specified in the HHS approved Work Verification Plan (incorporated into the TANF State Plan ) and the State of Alaska Policy Manual. Cause: The division encountered staffing turnover and shortages that contributed to insufficient documentation and inaccuracies of work hours reported. Several division units must collaborate, cross-train, and implement corrective action which can be a time-consuming process. Criteria: Per the 2025 Office of Management and Budget (OMB) Compliance Supplement, "the state agency must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of the data used in calculating work participation rates." Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: DOH should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. This may require increased resources and training. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-053 Prior Year Finding: 2024-060 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2501AKTANF, 2401AKTANF Applicable Compliance Requirement: Reporting Condition: The State could not provide evidence that the FFY 24 ACF-204 annual report and two ACF-196R quarterly reports were completed or submitted to the federal agency. Context: The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort (MOE) programs for that year. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. The state must complete and file quarterly reports containing financial information on the TANF Program including the state’s use of federal funds and the State’s MOE expenditures. This report replaces the standard SF-425, Federal Financial Report. Cause: DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements for submitting an annual ACF-204 report and quarterly ACF-196R reports. Criteria: Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 265.3(a) requires that each state must file quarterly expenditure data on the State’s use of Federal TANF Funds, State TANF Expenditures, and State Expenditures of MOE Funds in separate state programs. Title 45 CFR 75.303(c)(1) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed MOE expenditures. DOH should strengthen reporting procedures to ensure the quarterly ACF-196R reports are submitted and include all applicable financial reporting data. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-054 Prior Year Finding: 2024-062 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2501AKTANF, 2401AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Per the 2025 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." One of eight non-cooperative cases tested lacked appropriate documentation to support "waived" penalties. One of eight non-cooperative cases lacked documentation indicating the client was aware of cooperation requirements and Appendix D of the application was not completed. Context: In a statistically valid sample, one of eight non-cooperative cases tested lacked appropriate documentation to support “waived” penalties. For one of these there was no child support information through Appendix D of the application, yet the penalty was "waived" in EIS and not applied to payments. One case lacked information alerting the client to the cooperation requirements and was missing Appendix D of the application. This case was ultimately deemed to be a good cause claim of noncooperation but lacked proper documentation. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of child support non-cooperation provisions. Criteria: Per the 2025 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Per the Alaska Temporary Assistance Program Manual “A parent or caretaker relative cannot be required to cooperate with CSED activities if the parent or caretaker relative claims and establishes good cause. If at any time a parent or caretaker relative indicates they have good cause for noncooperation, they must be given the opportunity to complete the GEN 80 or EIS notice W060. Once a good cause claim is made, the caseworker must decide whether or not to allow the claim. If the good cause claim is allowed, the parent or caretaker relative is excused from cooperation.” Effect: USDHHS may penalize a state for up to 5 percent of the State Family Assistant Grant for failure to substantially comply with this required state child support program (42 USC 608(a)(2) and 609(a)(8); 45 CFR sections 264.30 and 264.31). Questioned Costs: $ 4,650 (known questioned costs) Recommendation: DOH should improve training and supervision to ensure child support non-cooperation penalties are appropriately applied. If a penalty is determined to be unapplicable, adequate documentation should be kept to support that determination. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-055 Prior Year Finding: 2024-066 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2305AK5021, 2405AK5021, 2505AK5021, 2405AK5MAP, 2405AK5ADM, 2505AK5MAP, 2505AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 14 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Seven of the sixty cases had not gone through a renewal assessment within 12 months of the last determination. • Eleven of the sixty cases’ eligibility determinations were not done timely (i.e., within 45 days). CHIP – 26 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of sixty cases’ eligibility determinations were not done timely (i.e., within 45 days). • Eighteen of sixty cases had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, fourteen of sixty Medicaid cases tested and twenty-six of sixty CHIP cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on modified adjusted gross income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 2,653 (known questioned costs); $712,969,620 (likely questioned costs) AL 93.767: $ 2,825 (known questioned costs); $ 5,719,575 (likely questioned costs) Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management concurs with the finding, but not the questioned costs. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding:  Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds;  Where the costs, at the time of the audit, are not supported by adequate documentation; or  Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2025-056 Prior Year Finding: 2024-067 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2305AK5021, 2405AK5021, 2505AK5021 2405AK5MAP, 2405AK5ADM, 2505AK5MAP, 2505AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – five of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of sixty case files lacked the proper case notes to properly maintain how the individual was determined eligible for payments. • One of sixty cases had an incorrect social security number entered into the ARIES system. In addition: • Five of sixty files lacked documentation of facts supporting the eligibility determination. • One of sixty participants did not meet income eligibility requirements. • Two of sixty cases lacked documentation to verify that the Income and Eligibility Verification System (IEVS) was used to verify income eligibility. CHIP – 17 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of sixty case files was missing a CHIP-specific application that was signed of by the program recipient. • Three of the sixty identified cases had identified income that exceeded income limits or income was unable to be verified. • Four of sixty cases lacked documentation to verify that the Income and Eligibility Verification System (IEVS) was used to verify income eligibility. • Three of sixty cases were not properly closed after the period of eligibility to receive benefits had ended. • Four of sixty cases that had payments to programs participants that were deemed unallowable costs/activities due to multiple individual compliance issues. • Sixteen of sixty cases lacked adequate support for eligibility determinations/redeterminations. Context: In a statistically valid sample, five of sixty Medicaid cases tested and nineteen of sixty CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. As a condition of eligibility Title 42 CFR 435.910 requires that each individual must furnish each of his or her Security Numbers (SSN) to be eligible for Medicaid. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via the income and eligibility verification system (IEVS). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 138 (known questioned costs); $37,006,989 (likely questioned costs) AL 93.767: $ 288 (known questioned costs); $582,269 (likely questioned costs) Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management concurs with the finding, but not the questioned costs. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding:  Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds;  Where the costs, at the time of the audit, are not supported by adequate documentation; or  Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2025-059 Federal Awarding Agency: U.S. Environmental Protection Agency (EPA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 66.202 Congressionally Mandated Projects (CMP) Federal Award Number: 01J83401, 02J14601 Applicable Compliance Requirement: Reporting Condition: Unliquidated obligations as reported in two of three tested SF-425 Federal Financial Reports were inaccurate. Context: Recipients of EPA grants must submit annual SF-425 Federal Financial Reports for all active federal awards. During FY 25, five grant awards were subject to SF-425 submission of which three were tested. The audit identified that the federal share of unliquidated obligations (line 10f) reported for two federal awards were overstated by $543,052 and $523,069, respectively. DEC staff inadvertently included the State’s share of unliquidated obligations in the report. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 2 CFR 200.328(c) requires the State to submit financial reports as required by the federal award. Title 2 CFR 200.303(a) requires the State to establish, document, and maintain effective internal controls over Federal awards that provide reasonable assurance that the State is managing Federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards. Effect: Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DEC’s DAS director should strengthen procedures for the preparation and review of the SF-425 report to ensure reports submitted to EPA are accurate. Furthermore, the DAS director should work with the federal oversight agency to revise the inaccurate SF-425 reports, as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-060 Federal Awarding Agency: EPA Impact: Significant Deficiency, Noncompliance AL Number and Title: 66.202 CMP Federal Award Number: 02J40501, 02J76901, 02J80901 Applicable Compliance Requirement: Reporting Condition: DEC did not fully comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to FY 25 CMP subawards. Context: FFATA requires information on federal awards to be made available to the public through USASpending.gov. SAM.gov is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. In FY 25 there were 11 CMP subawards subject to FFATA reporting of which the audit tested seven totaling $8,965,396. One subaward totaling $4,665,000 was not reported. In addition, the reported subaward action date for three subawards did not agree with the date the subaward agreement was signed. The three subawards with the inaccurate data element totaled $763,279. Cause: According to DEC management, staff turnover, legacy system (FSRS.gov) limitations, and insufficient review procedures contributed to the errors and omissions. According to DEC management, the $4.7 million subaward was not reported due to the submission inadvertently being left in draft status in SAM.gov. Once identified by auditors, management subsequently completed the reporting. Criteria: Title 2 CFR Part 170 requires recipients of federal grants or cooperative agreements to report subawards of $30,000 or more to SAM.gov by the end of the month following the subaward obligation. Title 2 CFR 200.303(a) requires the State to establish, document, and maintain effective internal controls over Federal awards that provide reasonable assurance that the State is managing Federal awards in compliance with federal statutes, regulations, and the terms and conditions of federal awards Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DEC’s DAS director should strengthen FFATA reporting review and submission procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-063 Federal Awarding Agency: U. S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.205 Highway Planning and Construction (HPC) Federal Award Number: 0956(036), 0A45(034), 0851(076), 0002(514), 0617(003), 0002(488), 0A43(024), 0A43(020) Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: Three of 40 timesheets tested (eight percent) were entered into the State’s accounting system with incorrect coding. Context: DOTPF’s staff allocated personal service costs to federal programs based on program, activity, and profile codes that identify specific federal highway projects. A supervisor reviews the coding and hours in the State’s accounting system to verify the accuracy of time entered by employees. A random sample of 40 timesheets that charged personal service costs to the HPC program in FY 25 was tested. Auditors found three timesheets were entered into the accounting system using incorrect program, activity, or profile codes, resulting in incorrect federal projects being charged. Cause: Human error resulted in timesheets being entered incorrectly. Additionally, supervisory review procedures were inadequate to identify and correct miscoded timesheets. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 2 CFR 200.430 requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. The records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, the records must comply with the entity’s established accounting procedures. Effect: Incorrect coding of personal service expenditures may result in project managers relying on misclassified information to manage and report on the status of the project. The lack of adequate controls could result in unallowable personal services expenditures. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action including withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should provide training to staff on timesheet processing procedures and strengthen supervisory review procedures to ensure personal service expenditures are accurately charged to federal projects. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-064 Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.205 HPC Federal Award Number: 0956(028), 0391(017), 0920(032), 0932(055), 0003(309) Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Four of four judgmentally selected engineering and design-related professional service procurements were not publicly noticed on the Alaska Online Public Notice System. Context: DOTPF uses AASHTOWare, a web-based application designed for States to manage preconstruction and construction processes. A platform of AASHTOWare called BidX was used by DOTPF procurement staff to advertise and award contracts via the department’s webpage. DOTPF added this method of advertising for construction-related professional services to more closely align with the construction bidding process. DOTPF’s federally approved written procedures for procuring engineering and design-related services requires that DOTPF advertise all engineering and design-related service requests on the department’s internet home page and on the State’s Online Public Notice System. Of the 31 FY 25 engineering and design-related professional services procurements, the audit reviewed four randomly selected and four judgmentally selected procurements. All four judgmentally selected procurements were from the Southcoast region. According to DOTPF procurement staff, during FY 25, Southcoast region procurements were advertised solely on BidX and were not posted on the State’s Online Public Notice System. Cause: Failure to publicly notice the procurements on the Alaska Online Public Notice System was due to human error. Additionally, the Southcoast region lacked monitoring controls to ensure professional service procurements were advertised on the State’s Online Public Notice System. Criteria: Title 23 CFR 172.5(c) requires the State to prepare and maintain federally approved written policies and procedures for the procurement, management, and administration of engineering and design related consultant services. Title 2 CFR 200.317 requires that States, when procuring property and services under a federal award, to follow the same policies and procedures it uses for procurements from its non-federal funds. The State’s procurement policies are outlined in the State Procurement Code – AS 36.30. Alaska Statute 36.30.130(a) requires the procurement officer to give adequate public notice of the invitation to bid at least 21 days before the date for the opening of bids. Notice shall be posted on the Alaska Online Public Notices System. Effect: Noncompliance with federal solicitation requirements may have prohibited qualified vendors from being considered for a contract award. Questioned Costs: None Recommendation: DOTPF’s chief contracts officer should strengthen procedures to ensure all engineering and design-related professional services solicitations are advertised on the State’s Online Public Notice System. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-065 Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.205 HPC Federal Award Number: Various Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: The indirect cost rate in two of 11 FY 25 consultant contracts tested (18 percent) were incorrect. Context: If an indirect cost rate has not been established by a federal cognizant agency, DOTPF staff must evaluate a consultant’s indirect cost rate and calculate an appropriate rate. Consultants submit financial information to DOTPF’s Internal Review section staff that perform an audit to establish an audited indirect cost rate. The audited indirect cost rate is sent to the consultant. The consultant may either accept or reject the rate. Once a consultant accepts the rate, the signed certificate of indirect cost rate is forwarded to DOTPF’s regional procurement staff. Regional procurement staff send an email to project managers, who are also the contract managers for the professional service procurements, informing them of the consultant’s revised indirect cost rate. Of the 31 FY 25 engineering and design-related professional services procurements, the audit reviewed four randomly selected and four judgmentally selected procurements. Indirect rates were tested for all 11 consultant contracts related to the eight procurements. For the two errors noted, the consultant’s contracts were not updated with the approved FY 25 indirect cost rate. Cause: Although project managers received notification when a consultant’s indirect cost rate was revised, DOTPF lacked procedures to ensure revised indirect cost rates were accurately billed by consultants. A new procedure to record the indirect cost rate as “on file” in contracts rather than issuing an amendment to the contract contributed to the errors. Furthermore, project manager review procedures were insufficient to ensure consultant invoices billed the correct indirect cost rates. Criteria: Title 23 CFR 172.11(b)(1) requires indirect cost rates to be updated on an annual basis in accordance with the consultant’s annual accounting period and in compliance with the federal cost principles. Once an indirect cost rate is accepted, contracting agencies must apply such indirect cost rates for the purposes of contract estimation, negotiation, administration, reporting, and contractor payments. A consultant’s accepted indirect cost rate for its one-year applicable accounting period must be applied to contracts. The federally approved Professional Services Agreement manual, dated January 2018, requires that the contract manager review consultant billings and certify that invoices are “valid and accurate.” Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: One consultant’s invoices included an indirect cost rate higher than the revised rate, resulting in the federal program being overcharged, whereas the other consultant submitted invoices that undercharged the federal program. Questioned Costs: None Recommendation: DOTPF’s regional directors should strengthen procedures to ensure project managers invoice review includes verification that the consultant’s indirect cost rate is accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-066 Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.205 HPC Federal Award Number: 0A41(034), 0902(042), 0A31(035), 0772(001) Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls for four of 11 construction projects tested were not submitted during FY 25. Context: All laborers and mechanics employed by contractors or subcontractors that perform work on construction projects in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established by the Department of Labor and Workforce Development for a project’s locality. To ensure compliance with federal regulations, required provisions for federal-aid construction contracts are included in the contractors’ contract. The provision outlines the frequency and method for submission of certified payrolls to the contracting agency and requires contractors and subcontractors to submit a certified copy of payrolls for each week of contract work. Contractors and subcontractors submit payroll submissions electronically to DOTPF using AASHTOWare. Cause: DOTPF lacked adequate procedures for project staff to oversee contractors’ and subcontractors’ submission of certified payrolls to ensure federal requirements were met. According to DOTPF programming staff, AASHTOWare lacked the ability to automatically send notifications to contractors for missing certified payrolls. Although training was provided to project staff to help ensure certified payrolls were appropriately reviewed, approved, or rejected; due to competing priorities, project staff did not regularly generate payroll status reports and follow up on missing certified payrolls. Criteria: Title 29 CFR 3.4 requires that each certified payroll be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.318(b) requires that recipients and subrecipients maintain oversight to ensure contractors perform in accordance with the terms, conditions, and specifications of their contracts. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should implement procedures and continue to provide training to ensure project staff perform timely review of contractors’ and subcontractors’ payroll submission to comply with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-067 Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.205 HPC Federal Award Number: 0711(076) Applicable Compliance Requirement: Special Tests and Provisions Condition: DOTPF’s statewide value engineering (VE) coordinator omitted one project with a VE analysis in the FFY 2025 annual VE summary report submitted to the Federal Highway Administration (FHWA). Context: State transportation departments are required to ensure that a VE analysis is performed on projects that are located on the National Highway System (NHS) with an estimated total project cost of $50 million or more that utilize federal highway funding; bridge projects located on the NHS with an estimated total cost of $40 million or more that utilize federal highway funding; and any other projects that the FHWA determined to be appropriate. DOTPF’s VE program is overseen by the State VE coordinator; however, identifying, tracking, and monitoring the VE analysis of projects is a coordinated effort between regional VE coordinators and project managers. VE data is forwarded to the State VE coordinator who prepares an annual report of projects with VE analysis, including the number of approved project recommendations. The report is forwarded to the chief engineer who signs and submits the report to FHWA. Cause: Although procedures were in place for the State VE coordinator to independently monitor projects requiring a VE analysis, human error resulted in the omission of one VE project on the annual report to FHWA. Additionally, supervisory review of the annual VE report was insufficient to identify and correct the omission. Criteria: Title 23 CFR 627.5(a) requires a VE analysis be conducted prior to the completion of final design on each applicable project that utilizes Federal-aid highway funds. Title 23 CFR 627.7(a)(5) requires the State’s VE program establish and document policies, procedures, and controls to ensure a VE analysis is conducted and the results of these analyses are included in the VE program monitoring and reporting. Title 23 CFR 627.7(c) requires the State to designate a VE program coordinator to promote and advance VE program activities and functions. The VE coordinator's responsibilities should include establishing and maintaining the State’s VE policies and procedures; ensuring VE analyses are conducted on applicable projects; monitoring, assessing, and reporting on the VE analyses conducted and VE program; submitting the required annual VE report to the FHWA; and supporting the other elements of the VE program. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Incomplete and/or inaccurate reporting reduces transparency, impairs decision-making, and may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DOTPF’s Statewide Design and Engineering Services director should strengthen review procedures to ensure the annual VE report includes all projects with a VE analysis. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-068 Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.532 Passenger Ferry Grant Program, Electric or Low-Emitting Ferry Pilot Program, and Ferry Service for Rural Communities Program (PFG) Federal Award Number: AK-2024-005 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: For two out of 40 timesheets tested (five percent), the employee’s hours were inaccurately recorded in the State’s accounting system. Context: Alaska Marine Highway System (AMHS) payroll costs are calculated based on regular hours worked, overtime hours worked, hazardous activities performed, and the type of work completed. These details are recorded on employee timesheets via various coding. For two AMHS employees, the amounts entered into the State accounting system did not accurately reflect overtime or the correct pay associated with the activities performed, resulting in incorrect employee compensation. Cause: Human error resulted in the incorrect entries into the State accounting system. Review procedures were insufficient to detect and correct the data entry errors. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 2 CFR 200.430 requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. The records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, the records must comply with the entity’s established accounting procedures. Effect: Incorrect recording of employee time in the accounting system can result in unallowable compensation. Inadequate controls increase the risk of noncompliance. Noncompliance with federal regulations may lead the federal awarding agency to impose additional conditions or take corrective actions, including withholding or terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should provide staff training on timesheet processing and strengthen supervisory review procedures to ensure employee hours are properly input into the State’s accounting system. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-070 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency AL Number and Title: 93.658 Foster Care - Title IV-E Federal Award Number: 2502AKFOST Applicable Compliance Requirement: Allowable Costs/Cost Principles, Eligibility Condition: An evaluation of the Office of the Children’s Services’ (OCS) Online Resources for the Children of Alaska (ORCA) system controls identified an internal control weakness. Context: ORCA is OCS’s primary information technology system used to manage foster care cases, document the delivery of child welfare services, and calculate benefit payments. The details of this control weakness and relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: The internal controls were insufficient to identify the deficiency. Criteria: Title 45 CFR 75.303 and the State Information Security Policies provide specific criteria related to the identified deficiency. Effect: The internal control weakness increased the risk of noncompliance with state and federal regulations and financial statement misstatements. Questioned Costs: None Recommendation: DFCS’s OCS director should strengthen information technology controls. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-071 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.658 Foster Care - Title IV-E Federal Award Number: 2502AKFOST Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Deficiencies were identified in OCS's FY 25 foster care base rate setting methodology. Context: Foster care program base rates must be reviewed annually. Since 2013, OCS had been using a rate setting methodology recommended in a study conducted by Hornby Zeller Associates, Inc. The study was conducted for the State in response to the Mulgrew v. State of Alaska lawsuit which concluded that OCS’s foster care reimbursement system did not reflect the current financial needs of family foster homes in Alaska. The study recommended the following rate setting methodology: 1. The U.S. Department of Agriculture (USDA) report titled "Expenditures on Children by Families" should be used as a foundation for rate calculations. This data is supported by the Bureau of Labor Statistics Consumer Expenditure Survey’s actual historical costs and projections associated with caring for a child and presents data by different regions such as urban northeast, urban south, urban midwest, urban west, rural areas, and a national average. The Hornby Zeller study recommended using the national average cost data as the foundation for foster care rate setting. 2. Rates should be grouped as follows: 0 to 5 years, 6 to 11 years, and 12 years or older. 3. The USDA cost data should be adjusted for inflation using the U.S. Consumer Price Index (CPI) inflation calculator. 4. Rates should then be adjusted using the cost-of-living multiplier for Anchorage. 5. Given the large variances in the cost of living across Alaska, rates should also be adjusted using the geographic multipliers defined in the 2008 Alaska Geographical Differential Study utilized by Alaska for reimbursement of Medicaid services. In summary, the rate study recommended OCS calculate foster care base rates annually by starting with the national average table from the most recently available USDA report, adjust for inflation, apply the cost-of-living adjustment for Anchorage, and apply the geographic multipliers as appropriate for non-Anchorage communities. The audit identified that OCS’s foster care rate setting methodology for FY 25 deviated from the methodology recommended by the Hornby Zeller study and was unreasonable as follows: National multiplier used on regional cost data When calculating the FY 25 rates, OCS’s staff used the most recent USDA Expenditures on Children and Families report, which was for 2015. The report included several different cost tables such as urban northeast, urban south, urban midwest, urban west, rural areas, and the national average. OCS’s management chose to start the rate calculation by using the “urban west” cost data instead of the national average data. Auditors noted the urban west cost data was higher than the national average cost data. After adjusting for inflation, OCS management applied the Anchorage cost-of-living multiplier of 128.4 percent to the urban west data. This was not reasonable because the cost-of-living multiplier for Anchorage reflected Anchorage costs in relation to the national average. Using the multiplier with the urban west data unreasonably inflated the FY 25 rates. 2015 USDA cost data was adjusted for inflation starting from 2018 When calculating the FY 25 rates, OCS staff used the 2015 USDA cost data, which was the most current data available. However, staff then adjusted the 2015 data for inflation using CPI inflation rates beginning in 2018, which was the last time rates were adjusted. Because the USDA cost table was presented in 2015 dollars, the costs should have been adjusted to include inflation from 2016 onwards. Cause: As the FY 25 foster care base rate setting methodology was set by the Department of Law, OCS management could not explain why the national multiplier was used on regional data and why inflation was not calculated beginning in 2016. Supervisory review of the FY 25 rate setting calculations was not sufficient to identify and correct the deficiencies. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 2 CFR 200.403, to be allowable under federal awards, costs must be necessary and reasonable for the performance of the award, and be adequately documented. Per Title 2 CFR 200.404, a cost is reasonable if it does not exceed an amount that a prudent person would incur under the circumstances prevailing when the decision was made to incur the cost. In determining the reasonableness of a given cost, consideration must be given to several criteria including whether the cost is generally recognized as ordinary and necessary for the proper and efficient performance of the federal award and whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the State, the public at large, and the federal government. Effect: The rate setting deficiencies understated FY 25 foster care rates due to not fully adjusting for inflation, and overstated rates due to using a national multiplier on regional cost data. Questioned Costs: Indeterminate Recommendation: DFCS’s OCS director should ensure the foster care rate setting methodology is reasonable. Further, supervisory review procedures should be strengthened to identify and correct deficiencies. Views of Responsible Officials: DFCS disagrees with this finding. DFCS evaluated two foster care base rate proposals using the established Hornsby Zeller Methodology. The first option applied the traditional methodology and the second followed the same structure but incorporated Urban West regional expenditure data, which includes Alaska and eleven other western states as well as Hawaii. This change was implemented because Urban West data more accurately reflects Alaska’s high cost of living environment, whereas reliance on national averages has historically produced rates below Alaska’s true cost of care. Both options were reviewed with departmental legal counsel, who were involved in the original settlement, division leadership and the Commissioner’s Office. DFCS advanced the second option, resulting in an approximate 30% increase to foster care base rate stipends effective July 1,2025. DFCS disagrees with the conclusion that the cost-of-living (inflation) factor should be adjusted to include inflation from 2016 forward. When the 2018 Foster Care Base Rates were established, inflation up to that point was already incorporated into the rate calculation. The current rate-setting process correctly used the 2018 rates as the baseline, which already accounted for prior inflation. Adding inflation from 2016 again would result in doublecounting. DFCS disagrees with the conclusion that the rate-setting process did not follow the Hornsby Zeller methodology. The methodology was followed in full. As part of the rate analysis, DFCS applied the national average cost-of-living factor as outlined; however, the resulting amount did not adequately meet the needs of the children under the care and responsibility of the Department. DFCS is fiduciarily required to ensure that rates are sufficient to meet the actual needs of children in out-of-home care, and the national average input did not satisfy that obligation. To ensure the methodology produced accurate and appropriate results, DFCS utilized the Urban West index, an allowable and geographically relevant data source under the methodology. This adjustment did not change the methodology itself; it refined the underlying input to better reflect Alaska’s actual cost of living and support the intended purpose of the rate-setting process. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. OCS management’s response did not explain why the national multiplier was used on regional data and why inflation was not calculated beginning in 2016. We reaffirm the finding.

Finding No. 2025-072 Federal Awarding Agency: United States Department of Agriculture (USDA) Impact: Significant Deficiency AL Number and Title: 10.859 Assistance to High Energy Cost Rural Communities Federal Award Number: AK0031-E84 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Alaska Energy Authority (AEA) did not have controls in place for review of progress reports for this program. During our testing of reports, we noted that two of the five reports sampled did not have evidence of a formal review before submission. Context: We tested a sample of five reports and found two exceptions as noted in the condition. This is a condition identified per review of AEA’s compliance with specified requirements not using a statistically valid sample. Cause: AEA did not have controls in place to ensure that progress reports were reviewed by personnel independent of the preparers prior to submission to the federal agency. Criteria: 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving federal awards establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Effect: Reports may contain inaccuracies, be incomplete, or fail to comply with the requirements outlined in 2 CFR 200.329 and the federal award. Questioned Costs: None Recommendation: AEA should establish procedures requiring all reports be reviewed and approved by personnel independent of the preparer prior to submission to federal agencies. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-073 Federal Awarding Agency: U.S. Department of Housing and Urban Development (HUD) Impact: Material Weakness AL Number and Title: 14.195,14.249 Section 8 Project-Based Cluster Federal Award Number: AK901SR Applicable Compliance Requirement: Eligibility Condition: In our testing of eligibility, there were seven instances where the required documentation for the tenant was not available from the project operating under Section 8 during 2025. Context: A non-statistical sample of 60 tenants out of 384 were selected for eligibility. Cause: The documentation was not filed or not retained. Criteria: The Public Housing Agency or owner should have an internal control system in place designed to provide for the retention and review of required documents as defined in the grant agreement and compliance supplement. Effect: All documents were not retained for seven tenants at certain projects during 2025. Questioned Costs: None Recommendation: Alaska Housing Finance Corporation (AHFC) management and those charged with governance should analyze the current control system and make the decision whether to accept the degree of risk associated with this condition around document retention and review or implement enhanced controls. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-074 Federal Awarding Agency: HUD Impact: Material Weakness AL Number and Title: 14.195, 14.249 Section 8 Project-Based Cluster Federal Award Number: AK901SR Applicable Compliance Requirement: Reporting Condition: In our testing of the Federal Funding Accountability and Transparency Act (FFATA), the required report was not filed during 2025. Context: AHFC had one obligating action subject to FFATA reporting. Cause: The documentation was not filed or not retained. Criteria: AHFC is required to submit FFATA information through the FFATA Subaward Reporting System (FSRS). Federal regulations require AHFC to report subawards of $30,000 or more to FSRS by the end of the month following the month in which the award was made. The Public Housing Agency or owner should have an internal control system in place designed to provide for the retention and review of required documents as defined in the grant agreement and compliance supplement. Effect: The required report under FFATA was not submitted during 2025. Questioned Costs: None Recommendation: AHFC management and those charged with governance should analyze the current control system and make the decision whether to accept the degree of risk associated with this condition around document retention and review or implement enhanced controls. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-075 Federal Awarding Agency: HUD Impact: Material Weakness AL Number and Title: 14.195, 14.249 Section 8 Project-Based Cluster Federal Award Number: AK901SR Applicable Compliance Requirement: Special Test and Provisions Condition: In our testing of special tests and provisions, annual housing quality inspections did not occur for seven units at one of the properties operating under Section 8 during 2025. Context: A non-statistical sample of 60 units out of 384 were selected for special test and provision testing. Cause: The property where the seven exceptions occurred, is the only project externally managed, and the property manager did not perform the inspections in a timely manner. Criteria: The Public Housing Agency or owner must provide housing that is decent, safe, and sanitary. To achieve this end, the Public Housing Agency or owner must perform housing quality inspections at the time of initial occupancy and at least annually thereafter to ensure that the units are decent, safe, and sanitary (24 CFR sections 880.612, 881.601, 882.516, 882.808(n), 883.701, 884.217, 886.123, and 886.323). Effect: Annual inspections did not occur on seven units at one of the properties during 2025. Questioned Costs: None Recommendation: AHFC management and those charged with governance should implement a compensating control at an overall Corporation level that ensures annual inspections are occurring at all properties operated under Section 8. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-076 Federal Awarding Agency: U.S. Department of Commerce Impact: Material Weakness, Noncompliance AL Number and Title: 11.307 – Economic Development Cluster – COVID-19 Federal Award Number: 2021 Applicable Compliance Requirement: Reporting Condition: The Alaska Industrial Development and Export Authority’s (AIDEA) controls were not designed to detect noncompliance in program income reported in AIDEA’s annual report. During our testing of reports, we noted that the annual report tested did not report interest earned on deposit accounts. The amount of interest income not included on the annual report totaled $167,023, which represents the cumulative interest income earned for the program from deposits since inception. Context: We tested the program's sole annual report and identified the exception as noted in the condition. This is a condition identified per review of AIDEA’s compliance with specified requirements not using a statistically valid sample. Cause: AIDEA had not reported program income in prior annual reports and the individual responsible for preparing the report was not aware of the program income reporting requirements. Criteria: Title 2 CFR 200.303, Internal Controls, requires the recipient or subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The annual report submitted did include program income as required by the program requirements. Questioned Costs: None Recommendation: AIDEA should establish procedures requiring all reports be reviewed by personnel knowledgeable of the program's requirements prior to submission to federal agencies. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-079 Prior Year Finding: 2024-081 Federal Awarding Agency: U.S. National Science Foundation, U.S. Department of the Interior and U.S. Department of Agriculture (USDA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.237 From Learning to Leading: Cultivating the Next Generation of Diverse Food and Agriculture Professionals 15.423, 47.050, 47.074, 47.078 Research and Development Cluster (RDC) Federal Award Number: 2040541-2025, 2224776-2025, 2322806-2025, M24AC00008-2025, 20237044040222-2025 Applicable Compliance Requirement: Cash Management Condition: The University did not make payments to subrecipients within 30 days after receipt of invoices. Context: During our testing we identified 11 out of 40 subrecipient payments related to four grants from the University of Alaska Fairbanks (UAF) under RDC, that did not process payment requests from the subrecipients timely. During our testing we identified two out of eight subrecipient payments related to one grant from UAF under the From Learning to Leading: Cultivating the Next Generation of Diverse Food and Agriculture Professionals Program, did not process payment requests from the subrecipients timely. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: Uniform Grant Guidance (2 CFR section 200.305(b)(3)) requires that when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: We recommend the University review and update policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-080 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.237 From Learning to Leading: Cultivating the Next Generation of Diverse Food and Agriculture Professionals Federal Award Number: 20237044040222 - 2025 Applicable Compliance Requirement: Reporting Condition: The University did not have documentation of the Federal Funding Accountability and Transparency Act (FFATA) reports submitted in a timely manner. Context: During our testing of two subawards from UAF that were reported to SAM.gov, we identified both reports did not have documentation of the reports being submitted by the required due date. Cause: UAF did not create a new report for the subaward amendments and replaced the information from the original subaward submission. Since the information was overwritten, there was no documentation of original submission date for the report during the fiscal year. Criteria: Uniform Grant Guidance (2 CFR 170 Appendix A(l)(2)(ii)) requires subaward information be reported no later than the end of the month following the month in which the obligation was made. Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The University was not in compliance with FFATA reporting requirements. Questioned Costs: None Recommendation: We recommend that the University review and update current procedures to ensure the program reporting requirements are completed timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-081 Federal Awarding Agency: US Department of Education (USED) Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.063, 84.268, 84.007, 84.033 Student Financial Assistance Cluster (SFAC) Federal Award Number: P063P240010-2025, P268K250010-2025, P007A240090-2025, P033A240090-2025 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Eligibility Condition: During inquiries with management, the University of Alaska identified multiple students during enrollment verification process that they determined were fictious. Context: During inquiries with management, the University identified multiple students that were awarded and disbursed Pell, Supplemental Educational Opportunity Grant (SEOG), and Direct Loans, who were subsequently determined to be ineligible for the programs. Cause: The University's internal control policies were not effectively designed to ensure funds are disbursed to eligible students. Criteria: The Code of Federal Regulation, 34 CFR 668.16(f), states the University is required to develop and apply an adequate system to identify and resolve discrepancies in the information that the institution receives from different sources with respect to a student's application for financial aid under Title IV, HEA programs. Uniform Guidance 2 CFR 200.303, non-federal entities receiving federal awards are required to establish and maintain internal controls designed to reasonable ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The University disbursed Title IV funds to ineligible students, resulting in questioned costs. Questioned Costs: AL 84.007: $4,947 AL 84.063: $27,059 AL 84.268: $158,554 Recommendation: We recommend the University review their internal control procedures to ensure that students are eligible prior to funds being disbursed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-082 Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.063, 84.268, 84.007, 84.033 SFAC Federal Award Number: P063P240010 - 2025, P268K250010 - 2025, P007A240090 - 2025, P033A240090-2025 Applicable Compliance Requirement: Special Tests and Provisions Condition: The University did not pay student's Title IV credit balance within 14 days. Context: During our testing of 40 students, we identified one student from UAF that had a credit balance refund returned later than 14 days after the credit balance occurred in student account. The refund issued after the 14 day deadline was issued on the 15th day, with only one day past the deadline. Cause: UAF was experiencing processing delays due to personnel issues. Criteria: Per 34 CFR 668.164 (h)(2), if a federal credit balance occurs (i.e., when the total Title IV aid credited to a student's account exceeds allowable charges), the institution must pay the credit balance to the student or parent no later than 14 calendar days after the date the balance occurred. Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The student did not have access to their credit balance refund timely. Questioned Costs: None Recommendation: We recommend the University review and update procedures around disbursements of credit balances and implement controls to ensure credit balances are being returned timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-083 Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.063, 84.268, 84.007, 84.033 SFAC Federal Award Number: P063P240010 - 2025, P268K250010 - 2025, P007A240090 - 2025, P033A240090-2025 Applicable Compliance Requirement: Special Tests and Provisions Condition: The University did not properly report student enrollment changes for students who received federal student aid to the National Student Loan Data System (NSLDS). Context: During our testing of 40 students, we identified from UAF one student that the student's enrollment status was reported after the 60-day reporting requirement and one student with effective date reported to NSLDS that did not align with institutional records. Cause: The University did not have proper procedures in place to verify students' status in NSLDS matched the institutions records accurately. Criteria: Per 34 CFR 682.610, institutions must report accurately the enrollment status of all students regardless of if they receive aid from the institution or not. Changes to said status are required to be reported within 30 days of becoming aware of the status change, or with the next scheduled transmission of statuses if the scheduled transmission is within 60 days. Uniform Guidance 2 CFR 200.303, non-federal entities receiving federal awards are required to establish and maintain internal controls designed to reasonable ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The University was not in compliance with the requirements to properly report student enrollment data correctly. Incorrect dates submitted to NSLDS may be used to determine the grace period for the repayment and interest of outstanding Title IV student loans. Questioned Costs: None Recommendation: We recommend the University review current processes for reporting to NSLDS and implement procedures to ensure submissions are reported timely and accurately. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2025-084 Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.044 TRIO Cluster Federal Award Number: P044A210918 - 2024 Applicable Compliance Requirement: Eligibility Condition: The University did not properly maintain documentation to demonstrate a student's intent to become a permanent resident. Context: During our testing of 40 students, we identified one student from the Talent Search program from the University of Alaska Anchorage (UAA) that did not have proper documentation of their intent to become a permanent resident. Cause: UAA did not maintain eligibility documentation prior to allowing the student to participate in TRIO Talent Search services. Criteria: Per 34 CFR 643.3(a)(1)(iii), an individual is eligible to participate in a Talent Search project if the individual is in the United States for other than a temporary purpose and provides evidence from the Immigration and Naturalization Service of his or her intent to become a permanent resident. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Failure to properly maintain documentation for eligibility requirements may result in noncompliance of federal regulations. Questioned Costs: None Recommendation: We recommend the University review and update current procedures to ensure all eligibility documentation is maintained prior to TRIO services being provided. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-003 Federal Awarding Agency: U.S. Department of the Treasury (US Treasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Reporting Condition: OMB staff submitted the quarter ended December 31, 2023, FY 24 SLFRF program project and expenditure report to US Treasury with material errors. Context: The SLFRF program project and expenditure reports are filed quarterly. Key line items include current period and cumulative obligations and expenditures for all projects exceeding $50,000. Under an agreed-upon process between OMB and DOF, OMB staff prepared the quarterly report and the DOF state accountant reviewed, certified, and submitted the report in the US Treasury report portal. The audit found that OMB staff submitted the quarter ending December 31, 2023, report directly to US Treasury without review, certification, and submission by the DOF state accountant. The report overstated five projects current period obligations and four projects current period expenditures by $47,668,558 and $47,375,062, respectively. Cause: Auditors noted OMB lacked written procedures for report preparation, review, and submission. OMB staff turnover at the beginning of FY 24 resulted in a lack of understanding of the agreed-upon process for report submission. According to OMB staff, the quarter ending December 31, 2023, report errors were due to a misunderstanding of changes to the US Treasury reporting portal. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 31 CFR 35.4(c) requires the State to submit periodic reports providing detailed accounting of the use of funds and other information that may be required by the Secretary. Effect: Incorrect reports reduce transparency and may impair decision-making. Questioned Costs: None Recommendation: OMB’s director should develop written procedures that outline the process for preparation, review, certification, and submission of federal reports required under the SLFRF program and work with the federal oversight agency to correct errors as needed. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-025 Federal Awarding Agency: U.S. Department of Health and Human Services Impact: Significant Deficiency AL Number and Title: 93.563 Child Support Services (CSS) Federal Award Number: 2001AKCSES, 2201AKCSES Applicable Compliance Requirement: Cash Management Condition: DOR staff processed an FY 24 CSS federal cash draw that was inadequately supported at the time of the draw. Context: The Child Support Enforcement Division’s (CSED) policy is to draw federal funds on a reimbursement basis to ensure compliance with federal cash management regulations. DOR draws are typically supported by receivables that are automatically generated by the State’s accounting system based on the draw periods expenditure transactions. DOR staff performed six cash drawdowns during FY 24 totaling $16.6 million, of which the audit tested three totaling $8.7 million. Of the three cash draws tested, one cash draw for $2.6 million (30 percent of the total tested), that processed in September 2023, was not supported by expenditures in the State’s accounting system. The unsupported draw was manually generated based on the remaining undrawn balance in two prior year federal awards – federal fiscal year 2020 and 2022. DOR management reports CSS expenditures to the federal oversight agency through a quarterly reporting process. According to DOR management, flawed revenue accounting and cash management processes in prior years resulted in revenue shortfalls. DOR management stated the September 2023 draw was intended to correct the shortfall and reimburse the State for expenditures reported to the federal oversight agency under prior year federal awards that were never claimed for reimbursement. DOR management could not provide auditors evidence of expenditures recorded in the State’s accounting system to support the drawn amount until five months after the support was requested. Cause: The lack of support for the draw was due to inadequate cash management procedures including the absence of review by an individual other than the preparer of the draw request. Furthermore, DOR management asserted that weaknesses in the methodology used for drawing federal funds in prior years created an imbalance between program expenditures and revenues that carried forward to FY 24. Criteria: Title 45 CFR 75.302(b)(6) requires the State to establish written procedures to implement the requirements for federal payments to states. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Inadequate internal controls resulted in the unsupported drawdown of federal funds and an increased risk of noncompliance with federal regulations. Questioned Costs: None Recommendation: DOR’s CSED and DAS directors should develop written cash management procedures to ensure federal expenditure reimbursement requests are supported by the State’s accounting records at the time of the draw. Furthermore, DOR management should complete a reconciliation of CSS program expenditures and revenues in the State’s accounting system and resolve all uncleared receivables and cash receipts. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-026 Federal Awarding Agency: U.S Department of Agriculture (USDA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DEED’s child nutrition services (CNS) management authorized Summer 2021 P-EBT benefits for ineligible children. Context: The Families First Coronavirus Response Act (P. L. 116-127), as amended by the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L 116-159), the Consolidated Appropriations Act, 2021 (P.L. 116-260), and the American Rescue Plan Act, 2021 (P.L 117-2) authorized a temporary assistance program for households with children without access to meals in school during the public health emergency declared January 27, 2020. The Families First Coronavirus Response Act, Section 1101 required P-EBT benefits to be issued in accordance with the State’s federally approved plan. DEED’s CNS staff and the Department of Health’s Division of Public Assistance developed a joint plan to issue P-EBT benefits to eligible children for the summer of 2021. The plan, approved by USDA in August 2021, required DEED’s CNS staff to determine eligibility for school age children. Pursuant to the approved plan, school children who were eligible to receive free or reduced-price National School Lunch Program meals as of the end of school year 2020–2021 were eligible for Summer 2021 P-EBT benefits. Auditors found DEED’s CNS staff authorized P-EBT benefits totaling $62,816 to 104 ineligible children. This included 46 children enrolled in an ineligible institution and 58 children that were not verified as being eligible at the end of the 2020-2021 school year. Cause: DEED’s CNS management attributed the issuance of unauthorized benefits to human error. Internal controls implemented by DEED management were inadequate to ensure benefits were only authorized for eligible children. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. The Families First Coronavirus Response Act, Pub. L. 116-127, Section 1101 and federal program guidance requires that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, Summer 2021, section 3(f), established the framework for payments to eligible school-aged children. The plan provides that summer P-EBT benefits were to be issued to students identified as eligible for National School Lunch Program meals at the conclusion of school year 2020–2021. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or inaccurate. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding or terminating funding. Questioned Costs: AL 10.542: $62,816 Recommendation: Although the P-EBT program has concluded, if relevant in the future, DEED’s Child Nutrition Programs manager should improve controls to ensure compliance with federal summer free lunch program requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-027 Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.553, 10.555, 10.559, 10.582 Child Nutrition Cluster (CNC) Federal Award Number: 237AKA3N1099, 247AKA3N1099, 237AKAK3N1199, 247AKAK3N1199, 237AKAK3N8903, 237AKAK1L1603 247AKAK1L1603 Applicable Compliance Requirement: Reporting Condition: DEED did not comply with Federal Funding Accountability and Transparency Act (FFATA) reporting requirements applicable to CNC FY 24 subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data for first-tier subawards. A DEED accountant is responsible for preparing and filing monthly FSRS submissions. No CNC FFATA reports were submitted in FY 24. CNC subawards totaling $49,364,912 were subject to FFATA reporting requirements. Cause: According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. In addition, due to turnover within the department, other projects were prioritized over FFATA reporting. Internal controls were not in place to ensure FFATA reports were filed timely. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Administrative Services director should allocate sufficient staff resources to comply with FFATA reporting requirements, complete outstanding reporting submissions, and implement controls to ensure FFATA reports are filed timely. Views of Responsible Officials: The department partially agrees with Finding 2024-027. While it is accurate that no FFATA reporting was accomplished for the Child Nutrition Cluster in FY2024, the department disagrees with the specific dollar amount. The methodology used for determining the dollar amount is overly simplistic and does not take each award into account, as specified in 2CFR170.220. The methodology also excludes awards to other State agencies when 2CFR170.300 specifically includes State entities. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for submission of federal reports and should allocate sufficient resources and implement controls to ensure compliance with federal reporting requirements.

Finding No. 2024-028 Federal Awarding Agency: U.S. Department of Education Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425 Education Stabilization Fund – COVID-19 Federal Award Number: S425U210020 Applicable Compliance Requirement: Reporting Condition: The Elementary and Secondary School Emergency Relief fund (ESSER) annual report filed by DEED in May 2024 was submitted with incomplete subrecipient expenditure data for key line item 3b.1. Context: ESSER funding is broken out into three different groups: ESSER I, ESSER II and American Rescue Plan (ARP) ESSER. Over 75% of total Education Stabilization Fund expenditures incurred in FY 23 for reporting in FY 24 were grants to subrecipients from ARP ESSER funding. State education agencies are to report on line 3b.1 subaward information, including which agencies received subawards and the funds allocated for and incurred by expenditure category. DEED staff submitted the ARP ESSER amounts awarded to grantees as part of the annual report; however subrecipient expenditure fields were submitted with zeros. Cause: According to DEED management, subrecipients were unresponsive to requests for information and staff assigned to prepare the report had competing priorities and insufficient time. In addition, management reviewed and submitted the report with known errors. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 34 CFR 76.720 requires states to submit reports required for monitoring and continuous improvement and other reports required by the Secretary and approved by the US Office of Management and Budget (OMB). State education agencies are required by the Secretary to submit an annual performance report (OMB No. 1810-0749) with data on subrecipients, state education agencies and subrecipient expenditures, planned expenditures, and uses of funds. Grant Award Notification S425U210020 Attachment T: Grant Conditions: Part A 13. The state education agencies will comply with, and ensure that local education agencies comply with, all reporting requirements at such time and in such manner and containing such information as the Secretary may reasonably require. Effect: Inaccurate federal reporting reduces transparency and may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DEED's Innovation and Education Excellence division director should allocate sufficient staff resources to prepare the ESSER annual report and strengthen report review and approval controls to ensure compliance with annual reporting requirements. Views of Responsible Officials: The department partially disagrees with Finding 2024-028. While it is true that the department did initially report zeros in the LEA portion of ESSER III reporting it is untrue that the effect was a reduction in transparency or impaired the federal agency’s oversight ability. No ESSER annual reporting can be submitted if all entered answers do not conform to implemented data validations requirements. Relevant in this instance is that if district level data reported does not match, to the penny, between different reporting categories, data validation errors occur. Including zeros, when accurate data conforming to data validation checks was not able to be entered, allowed the department to enter the data accurately during the first reporting reopen period. Had the department not entered zeros, data validation errors would have prevented the department from submitting the entire FY2023 ESSER annual report. If no report had been entered as of the initial due date the department would not have been allowed to submit any report at all, which would be less accurate than temporary partial inaccuracy. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DEED is responsible for timely and accurate submission of federal reports and should allocate sufficient resources and strengthen controls to ensure compliance with federal reporting requirements.

Finding No. 2024-032 Federal Awarding Agency: U.S. Department of the Treasury Impact: Material Weakness, Material Noncompliance AL Number and Title: 21.027 Coronavirus State and Local Fiscal Recovery Funds (SLFRF) – COVID-19 Federal Award Number: SLFRP0006, SLFRP2633, SLFRP4544 Applicable Compliance Requirement: Subrecipient Monitoring Condition: During FY 24, DCCED staff did not sufficiently monitor the subrecipient tasked with administering the SLFRF Tourism and Other Businesses program. Furthermore, DCCED management did not take action with respect to the subrecipient’s noncompliance with requirements to obtain a single audit. Context: One of the purposes of the federal SLFRF program was to provide funding to address the negative economic impacts of the pandemic. For this purpose, DCCED entered into a contract with a subrecipient to administer $90 million in grants to tourism and other businesses. The contract required the subrecipient to determine eligibility, send payments to eligible businesses, and provide disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship. The audit determined that DCCED’s monitoring of the subrecipient was insufficient on two grounds. 1. DCCED staff did not perform monitoring activities to verify that the subrecipient was correctly determining eligibility, calculating award amounts, or correctly disbursing funds. DCCED staff reviewed reports and participated in meetings regarding issues raised by the subrecipient or participating businesses. However, DCCED staff did not obtain and review detailed FY 24 disbursement reports, or perform a desk review or onsite visit, to verify the subrecipients compliance with SLFRF program requirements. DCCED staff did not reconcile the total amount of funds DCCED advanced to the subrecipient with the total funds disbursed by the subrecipient. 2. Furthermore, DCCED staff did not ensure that the subrecipient obtained a single or program-specific audit. In FY 22 and FY 23 DCCED advanced a total of $77 million to the subrecipient. The Department of Administration, Division of Finance (DOF) compiles the amount of pass-through funds by subrecipient in order to identify and track subrecipients that must obtain a single audit. DOF sent the subrecipient single audit noncompliance letters for FY 22 and FY 23 and added the subrecipient to the State’s “Delinquent Audits” tracking log, which is posted on DOF’s webpage. However, DCCED staff did not verify the subrecipient’s single audit status and took no action to address the noncompliance. The subrecipient did not obtain a single audit for FY 22 and FY 23. Cause: DCCED lacked resources in its Division of Community and Regional Affairs to administer the SLFRF program. As a result, the program was administered by staff within the Commissioner’s Office that lacked adequate training, knowledge, and experience to administer a federal pass-through program. Consequently, DCCED staff administering the program were not fully aware of federal subrecipient monitoring requirements. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(d) requires pass-through entities to monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with statutes, regulations, and the terms and conditions of the subaward. The amount of monitoring should be commensurate with the subrecipient’s fraud risk and risk of noncompliance. Title 2 CFR 200.332(f) requires pass-through entities to verify that a subrecipient is audited as required by Uniform Guidance Subpart F - Audit. When a subrecipient is noncompliant with the single audit requirement, Title 2 CFR 200.505 states that pass-through entities "must take appropriate action." Authorized action includes withholding payments from the subrecipient or terminating the grant per Title 2 CFR 200.339. Effect: Inadequate subrecipient monitoring increases the risk of subrecipient noncompliance with federal statutes, regulations, and the terms and conditions of a program. Subrecipient noncompliance with the terms and conditions of the federal award could result in the State having to repay SLFRF monies to the federal government. Questioned Costs: None Recommendation: DCCED’s commissioner should ensure compliance with federal subrecipient monitoring requirements through adoption of written procedures and staff training. Furthermore, the commissioner should ensure the SLFRF subrecipient obtains single or program-specific audits for all required fiscal years. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-034 Federal Awarding Agency: U.S. Department of Defense (USDOD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 National Guard Military Operations and Maintenance Projects (NGMOMP) Federal Award Number: W91ZRU-20-2-1001, W91ZRU-21-2-1001, W91ZRU-22-2-1001, W91ZRU-23-2-1001, W91ZRU-24-2-1001 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: The State’s accounting system was not updated for changes to the FFY 24 federally certified Facilities Inventory and Support Plan (FISP), which is used to allocate costs to the NGMOMP program. Context: The FISP is USDOD’s federal registry of real property inventory and includes detailed information of all federal/state owned and state operated Army National Guard (ARNG) facilities within the state. All ARNG facilities are owned by, leased for, or licensed to the State. As a result, the State operates and maintains all ARNG facilities. The FISP identifies the level of federal reimbursement authorized for each real property facility through support codes. National Guard Regulations (NGR) Pamphlet 420-10, Chapter 7, provides the support codes with the corresponding federal funding level percentage (i.e. 100 percent, 75 percent, 50 percent, or no support provided). The FISP is annually updated and certified to identify new facilities, changes in funding support, or facilities no longer supported by USDOD. The certified FISP is provided to DMVA management for tracking of ARNG facilities and determining the appropriate funding levels. DMVA management tracks the facilities using location codes in the State’s accounting system. The appropriate federal and State funding level is assigned to each location code. In FY 24 there were expenditures for 139 facility location codes. The audit reviewed all 139 facilities and found 11 (eight percent) had expenditures allocated at a higher federal rate than authorized in the FISP and one of the 11 locations was not listed on the FISP. Cause: DMVA’s procedures were insufficient to ensure the FISP was reviewed annually to identify changes in the facility support codes that require coding changes in the State’s accounting system. DMVA management also applied a higher reimbursement rate based on misinterpretation of multi-use facilities. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.403 requires costs to be necessary, reasonable, and allocable to the federal award, and to conform to any limitations or exclusions in the federal awards as to types or amount of cost items. NGR 5-1 Section 5-4, dated May 28, 2010, states that when there is an identified cost share in an agreement, the grantor shall reimburse the grantee only for the grantor’s percentage share of the total allowable costs. NGR 420-10, Policy and Guidance for ARNG Facilities Program, dated September 2019, states the rate of reimbursement to the State for all authorized charges shall be based on the FISP support codes for the facility generating the expenditure. Effect: Failing to update the State’s accounting system resulted in DMVA management overcharging expenditures to the federal program. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including withholding/terminating funding. Questioned Costs: AL 12.401: $88,984 Recommendation: DMVA’s Division of Administrative Services (DAS) director and the Army Guard Facilities Maintenance director should strengthen procedures to ensure the State’s accounting system is updated annually based on revisions to the certified FISP and ensure the proper codes are used for multi-use facilities. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-035 Federal Awarding Agency: USDOD Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 NGMOMP Federal Award Number: W91ZRU-23-2-1001, W91ZRU-23-2-1004, W91ZRU-23-2-1005, W91ZRU-23-2-1010, W91ZRU-23-2-1021E, W91ZRU-23-2-1021K, W91ZRU-23-2-1040 Applicable Compliance Requirement: Period of Performance Condition: Six of seven award extensions for the NGMOMP program were untimely. Additionally, one award was not closed timely. Context: National Guard Bureau Grants and Cooperative Agreement Policy Letter 21-07, effective date July 19, 2021, revised the program period of performance requirements for extension requests to be submitted no later than 10 days prior to the end of the 120-day award closeout period. Award extension requests were required to be submitted no later than January 21, 2024. Three of the six extension requests were submitted on January 30, 2024 (nine days late); two were submitted on January 25, 2024 (six days late); and one was submitted on January 22, 2024 (one day late). The policy letter also revised the timeframe for award closeout requiring the grantee to conduct closeout within 120 calendar days from the end of the period of performance. Two awards closed during FY 24, of which one did not have a final accounting submitted within the 120 days. Award closeout was submitted approximately 200 days after the end of the period of performance or approximately 80 days late. Cause: DMVA has written procedures for federal extension requests and award closure. However, competing priorities resulted in untimely submission of extension requests. The final reimbursement requests were submitted to USDOD on January 25, 2024, six days before the end of the closeout period. Federal payment was not received until March 19, 2024. Due, in part, to the untimely receipt of the payments, closeout documentation was not signed by all necessary parties until April 13, 2024. Criteria: Per Title 2 CFR 200.308(e)(2) all requests for one-time extension should be submitted at least 10 calendar days before the conclusion of the period of performance. Title 2 CFR 200.344 prescribes the pass-through entity must close out the federal award when it determines that all administrative actions and required work of the federal award have been completed. A recipient must submit all reports and liquidate all financial obligations no later than 120 days after the conclusion of the period of performance. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Untimely award extension requests and award closeouts may result in unallowable program expenditures. Questioned Costs: None Recommendation: DMVA’s DAS director should follow procedures to ensure cooperative award extensions and award closeout documents are submitted timely, including requesting final payments timely, given the extended timeframe for federal reimbursement. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4646DRAKP00000001, 4667DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 25 FY 24 Disaster Grants payments found that 14 payments (56 percent) lacked required supporting documentation. Specifically, six payments lacked pay policy and/or fringe benefit calculations and eight payments lacked procurement contracts that included all federal requirements. Additionally, two of the eight payments lacked a complete or signed contract on file. Context: The Federal Emergency Management Agency (FEMA) reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. The applicant is required to submit the following documentation to support labor costs claimed: summary of actual costs for completed work, individual information (such as name, job title, type of employee, days and hours worked, pay rate and fringe benefit rate, and a description of work performed), fringe benefit calculation, and pay policy. FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s pre-disaster written pay policy. Six of the 25 transactions included force account labor that was not supported by a pay policy or benefit calculation. FEMA provides public assistance funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contracting requirements. The applicant must include required provisions detailed in Title 2 CFR 200.327 in all contracts awarded and maintain oversight to ensure that contractors perform according to the conditions and specifications of the contract. FEMA reimburses funding for contract costs based on the terms of the contract if the applicant meets federal procurement and contract requirements. Eight of the 25 transactions included contractor payments and, based on review of the contract, not all federally required provisions were included. Two of the eight were not supported by a signed contract. According to DMVA management, contractors were utilized to provide project management of the federal disasters due to an increased workload and a lack of available DMVA staff. Contractors were tasked with gathering the required documents to ensure projects were administered in accordance with FEMA requirements. Cause: Division of Homeland Security and Emergency Management (DHSEM) lacked written procedures for monitoring contractors. Also, due to staff turnover and an increase in workload, DHSEM management did not adequately monitor contractor’s work. Specifically, to ensure the contractor verified the contracts awarded by subrecipients included federal requirements, final signed contracts were provided to the state, and required documentation was received for the reimbursement of subrecipient force account labor costs. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), 2018, which requires labor costs to be supported by specific documentation: summary of actual costs for completed work; for each individual: name, job title and function, type of employee, days and hours worked, pay rates and fringe benefit rate, and description of work performed; fringe benefit calculations; and pay policy. The PAPPG also requires contracts to include the required provisions in Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses in all contracts awarded. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Lack of fringe benefit calculations and pay policy may result in FEMA limiting public assistance funding to the applicant non-discretionary, uniformly applied pay rates. Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: AL - 97.036: $96,758 AL - 97.036 COVID-19: $2,159 Recommendation: DHSEM’s director should develop written procedures for adequately monitoring DMVA contractors to ensure all federally required documentation is obtained to support reimbursements to subrecipients. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-037 Federal Awarding Agency: USDHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award Number: 4646DRAKP00000001, 4661DRAKP00000001, 4672DRAKP00000001, 4730DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of 16 FY 24 Disaster Grants program subrecipients’ obligating award documents (OAD) found seven did not include all federally required information and one was also missing a completed assurances and agreement form. Context: Effective April 4, 2022, the unique entity identifier (UEI) replaced the Data Universal Numbering System number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. DMVA enters into awards with subrecipients using the OAD as the subgrant agreement. The subrecipient’s name and UEI are recorded on the OAD. An assurances and agreement form accompanies the OAD that includes additional federal requirements not included in the OAD. Subrecipients sign the OAD and the assurances and agreement forms certifying and agreeing to the federal requirements. According to DHSEM management, DMVA contractors assisted division staff in completing the OADs with subrecipients and provided project management for the federal disasters. Contractors were needed due to the increased workload resulting from the 2018 Cook Inlet earthquake, COVID-19 pandemic, and state declared disasters. The audit reviewed a random sample of 16 of 143 subrecipients’ OADs, including assurances and agreement forms, and found seven had the following errors: two included a subrecipient’s name that did not match the UEI number provided, of which one also included a period of performance that did not agree with the federally approved project performance period; one did not include a UEI number; one included a name and UEI number that could not be found in the federal system for award management (sam.gov) and did not have the completed assurances and agreement form; and three included a period of performance that did not agree with the federally approved project performance periods. Cause: Due to staff turnover and an increase in workload, DHSEM staff did not monitor contractors to ensure subrecipient information was accurately documented on the OAD, the assurances and agreement form was complete, and information was in sam.gov before issuing the subaward. Furthermore, DHSEM management and contractors lacked procedures to ensure all required information was obtained and documented on the OAD, including adequate DHSEM review procedures. Criteria: Title 2 CFR 200.332 requires pass-through entities ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the required information at the time of the subaward. Required information includes subaward period of performance start and end dates, subrecipient UEI, and the subrecipient’s name, which must match the name associated with the subrecipient’s UEI. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Not providing accurate and complete information in the subaward documents increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DHSEM’s director should develop written procedures and adequately monitor contractors to ensure federally required information is accurately identified on the OAD and completed assurance and agreement forms are received from the subrecipient certifying agreement with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-039 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: Four of 12 randomly selected FY 24 Disaster Grants SF-425 reports tested had incorrect matching amounts, one of which also had an incorrect recipient share of expenditures. Context: The SF-425 is a required quarterly federal financial form used for reporting the financial status of federal grant awards. During FY 24, 15 disasters required quarterly SF-425 reports for a total of 58 reports filed. Twelve of the 58 were selected for testing. Due to incorrect calculations, the matching amounts for four reports were understated. One report also reported incorrect recipient share of expenditures. Cause: The errors were due to insufficient procedures over the preparation and review of SF-425 reports. Criteria: Title 44 CFR 206.120(f)(2) prescribes the State shall provide financial status reports. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: The insufficient internal controls resulted in misreported financial data. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DMVA's finance officer should strengthen written procedures for the preparation and review of the SF-425 report to ensure the reports submitted to FEMA are accurate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-040 Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4646DRAKP00000001, 4648DRAKP00000001, 4667DRAKP00000001, 4672DRAKP00000001, 4585DRAKP00000001, 4730DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 24 Disaster Grants program subawards key data elements in the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Additionally, the names and total compensation of each of the subrecipient’s five most highly compensated executives, if applicable, were not communicated to DMVA’s DAS staff for data entry into FSRS. Context: The FFATA was signed into law on September 26, 2006, with the intent to empower every American with the ability to hold the government accountable for each spending decision. The FFATA legislation requires information on federal awards be made available to the public via a single, searchable website, at www.usaspending.gov. The FFATA FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. To comply with FFATA requirements, DHSEM staff responsible for Disaster Grants program management obtain subawardee information from the OAD and the assurances and agreement document. The OAD is sent to DAS staff for data entry into FSRS. There were 86 Disaster Grants program subawards subject to FFATA reporting during FY 24. The audit reviewed seven randomly and two judgmentally selected subawards, totaling $6,819,071, for compliance and internal controls testing of FFATA reporting requirements. One of the seven (14 percent) subawards, totaling $1,625,735, reported an incorrect subaward project description and three (43 percent) subawards, totaling $369,218, were not reported timely. One judgmentally selected subaward, totaling $164,393, was not reported timely to FSRS, and one, totaling $4,009,660, was not reported at all. An additional 48 subawards were not reported that should have been. Reporting errors are summarized in the table below. Cause: Staff turnover and vacancies contributed to the errors and omissions. Inadequate procedures resulted in highly compensated executive salaries not being communicated to DAS staff. Since the data was entered directly into FSRS, DAS staff stated the system did not allow for review by a supervisor to ensure accuracy of the data prior to submission. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHSEM director to strengthen FFATA reporting procedures to ensure required reports are filed timely and key data elements comply with federal reporting requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-043 Federal Awarding Agency: United States Department of the Interior (USDOI) Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.605,15.611 Fish and Wildlife Cluster (FWC) Federal Award Number: F22AF02164, F22AF01666 and F22AF01963 Applicable Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Condition: Testing a random sample of 60 FY 24 non-personal service expenditures charged to the FWC identified two expenditures that lacked proper approval, and one that charged unallowable costs to the FWC. Context: DFG’s primary internal control over financial transactions is knowledgeable DFG staff review of invoices or other supporting documentation to ensure the costs are allowable, supported, coded to the correct program, and within the period of performance. This review is demonstrated by the approver’s signature on the invoice or other supporting documentation authorizing payment. In FY 22, the processing of DFG transactions transitioned to the Department of Administration’s (DOA) centralized Shared Services of Alaska (SSoA). DFG submits invoices with coding and approval to SSoA to initiate processing. According to SSoA procedures, a final verification of coding and approval by departmental administrative services staff prior to SSoA processing is optional. The audit tested a random sample of 60 non-personal services expenditure transactions. Auditors identified two transactions that lacked DFG staff signature authorization. In addition, one transaction approved by DFG staff totaling $206.24 was not allowable due to the costs being for advertising a big game hunt permit raffle. Cause: DFG management attributed the errors to changes in the internal control environment, specifically the shift in non-personal service expenditure input and certification in the accounting system from DFG staff to SSoA staff. Furthermore, management noted that this transition weakened the control processes and emphasized that unauthorized payments should not have been processed by SSoA staff. DFG management also cited DFG staff turnover and inadequate training as a contributing factor. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that a state is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Per Title 50 CFR 80.54, ineligible activities include those conducted for the primary purpose of producing income. Per Title 2 CFR 200.421, the only allowable advertising costs are those which are solely for: staff recruitment, goods and services for the performance of a federal award, disposal of materials acquired in the performance of a federal award, and program outreach (such as recruiting project participants) and other specific purposes necessary to meet federal award requirements. Effect: Inadequate internal controls increase the risk that expenditures may be unallowable, unsupported, or miscoded. Furthermore, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including adding reporting requirements or withholding/terminating funding. Questioned Costs: ALN 15.611: $206 Recommendation: DFG’s Division of Administrative Service (DAS) director and Division of Wildlife Conservation director should work together to improve training for DFG staff to ensure expenditures charged to FWC are allowable and properly authorized prior to processing by SSoA staff. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-044 Federal Awarding Agency: USDOI Impact: Material Weakness AL Number and Title: 15.605, 15.611 FWC Federal Award Number: Multiple Applicable Compliance Requirement: Equipment and Real Property Management Condition: Auditors could not obtain sufficient and appropriate evidence to verify compliance with FWC’s equipment and real property management requirements. Context: DFG is responsible for ensuring equipment, real property, and capital improvements, acquired with FWC funds, are used for an authorized purpose, sufficiently tracked, and appropriately disposed of in accordance with federal regulations. In FY 24, DFG staff did not maintain sufficient evidence to demonstrate compliance with equipment and real property management requirements. DFG equipment and real property records did not reliably catalog the universe of equipment, real property, and capital improvements funded with FWC grant monies. Equipment records were incomplete and not trackable by funding source in the accounting system. As a result, the audit was unable to determine the extent of equipment purchased with FWC funds. Real property records had not been reconciled since 2019 and could not be matched with DFG site visit logs. The audit could not identify the FWC assets to be monitored and the extent of site visits conducted during the audit period, and whether the site visits included monitoring for authorized uses. Cause: DFG management attributed the deficiencies to a lack of department-wide procedures, staff turnover, and insufficient training. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 2 CFR 200.311 and Title 50 CFR 80.134 requires the State to use real property for the purpose authorized in the grant for as long as it is needed for that purpose. When real property is no longer needed for the originally authorized purpose, property must be disposed of in accordance with federal requirements. Title 2 CFR 200.313 requires the State to use, manage and dispose of equipment acquired under a federal award in accordance with State laws and procedures. Such equipment must be used for the project or program for which it was acquired and for as long as needed. The State agency must maintain equipment property records, perform physical inventory of equipment, develop a control system, and perform regular maintenance of equipment. Title 50 CFR 80.133 requires the State to maintain acquired or completed capital improvements under FWC grants to ensure that each capital improvement continues to serve its authorized purpose during its useful life. Effect: The lack of department-wide procedures increases the risk that FWC funded assets are not used for authorized purposes and properly disposed of when no longer needed. Inadequate equipment tracking increases the risk of loss or theft. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DFG’s commissioner should ensure procedures are developed and training is implemented so that FWC funded equipment, real property and capital improvements are managed in compliance with federal requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-052 Prior Year Finding: Federal Awarding Agency: 2023-032 U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020–2021, Summer 2021 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: DOH’s DPA did not determine or distribute benefits to school children or children in child care in accordance with the process and timeframes in the federally approved state plan. The audit identified the following deficiencies in FY 24: • The children in child care beneficiaries were not identified as required by the school year 2020–2021 state plan. • The per child benefit amount paid to the 15,697 children in child care was understated by $6.21 and 125 children were included in both the student and the child care benefit eligibility lists. • Issuance records provided by DPA’s Electronic Benefits Transfer (EBT) contractor, Fidelity National Information Services (FIS), were $795,659 more than DPA reported issuances. Furthermore, the FIS report included $28,992 in duplicate summer 2021 benefit issuances to school children. • School year 2020–2021 student beneficiaries paid in FY 24 received benefits at least two years late and the children in child care beneficiaries were paid benefits at least 20 months late. Summer of 2021 beneficiaries paid in FY 24 received benefits at least 20 months late. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127) authorized a temporary assistance program for households with children without access to meals in school and to certain Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program school children were eligible for benefits if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. Children enrolled in a child care facility were also eligible for the program if the child was a member of a household that received SNAP benefits after October 1, 2020. P-EBT benefits were to be issued in accordance with a federally approved state plan. DPA and the Department of Education and Early Development, Child Nutrition Services (CNS) section, developed joint plans to issue P-EBT benefits to eligible school children and children in child care for the school year 2020–2021 and summer 2021. The school year 2020–2021 plan was approved by USDA in June 2021 and the summer 2021 plan was approved by USDA in August 2021. The approved plans required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. CNS staff determined school children eligibility and calculated benefits using operating and enrollment information obtained from school districts. DPA staff determined children in child care eligibility for school year 2020–2021 using data from the Eligibility Information System (EIS). DPA issued children in child care benefits to all SNAP eligible children that were under the age of six at any time between October 2020 and June 2021. All children determined eligible at the end of school year 2020–2021 were deemed eligible for summer 2021 benefits. The school year 2020–21 plan outlined that P-EBT benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the plan outlined that benefit issuances to children in child care were to begin September 22, 2021. The summer 2021 plan outlined that benefits to students and children in child care were to be issued in September 2021 and October 2021, respectively. The approved plans also required the State to ensure that children did not receive a child care benefit and a school benefit for the same month. Additionally, the State was to confirm monthly eligibility for SNAP-enrolled children under the age of six living in the area of a school that was closed or operating at reduced attendance. Benefit levels for these children were to be set at the same rate as the average P-EBT benefit for school children in the same area. Furthermore, the State was to identify areas that did not have a school operating at reduced attendance or hours, but were experiencing a reduction in child care access each month using Child and Adult Care Food Program meal claim data provided by CNS. The State was to identify facilities with a 25 percent reduction in meal claims and provide benefits equal to the statewide average P-EBT benefit for school children. DPA was to gather demographic data from the child care facilities to match against SNAP EIS data to identify eligible children. The status of the facilities was to be examined each quarter to determine benefit levels. As noted above, the approved process was not followed and all SNAP-enrolled children under the age of six were determined eligible and received benefits. USDA’s memo approving Alaska’s P-EBT 2020–2021 state plan outlines that any significant impairment in the ability to implement the approved P-EBT plan or substantive changes should be communicated to USDA as soon as possible. No substantive changes regarding the eligibility determination process were communicated by DPA to USDA in FY 24. DPA staff alerted USDA in June 2023 that P-EBT issuances would extend to December 31, 2023. Between July 2023 and April 2024 DPA issued P-EBT benefits (per FIS data) totaling approximately $43.2 million. Cause: DPA management asserted that the children in child care population could not be identified as originally agreed upon under the school year 2020–2021 state plan and that a deviation from the plan was necessary to provide the benefits. The understated benefit amount was due to a calculation error. DPA lacked supervisory review procedures to ensure the accuracy of the benefit calculation and to prevent children from appearing on both student and child care eligibility lists. DPA management and FIS staff could not explain the variance between FIS reported issuance amounts and the amounts reported by DPA staff to USDA. DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing EIS to issue benefits. Delayed payments to SNAP-enrolled school children in child care were ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the State's approved plan. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 5, describes how the State will identify eligible children in child care and calculate benefits. Alaska’s State Plan for P-EBT Children in School and Child Care, 2020–2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The plan outlines that benefits for the period of August 2020 through December 2020 would be issued beginning July 2021 and benefits for January 2021 through June 2021 would be issued beginning August 2021. Alaska’s State Plan for P-EBT Children in School and/or Child care, Summer 2021, section 3 establishes a tentative issuance schedule as September 2021 for school children and October 2021 for children in child care, and USDA encouraged the State to distribute benefits in two or three issuances across the summer of 2021, to the extent practical. Section 3 also outlines the framework for identifying eligible school children and children in child care for summer 2021 P-EBT benefits. USDA Memo, P-EBT Approval of Alaska’s State Plan for Summer 2021, Plan Timetable and Revisions section provides that Alaska will distribute benefits to households consistent with the timeframes identified in the state plan. If any challenges or delays significantly impair the State’s ability to implement the approved plan or require substantive changes to the plan, the State must notify USDA’s Food and Nutrition Services (FNS) regional office as soon as possible. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the federally approved plans may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs were indeterminate due to the unreliability of FIS data. Questioned Costs: AL 10.542: Indeterminate Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. Views of Responsible Officials: The department partially agrees with the finding. The Division of Public Assistance disagrees with the finding regarding issuance timelines. The division communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter our issuance plan. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the division consistently communicated with FNS regarding procedural delays affecting the payment timeline and that FNS did not request an updated timeline; however, DPA management could not provide evidence that FNS waived the requirement to submit an updated timeline.

Finding No. 2024-053 Prior Year Finding: 2023-034 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 24 SNAP benefits reported to USDA as issued by the State’s EBT contractor, FIS, was $2,628,951 more than the amount of authorized benefits reported in data from DPA’s EIS. Furthermore, FIS could not provide a reliable audit trail of issuances. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts, to the State’s EBT contractor, FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 24 the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS data or the amounts reported by DPA to USDA. Furthermore, FIS could not provide a detailed list of issuances to support the monthly amounts reconciled by DPA staff and reported to USDA. As a result, the audit could not verify the accuracy and completeness of benefit calculations. Cause: DPA management and FIS staff could not identify the cause of the variances. DPA’s outdated legacy information system and the lack of daily reconciliations (see Finding No. 2024-055) contributed to the deficiencies. Criteria: Title 7 CFR 274.1(h) requires that the State agency create and maintain a master issuance file that consolidates records of all certified SNAP households, record participation activity for each household, and supply all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $2,628,951 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. Views of Responsible Officials: The department agrees with the finding, but not the questioned cost. The Division of Public Assistance performs monthly reconciliations and balancing efforts to ensure accuracy with routine FIS reports, EIS authorization and issuance reports, and federal reporting. However, the division agrees that a new ad hoc report created for this audit by the EBT contractor, FIS, does not match with issuances and reporting. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states the monthly reconciliations of FIS, EIS, and federal reports ensures the accuracy of issuance data; however, DPA management could not provide evidence that eligibility determinations in EIS supported FIS benefit issuances. Furthermore, FIS payment issuance details did not support the summary data used in the monthly reconciliations.

Finding No. 2024-054 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: Testing of 42 SNAP recipient cases to verify the completeness and accuracy of benefit calculations found 37 (88 percent) were incorrect or unsupported, including 24 (57 percent) in which the recipients’ application or reports of changes were not processed within federally required timeframes. Testing of 42 SNAP recipient cases to verify the adequacy of case information stored in EIS and DOH’s document management system, ILINX, found 18 (43 percent) had inadequate verifications of required information. Context: The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household, less specific allowable deductions. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cut off households at the end of a certification period unless recertified; and provide the data necessary to meet federal issuance and reconciliation reporting requirements. DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies, such as the federal Social Security Administration, State employment security agency, and current employers, to verify the household’s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS’s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews. On November 3, 2023, DOH management submitted a request to FNS to waive federally required interviews and certain verifications of SNAP household eligibility criteria in order to address the ongoing backlog of SNAP cases that built up during the COVID-19 public health emergency. FNS denied the waiver request on November 22, 2023. Disregarding the denial, DOH management informed FNS of the State’s intent to streamline the verification process, whereby ETs, when verifications are not available, authorized SNAP benefits without performing federally required verifications. The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. Of the 42 SNAP cases tested the following errors were identified, and some cases had multiple errors: • Twenty-two SNAP households’ (52 percent) monthly allotment could not be corroborated by the information in EIS and/or ILINX. • Twenty-four SNAP applications (57 percent) were not processed timely. Fifteen of the 24 were processed 100 or more days after receipt by DPA, including one application that was processed after 295 days. • Nine SNAP applications (21 percent) were certified eligible without an interview at initial application or recertification. Cause: To resolve DPA’s backlog of SNAP applications and recertifications, on December 8, 2023, DOH’s Commissioner directed ETs to process all applications, recertifications and renewals without verifying federally required eligibility information. DPA management informed FNS that the State would reassess these temporary processing procedures after six months or earlier. Furthermore, due to competing priorities, quality control reviews were not consistently performed during FY 24. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all case file information necessary for the eligibility determinations and benefit computations including, but not limited to, all household members’ names, addresses, dates of birth, social security numbers, individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information to verify eligibility for, and the amount of, SNAP benefits due to eligible households. Title 7 CFR 273.2(f)(1) requires the State to verify certain household income, expenses, and circumstances necessary to determine eligibility prior to certifying a household for SNAP benefits. Title 7 CFR 273.2(f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination. Effect: Inadequate, outdated, or unsupported case file information increases the risk of incorrect or ineligible benefits. Errors in SNAP determinations could result in further sanctions and/or penalties imposed on DOH. Questioned Costs: AL 10.551: $59,073 Recommendation: DOH’s commissioner should allocate the resources necessary to administer SNAP in accordance with federal regulations. DPA’s director should increase staff training and quality control reviews to help ensure procedures are followed for determining SNAP eligibility and retaining required documentation, including the documentation to support compliance with verifications of income through required data exchanges. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-055 Prior Year Finding: 2023-035 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 23AK35050292301, 24AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 24. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s U.S. Treasury benefit account and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the U.S. Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 24, required daily reconciliations were not performed. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer’s credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: The lack of daily reconciliations increases the risk of unidentified processing errors and unallowable costs, including potential non-federal liabilities. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-056 Prior Year Finding: 2023-038 Federal Awarding Agency: United States Department of Health and Human Service (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Eligibility Condition: Three of 60 TANF recipient case files tested lacked adequate documentation to indicate that the participant met all eligibility criteria. The following errors were noted: • Two cases exceeded the 60-month benefit limit, which resulted in excess benefits. • One case lacked documentation to verify one parent's relational status to the children. Additionally, seven of 60 cases tested had documentation to support individual's eligibility, but lacked sufficient documentation to verify that the key control over compliance occurred. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, the State’s Income Eligibility and Verification System (IEVS), unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into the EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 264.1 stipulates that no State may provide assistance to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: AL 93.558: $ 5,720 (known questioned costs); $ 173,417 (likely questioned costs) Recommendation: DOH management should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-057 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Insufficient documentation was available to support the manual transfer of time originally coded to another federal program to the TANF program. Context: In a statistically valid sample, two of sixty selections showed time coded to the employee’s time sheet for the Low-Income Home Energy Assistance Program (LIHEAP) that was later manually transferred to TANF. During the audit, a verbal explanation was given that this was done for budgetary reasons, as they are similar activities that can be coded to both LIHEAP and TANF. However, there was insufficient documentation to support that the transferred time was reasonable under the TANF program. Both of the deficient selections were for the same employee. Cause: Inadequate understanding of the documentation needed to support manual adjustments to payroll. Criteria: Per 2 CFR 200.430, costs of compensation are allowable to the extent that they are reasonable for the services rendered and conform to the established written policy of the recipient or subrecipient and meet the standards for documentation of personnel expenses, as outlined in 200.430(g). Effect: Unallowable costs may lead to potential penalties, increased audit scrutiny, distorted indirect cost rates, and the need to repay funds. Questioned Costs: AL 93.558: $1,730 Recommendation: DOH management should improve documentation kept to support manual interference with payroll costs. Views of Responsible Officials: The department does not agree with the finding. The Division of Public Assistance (DPA) met with CLA regarding the questioned costs which were explained and documented. For the sample selected, the employee did positive time keep to LDP U6615 - LIHEAP Policy for their time spent processing heating assistance applications. This was during a time when our Policy section was understaffed, and the administrative section absorbed programmatic duties. The division followed the State of Alaska’s payroll correction process. When IRIS-HRM (payroll) interfaced to IRIS-FIN (financial), the payroll transactions errored due to insufficient program budget. The Department of Administration, Division of Finance provides an erroring payroll transaction report. The departments are instructed to update the report with correct financial coding and send to a BOT email address. The BOT enters the correction in the State’s financial system and attaches the spreadsheet to document the update in coding. Department staff do not have permissions to add notes or additional attachments to the payroll transaction. DPA accounting staff reviewed the errored transaction and identified another allowable fund source to code these expenditures to. Therefore, the payroll expenses were adjusted and charged to the TANF program. Auditor’s Concluding Remarks: Cost transfers must be sufficiently documented in accordance with the provisions of the Office of Management and Budget (“OMB”) as part of 2 CFR Part 200, Subpart E (Uniform Guidance). Under the Uniform Guidance, costs must meet the following conditions: • Be necessary and reasonable for the performance of the award and be allocable to the award; • Be allowable (the cost is allowed by federal regulations, sponsor terms and conditions, including program specific requirements); • Treated consistently (a cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost); • Be adequately documented. The Uniform Guidance also states that any cost allocable to a federal award may not be charged to other federal awards to overcome fund deficiencies, to avoid restrictions imposed by regulations of terms and conditions of the federal award, or for other reasons. The auditor concluded that DPA did not have adequate documentation to support the activities the employee provided to the TANF program were allowable.

Finding No. 2024-058 Prior Year Finding: 2023-039 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF’s level of effort and earmarking requirements. Context: The State was unable to provide documentation to show how the State was monitoring the level of effort and earmarking requirements throughout the year. This monitoring is normally done as a part of reporting for the program. Cause: Level of effort and earmarking assessment is done through the ACF-204 reporting process. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. The State’s DOH lacked adequate monitoring procedures, primarily due to turnover and staffing shortages. Criteria: Title 45 CFR 263 states that a state must maintain an amount of “qualified state expenditures” for eligible families at least at the applicable percentage of the state’s historic state expenditures. It also states that a state may not spend more than 15 percent for administrative purposes, excluding certain types of expenditures, of the total combined amounts available. Title 45 CFR 264.72 requires a state to spend more than 100 percent of its historic state expenditures for FY 1994 to keep any of the federal contingency funds it received. Title 45 CFR 264.1 states that the average monthly number of families that include an adult head-of-household or a spouse of the head-of-household who has received federal assistance for a total of five years (60 countable months, whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state has provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Lack of monitoring level of effort and earmarking requirements creates a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DOH management should develop procedures to ensure that monitoring procedures are in place for level of effort and earmarking. This may include allocating resources to correct the supporting documentation used to monitor these requirements. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-059 Prior Year Finding: 2023-040 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Tests and Provisions Condition: One of the 60 cases tested had insufficient documentation to verify work hours which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. One of cases tested had insufficient documentation to verify work hours. Case notes referenced a submitted TA-10 form, however the document was unable to be found for audit purposes. All other elements of compliance were supported. Cause: According to DPA management, the division continues to work through the backload associated with the public health emergency and continues to experience staffing shortages. This has adversely affected DPA resources and impacted the ability to meaningfully execute the corrective action plan. Criteria: Per the 2024 Office of Management and Budget (OMB) Compliance Supplement, "the state agency must maintain adequate documentation, verification, and internal control procedures to ensure the accuracy of the data used in calculating work participation rates." Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. This may require increased resources and training. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-060 Prior Year Finding: 2023-042 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting Condition: No Federal Funding and Transparency Act (FFATA) reports were submitted during the audit period of July 1, 2023 through June 30, 2024. Additionally, the State could not provide evidence that the FFY 23 ACF-204 annual report was completed or submitted to the federal agency. Context: FFATA reports related to 13 subrecipients were not filed during the audit period. Payments to subrecipients total $2,951,541.10 in the audit period. The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort programs for that year. The annual ACF-204 report is due 45 days after the fourth quarter end, however it had not been submitted as of the audit's conclusion. Cause: TANF program management was split between two State departments: DOH and the Department of Community Services (DFCS). Due to the transition, these subrecipients were administered under a reimbursable service agreement and bypassed the necessary flag for reporting. It was unclear which department was responsible for FFATA reporting, resulting in the reports not being filed by either department. DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements for submitting an annual ACF-204 report. Criteria: Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit reports results in noncompliance with FFATA. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH management should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed maintenance of effort expenditures. The State should clearly identify and communicate to the parties responsible for FFATA reporting. The State should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-061 Federal Awarding Agency: USDHHS Impact: Material Weakness, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Each state shall participate in IEVS required by Section 1137 of the Social Security Act as amended. Fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Context: In a statistically valid sample, fifteen of 60 cases tested lacked adequate documentation to indicate if all components of income verification were gathered and processed correctly. Of the deficient cases (note, some cases had multiple deficiencies): • Two of 15 cases lacked evidence to show that the state was using EIS to determine eligibility in accordance with the state plan. • Eight of 15 cases lacked evidence to show the state requested and obtained income verification data from State Wage Information Collection Agency, State unemployment agency, SSA, U.S. Citizenship and Immigration Services, and unearned income from IRS located in the EIS system. • Seven of 15 cases did not have evidence that the management-level pre-authorization review was performed nor that the individual making determinations for the case signed and authorized each step within EIS. Although 15 cases had deficient documentation, each case had some form of income verification documented, implying that all participants would likely have been determined to be eligible if all appropriate steps were taken and all required documentation kept. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of IEVS verification. Criteria: Each state shall participate in the IEVS required by Section 1137 of the Social Security Act as amended. Effect: USDHHS may penalize a state for up to 2 percent of the State Family Assistance Grant for failure to participate in IEVS (42 USC 609(a)(4) and 1320b-7; 45 CFR sections 264.10 and 264.11). Questioned Costs: None Recommendation: DOH management should improve training and supervision to ensure all elements of IEVS determination are performed and adequate documentation is kept. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-062 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2401AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Two of seven non-cooperative cases tested lacked appropriate documentation to support "waived" penalties. Context: In a statistically valid sample, two of seven non-cooperative cases tested lacked appropriate documentation to support “waived” penalties. For both of these, there was no child support information through Appendix D of the application, yet the penalty was "waived" in EIS and not applied to payments. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of child support non-cooperation provisions. Criteria: Per the 2024 OMB Compliance Supplement, if the state agency determines that an individual is not cooperating in regards to establishing paternity or related to a support order, "the TANF agency must (1) deduct an amount equal to not less than 25 percent from the TANF assistance that would otherwise be provided to the family of the individual, and (2) may deny the family any TANF assistance." Effect: USDHHS may penalize a state for up to five percent of the State Family Assistance Grant for failure to substantially comply with this required state child support program (42 USC 608(a)(2) and 609(a)(8); 45 CFR sections 264.30 and 264.31). Questioned Costs: AL 93.558: $ 4,167 Recommendation: DOH management should improve training and supervision to ensure child support noncooperation penalties are appropriately applied. If a penalty is determined to be unapplicable, adequate documentation should be kept to support that determination. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-063 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund Cluster (CCDF) Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Eligibility Condition: The State lacked sufficient documentation, as outlined in the federal requirements and the state plan, to clearly document what services one child was receiving and if they were authorized for services during the period under audit. Context: In a statistically valid sample, one of 60 case files tested lacked sufficient documentation. The one negligent file did adequately support that the child was approved to receive CCDF services, but it was unclear if those services were authorized to continue during the period under audit. Cause: The deficiency was due to inconsistent understanding of what is considered adequate case notes/file documentation. Criteria: Per the 2024 OMB Compliance Supplement, "Lead Agencies must have procedures in place for documenting and verifying eligibility in accordance with …federal requirements, as well as the specific eligibility requirements elected by each Lead Agency in its approved plan." Effect: Failure to accurately document eligibility decisions could result in benefits provided to applicants who are ineligible for CCDF services. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst case workers on the importance of clear documentation and should increase the review of case files to ensure documentation is adequate. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-064 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Reporting Condition: Five of five ACF-696 quarterly reports and three of five FFATA reports selected for testing were submitted after the required due dates. Context: All five ACF-696 quarterly reports tested were submitted later than 30 days after quarter end. Delayed submissions ranged from two to eleven months. Three of five FFATA reports tested were not submitted timely. Delays ranged from four months late to nine months late. Subaward amounts that were not reported timely total $4,382,068.61. Cause: Turnover and staffing shortages amongst staff responsible for reporting and delayed communication between departments who approve awards and those who prepare and submit reports contributed to delayed report submissions. Criteria: Title 45 CFR 98.65(g) requires the State to submit financial reports, in a manner specified by ACF. These reports must be submitted quarterly and are due 30 days after quarter-end. Per 2 CFR Part 170, prime awardees of federal grants are required to report on first-tier subawards, in accordance with FFATA. Per review of the 2024 OMB Compliance Supplement, reports must be submitted in FSRS "no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made." Effect: The State could be penalized for failing to substantially comply with reporting requirements. Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. Failing to submit timely FFATA reports results in noncompliance with Federal Funding Accountability and Transparency Act. Questioned Costs: None Recommendation: DOH management should implement procedures to ensure all reports are prepared, reviewed, and submitted timely. Specific to FFATA, management should implement procedures and controls that require individuals/departments who approve new subaward and subaward amendments to notify the individuals/departments who are tasked with FFATA report in a timely manner so that reports can be prepared, reviewed, and submitted timely. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-065 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.575, 93.596 CCDF Federal Award Number: 2101AKCDC, 2201AKCCDD, 2201AKCCDF, 2301AKCCDD, 2301AKCCDF, 2401AKCCDD, 2401AKCCDF, 2401AKCCDM Applicable Compliance Requirement: Special Tests and Provisions Condition: The State developed a sufficient state plan outlining appropriate procedures for ensuring child care providers serving children who receive subsidies are compliant with relevant health and safety requirements. However, one of 27 selections lacked documentation to adequately support that all controls, as outlined in the state plan, were fully followed. Context: In a statistically valid sample, one of 27 selections had compliance deficiencies related to State created provisions. The deficient selection had adequate documentation to show that the required monitoring checklist had been partially complete during the required annual facility inspection, however significant portions of the checklist were left blank, leading to concern that the inspector may not have thoroughly reviewed all health and safety compliance requirements. Cause: The deficiency was due to inconsistent application of internal processes for completing and documenting facility inspections. Criteria: Per 42 USC 9858c(c)(2)(I) and 45 CFR section 98.41, Lead Agencies must ensure that child care providers serving children who receive subsidies meet applicable health and safety requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Subsidies could be paid to child care providers who do not meet health and safety requirements, which could put children under their care in unsafe conditions. Questioned Costs: None Recommendation: DOH management should implement consistent training amongst staff that perform health and safety inspections. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-066 Prior Year Finding: 2023-050 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 Children’s Health Insurance Program (CHIP) 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021, 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 24 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Fifteen of the 60 cases, two of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. • Sixteen of the 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), one of which was a behavioral health case. • One of the 60 cases' eligibility effective date was earlier than 3 months prior to the month of application. CHIP – 40 of 60 cases had timing issues (note, some cases had multiple deficiencies): • Twenty-eight of 60 cases’ eligibility determinations were not done timely (i.e., within 45 days), two of which were behavioral health cases. • Nineteen of 60 cases, four of which were behavioral health cases, had not gone through a renewal assessment within 12 months of the last determination. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. In a statistically valid sample, 24 of 60 Medicaid cases tested and 40 of 60 cases tested had timing issues. Issues related to renewals not happening within 12 months of the last determination, determinations not being done within 45 days of the application, and eligibility effective dates earlier than three months prior to the month of application. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State was prioritizing SNAP eligibility processing over Medicaid/CHIP. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on Modified Adjusted Gross Income (MAGI), a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CDF 432.915(a) allows for retroactive benefits for up to three months prior to the month of application, if the individual would have been eligible during that period had he or she applied. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 608 (known questioned costs); $81,540,436 (likely questioned costs) AL 93.767: $ 6,888 (known questioned costs); $ 3,482,307 (likely questioned costs) Recommendation: DOH management should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-067 Prior Year Finding: 2023-051 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021, 2405AK5021 2305AK5MAP, 2305AK5ADM, 2405AK5MAP, 2405AK5ADM Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and 60 CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid – 22 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • One of 60 files was approved by the federally facilitated marketplace in 2015 and has been rolling forward ever since with no review and no documentation to support the case as an ongoing Medicaid-eligible case. Electronic review did not have enough information so roll forward was cancelled as of June 30, 2024. In addition: • Ten of 60 cases, one of which was a behavioral health case, lacked documentation to indicate the participant submitted a signed Medicaid application. • Ten of 60 files, one of which was behavioral health, lacked documentation of facts supporting the eligibility determination. • Two of 60 cases were determined to not be part of one of the non-MAGI covered groups and did not fit into one of the MAGI-exempted categories. • One of 60 participants did not meet income eligibility requirements. • Fifteen of 60 cases, five of which are behavioral health, lacked documentation to verify that IEVS was used to verify income eligibility. • Two of 60 cases lacked review by the appropriate staff/supervisor for manual overrides. CHIP – 23 of 60 cases lacked eligibility determination issues (note, some case had multiple deficiencies): • Three of 60 cases lacked adequate support to eligibility determinations/redeterminations, one of which was a behavioral health case. • Two of 60 cases were not covered groups, one of which was a behavioral health case. • One of 60 participant files did not contain a social security number. During testing it was noted that the application was denied once reviewed, but it was initially allowed through the federally facilitated marketplace. • Three of 60 participants received benefits after aging out of the program (age 19). One of these was a behavioral health case. • One of sixty behavioral health case files was missing a CHIP-specific application and support for determination. • Eighteen of 60 case files, four of which were behavioral health cases, lacked sufficient documentation to indicate that IEVS participation was verified. Context: In a statistically valid sample, 22 of 60 Medicaid cases tested and 23 of 60 CHIP cases tested had eligibility determination issues. Issues related to missing support for eligibility determinations, ineligible individuals receiving benefits, missing social security numbers, inappropriate applications, missing IEVS verification, and insufficient case management. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the state plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.907(f) requires that all initial applications are signed. Financial eligibility should be based on MAGI, as described at 42 CFR 435.603, unless an individual is exempted from the use of MAGI, as described at 42 CFR 435.603(j). Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 435.945(g) requires agencies to report information via IEVS. As a condition of eligibility, the CHIP Agency must require individuals to furnish their social security number (42 CFR 457.340(b)). Children up to, but not including, age 19 are eligible for CHIP (Title 42 CFR 457.320). Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.778: $ 5,691 (known questioned costs); $762,897,131 (likely questioned costs) AL 93.767: $ 5,019 (known questioned costs); $ 2,537,251 (likely questioned costs) Recommendation: DOH management should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. Views of Responsible Officials: The department agrees with the finding but does not concur with the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’ Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Finding No. 2024-081 Federal Awarding Agency: U.S Department of Energy, U.S. Department of Defense, National Aeronautics and Space Administration (NASA), and Department of Commerce Impact: Significant Deficiency, Noncompliance AL Number and Title: 81.049, 12.000, 43.001, 11.417 Research and Development Cluster (RDC) Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition: Fifteen of the sampled 40 subrecipient draws, on reimbursement basis, were paid to the subrecipients beyond 30 days of when the University received the payment request. Context: During testing of subrecipient cash management, five grants from University of Alaska Fairbanks (UAF) had fifteen observed instances of individual payments requests from the subrecipient were received by UAF and not disbursed to the subrecipient within the allowable thirty days. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: The federal Government requires that when the reimbursement method is used, the federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: UAF management should work to develop policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-082 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.859 RDC Federal Award Number: 5P20GM103395-23 Applicable Compliance Requirement: Equipment and Real Property Management Condition: One of the 40 sampled equipment had a lapse of greater than two years between physical inventories. Context: During the testing of equipment for real property management, one item of equipment was found to have an interval between physical inventories that was greater than two years. Inventory for this equipment was taken May 7, 2021, then again June 4, 2024. Cause: University of Alaska Anchorage (UAA) had a loss of information regarding compliance requirements through employee turnover at the responsible department level. Criteria: Per 2 CFR 200.313(d)(2), a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: The equipment was not inventoried within the two-year timeframe. Questioned Costs: None Recommendation: UAA management should ensure proper policies and procedures are in place to monitor capital asset inventory observations. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-083 Prior Year Finding: Federal Awarding Agency: National Science Foundation Impact: Significant Deficiency AL Number and Title: 47.076 RDC Federal Award Number: 1839290 Applicable Compliance Requirement: Period of Performance Condition: One of 40 sampled transactions were coded incorrectly to the wrong grant. Context: During testing of period of performance, one transaction was observed that appeared to have been liquidated beyond 120 days after the end of the period of performance. Upon further inspection, we concluded that the transaction was coded to the incorrect grant. The correct grant was still within the 120-day liquidation period after the end of the period of performance. Cause: UAF did not perform timely close out procedures on the grant which resulted in incorrectly coded expenditures to go undetected. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: One transaction was incorrectly coded to the wrong grant. Questioned Costs: None Recommendation: UAF management should adhere to their existing requirements for timely grant close out procedures. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-084 Federal Awarding Agency: NASA and USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 43.001, 93.859 RDC Federal Award Number: 80NSSC22K0579, P20GM103395 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: Two of the sampled 40 covered transactions did not have checks for suspension or debarment with the external parties prior to entering the contract. Context: During the testing of suspension and debarment, two grants from the UAF campus had covered transactions, one a subrecipient and another a procurement transaction, that did not have evidence federal excluded parties list system checks were performed prior to entering into the covered transaction. Cause: UAF did not perform timely review of suspension and debarment listings prior to entering into a covered transaction. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Per 2 CFR 180.300 nonfederal entities entering into a covered transaction are required to verify the entity whom they intend to do business with are not excluded or disqualified. Effect: Potentially suspended or debarred vendor may have been contracted by the University for a covered transaction. Questioned Costs: None Recommendation: UAF management should perform suspension and debarment checks on all covered transactions paid with federal funds. Views of Responsible Officials: Management agrees with this finding.

Finding No. 2024-085 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.031 Higher Education Institutional Aid Federal Award Number: P031R210002-23 Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: One sample of five grants with level of effort provisions in the grant award notification did not meet the level of effort for key personnel required by the federal agency. Context: During testing of special tests and provisions one grant of a sample of five from UAF was observed to not have met level of effort requirements as stipulated in the award documents. The campus had inadvertently submitted an incorrect budget with different key personnel to the agency and did not correct this with the federal agency upon receipt of the award documents stipulating the incorrect key personnel. Cause: An incorrect budget was submitted with the grant proposal to the Federal agency. Criteria: Per 2 CFR 200.308(f)(3) the Federal Government required a recipient of federal awards must receive prior written approval from the Federal agency for the disengagement of key personnel from a project for more than three months, or a 25% reduction in time and effort devoted to the Federal award. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Key personnel listed in the award documents did not have time and effort tracked towards the grant project. Questioned Costs: None Recommendation: UAF management should continue to review budgets and key personnel submitted with grant proposals to Federal agencies. Views of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-026 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Material Weakness, Material Noncompliance AL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425R – Emergency Assistance for Non-Public Schools – COVID-19 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief Fund – COVID-19 84.425W American Rescue Plan – Homeless Children and Youth – COVID-19 Federal Award Number: S425D210020, S425R210001, S425U210020, S425W210002 Applicable Compliance Requirement: Reporting Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.010 Title I Grants to Local Educational Agencies (Title I-A) 84.011 Migrant Education State Grant Program (Title I-C) Federal Award Number: S010A220002, S011A220002 Applicable Compliance Requirement: Reporting Condition: DEED did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 Education Stabilization Fund (ESF) programs, Title I-A, and Title I-C subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. According to DEED procedures, staff prepare a monthly report to be submitted to FSRS within 10 days after the end of the month. DEED has not completed the monthly submission to FSRS since April 2022. The audit found that unreported FY 23 subawards subject to FFATA reporting totaled $19.2 million for ESF programs, $49.3 million for Title I-A, and $20.4 million for Title I-C. Cause: According to DEED staff, uploading reports to FSRS consistently resulted in errors related to the subawardees’ zip codes. The upload errors were time-consuming to resolve and required significant manual input. Due to limited capacity and competing priorities, DEED management instructed staff to disregard procedures and discontinue FFATA reporting until the upload errors could be resolved. According to DEED management, the FSRS help desk was unresponsive in resolving issues with FFATA reporting. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED's Division of Administrative Services director should continue to work with the appropriate federal contacts to resolve FSRS reporting errors and follow procedures to ensure compliance with FFATA reporting requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Labor (USDOL) Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 Workforce Innovation and Opportunity Act (WIOA) cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Reporting Condition: DLWD staff did not file Federal Funding Accountability and Transparency Act (FFATA) reports for FY 23 WIOA cluster subawards. Context: FFATA requires information on federal awards be made available to the public through a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data for first-tier subawards. The audit found eight unreported FY 23 WIOA cluster subawards subject to FFATA reporting totaling $3.4 million. Cause: According to DLWD management, the FFATA reports were not filed due to staff turnover and a lack of procedures. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of the grant award. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient’s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DLWD’s Alaska Workforce Investment Board (AWIB) executive director should develop and implement procedures to ensure compliance with FFATA reporting requirements for WIOA subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOL Impact: Significant Deficiency, Noncompliance AL Number and Title: 17.258, 17.259, 17.278 WIOA cluster Federal Award Number: AA347542055A2, AA363062155A2, AA385152255A2 Applicable Compliance Requirement: Subrecipient Monitoring Condition: WIOA cluster FY 23 subaward agreement forms did not identify the subrecipients’ unique entity identifier (UEI) number. Furthermore, one of three subaward agreements tested did not identify the Assistance Listing number associated with the subaward. Context: Effective April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number as the authoritative identifier for entities doing business with the federal government. All federal award recipients are required to have a UEI. When a state enters into a subrecipient relationship with an entity it must communicate required subaward information to subrecipients including, but not limited to, the subrecipient's UEI and the federal award Assistance Listing number. DLWD management provided subawards to eight entities to administer certain WIOA cluster grants. DLWD staff used a standard subaward agreement form to communicate federally required information to subrecipients. The audit reviewed the subaward agreement form for three of the eight subrecipients and determined the form listed a DUNS number instead of the federally required UEI. Additionally, one of the three forms did not include a complete Assistance Listing number. Cause: AWIB staff review of the grant agreement forms during the award process was insufficient to identify the transition to the UEI. According to DLWD management, the subaward agreement forms were not updated when the federal government transitioned from using the DUNS number to using the UEI. The incomplete Assistance Listing number was due to a human error during the subaward process. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award Title 2 CFR 200.332 requires the State to ensure that every subaward is clearly identified to the subrecipient by communicating certain required federal award information. Information to be communicated at the time of subaward includes the subrecipient’s UEI and the Assistance Listing number. Effect: Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DLWD’s AWIB executive director should strengthen review procedures and update subaward agreement forms to ensure all required federal award information is communicated to subrecipients. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 Fire Management Assistance Grant (FMAG) program Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: Three FY 23 FMAG SF-425 reports were randomly selected for testing. Two reports had incorrect matching amounts and one report for quarter ending September 2022 was not filed. Context: The SF-425 is a required quarterly federal financial form used for reporting on the financial status of federal grant awards. During FY 23, three fires required quarterly SF-425 reports for a total of 12 reports due. Three of the 12 were selected for testing. Due to incorrect calculations, the matching amounts for two SF-425 reports were understated for the quarters ending December 2022 and March 2023 by $946,691 and $62,388, respectively. Cause: Turnover in staff, inadequate written procedures over report preparation, and insufficient supervisory review resulted in reporting incorrect matching amounts. Lack of staff oversight contributed to the one SF-425 report that was not filed. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for FMAG program administration. The plan requires the SF-425 be submitted to the Federal Emergency Management Agency (FEMA) within 30 days after the end of each calendar quarter that reflects financial transactions generated from the accounting system. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effect: The ineffective internal controls resulted in underreported matching amounts in two reports and not filing one report. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DNR’s Division of Forestry director, in conjunction with the SSD director, should update written procedures for the preparation and review of the SF-425 report to ensure the reports are accurate prior to submission to FEMA and should improve oversight to ensure required reports are filed. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 FMAG Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: DNR SSD staff did not file the FY 23 Federal Cash Transaction Reports (FCTR) for quarters ending September 2022, December 2022, and June 2023. The audit reviewed the March 2023 quarterly report filed and determined inaccurate cumulative cash receipts and cash disbursements were reported. Context: As required by federal regulations, DNR uses the U.S. Department of Health and Human Services Payment Management System (PMS) for FMAG cash management. As such, the FCTR reports are required to be submitted in PMS. Each quarter DNR must report FMAG cumulative federal cash disbursements until the State has finished drawing down the FMAG award. Cause: DNR management lacked adequate written procedures over the preparation and review for the FCTR to ensure accurate reporting. According to DNR management, the inaccurate reporting was due to lack of training for new staff. Further, since the data was entered directly in PMS, the system did not allow for review by another staff member to ensure accuracy of the data prior to submission to FEMA. The SSD accountant stated the reports were not filed timely due to human error and uncertainty over which DNR section was responsible for completing and submitting the report. According to DNR management, once the lack of reporting was identified by DNR staff the PMS did not permit delinquent reports to be processed. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for administration of the FMAG program. The plan requires the FCTR be submitted within 30 days after the end of each calendar quarter. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effect: The ineffective internal controls resulted in incomplete and inaccurate federal reporting, which may impair federal decision-making and result in the federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: Division of Forestry’s director, in conjunction with the SSD director, should update written procedures for the preparation and review of the FCTR and properly train new employees on preparation of the FCTR to ensure the data entered into PMS is accurate and reviewed. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.046 FMAG Federal Award Number: 5282FMAKP00000001, 5287FMAKP00000001, 5290FMAKP00000001 Applicable Compliance Requirement: Reporting Condition: Of the two FY 23 FMAG quarterly progress reports (QPR) selected for testing, one was not filed. Testing of the QPR for quarter ending June 30, 2023, identified incorrect amounts and data. Context: QPRs are required to be submitted to FEMA to track and communicate the progress on all open FMAG projects identified in project worksheets (PW). FEMA sends DNR staff the QPR template with highlighted data fields that require update. Errors on the QPR tested for quarter ending June 30, 2023, included amounts for drawdowns and federal funds disbursed during July 2023 for six of the 10 reported PWs, resulting in an overstatement of $6,375,401. All ten PWs reported in the June 2023 QPR had incorrect approved and projected completion dates. The QPR for quarter ending December 31, 2022, was not filed because DNR staff attached an incorrect quarterly report to the email submitted to FEMA. DNR management did not realize the error until an auditor requested a copy. After recognizing the error, DNR staff filed the report for the quarter ending December 2022 in January 2024. Cause: DNR management lacked adequate written procedures over preparation and review to ensure the QPRs were complete and accurate prior to submission as staff relied on FEMA’s general instructions. Human error resulted in the wrong quarterly report being attached to the email. Criteria: Title 44 CFR 204.51(d)(1) requires the State have an up-to-date State Administrative Plan (plan) that describes the procedures for administration of the FMAG program. The plan requires the QPR be submitted to FEMA within 30 days after the end of each quarter. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Effect: Lack of adequate internal controls resulted in a report not being filed and inaccurate data in the filed report. Incomplete and inaccurate federal reporting may impair federal decision-making and may result in federal awarding agency imposing additional conditions or taking corrective action, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: Division of Forestry’s director should improve oversight to ensure reports are filed and should update written procedures for the preparation and review of the QPR to ensure FMAG reports are complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Agriculture (USDA) Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.542 Pandemic Electronic Benefit Transfer Food Benefits (P-EBT) – COVID-19 Federal Award Number: School Year 2020-21 Applicable Compliance Requirement: Activities Allowed or Unallowed, Eligibility Condition: P-EBT benefit payments were not issued in accordance with the process and timeframes outlined in the federally approved state plan. Testing a sample of 136 payments found 37 issuances (27 percent) were sent to unauthorized or unsupported addresses and one issuance included unauthorized benefits. Additionally, no benefits were issued during FY 23 to Supplemental Nutrition Assistance Program (SNAP)-enrolled children in child care. Context: The Families First Coronavirus Response Act (FFCRA) (P. L. 116-127), authorized a temporary assistance program for households with children without access to meals in school and to certain SNAP-enrolled children in child care during the public health emergency declared January 27, 2020. Under the P-EBT program, school children were eligible for the program if the child would have received free or reduced-price meals at a school through the National School Lunch Program if not for a school’s closure, or reduced attendance or hours, for at least five consecutive days due to the COVID-19 pandemic. P-EBT benefits were to be issued in accordance with a federally approved state plan. The Division of Public Assistance (DPA) and the Department of Education and Early Development’s Child Nutrition Services section (CNS) management developed a joint plan to issue P-EBT benefits to eligible school children for the school year 2020–2021. The State’s P-EBT School Year 2020–21 State Plan (Plan) was approved by USDA’s Food and Nutrition Service (FNS) in June 2021. The Plan required CNS to determine eligibility for school age children and DPA to determine eligibility for children in child care. According to the Plan, benefits for the period August 2020 through December 2020 were to be issued beginning July 2021 and benefits for the period January 2021 through August 2021 were to be issued beginning in August 2021. Additionally, the Plan outlined that benefit issuances to children in child care were to begin 106 days subsequent to state plan approval or September 22, 2021. Pursuant to the Plan, CNS staff instructed participating school districts to report monthly enrollment data, school learning models, and number of operating days for each of the district’s schools. Daily benefit levels for each eligible child were equal to the free reimbursement for a breakfast, a lunch, and a snack for the school year 2020–2021. CNS calculated monthly benefits for each eligible child in the household equal to the daily reimbursement rate ($10.99) multiplied by the number of benefit days calculated, as described in the Plan. Eligible student data and benefit amounts were transferred beginning August 2021 to DPA for electronic benefit transfer (EBT) card processing and issuances. The Plan outlined that DPA was to issue benefits through a batch process that would utilize DPA’s vendor-operated SNAP EBT card system; however, batch processing was not functional until June 2023. Rather than using a batch process, DPA staff manually entered student data and CNS authorized benefits directly into FIS’s system interface, ebtEDGE. The information entered into ebtEdge was not reviewed prior to submission. DPA staff began processing P-EBT school year 2020–2021 payments during June 2022, one year after the end of the 2020–2021 school year. During FY 23, DPA staff processed 58,433 P-EBT benefit transactions totaling $33.7 million based on the CNS eligibility data. No benefits were issued in FY 23 to SNAP-enrolled school children in child care. Of the 38 issuance errors identified by auditors, one issuance included $24 of unauthorized benefits, 30 went to an address that did not match the address provided to auditors by CNS, and six were issued without an address. Cause: DPA management asserted that benefit issuance delays were attributable to untimely receipt of eligibility data from CNS and system limitations that prevented the division from utilizing the Eligibility Information System (EIS) to issue benefits. Due to competing priorities, DPA was unable to establish batch processing procedures with the State’s EBT contractor, Fidelity Information Services (FIS), to efficiently and effectively issue benefits. The lack of batch processing led DPA management to implement a manual process whereby a team of four staff manually entered eligible student information directly via ebtEDGE. Management believed limiting the size of the team issuing benefits mitigated potential risks of data entry errors and unauthorized issuances. However, the manual process and small team significantly delayed the issuance process. Additionally, DPA management did not implement pre or post payment review procedures to ensure errors were prevented or detected. Furthermore, the lack of payments to SNAP-enrolled school children in child care was ascribed to competing priorities and difficulty identifying child care facility closures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. FFCRA, Pub. L. 116-127, Section 1101 and federal program guidance required that P-EBT benefits be issued in accordance with the state's approved plan. Alaska’s State Plan for Pandemic EBT Children in School and Child Care, 2020-2021, section 7, establishes the framework for initial retroactive payment to eligible children from the beginning of the school year to June 2021. The Plan outlines that benefits for the period of August 2020 through December 2020 be issued beginning July 2021 and benefits for January 2021 through June 2021 be issued beginning August 2021. In FNS’s memo approving the Plan, the federal agency states that benefits should be issued as soon as possible following state plan approval. Effect: The delayed P-EBT payment processing reduced access to food benefits. Significant delays in issuing benefits increased the risk that eligibility data had grown stale and intended recipients did not receive the benefits. DPA management’s noncompliance with the Plan may result in the federal awarding agency issuing sanctions or disallowances. Questioned costs are the total costs associated with the 38 erred issuances. Based on the high error rate, additional questioned costs are likely. Questioned Costs: AL 10.542: $27,387 Recommendation: DOH’s commissioner should allocate the resources necessary to ensure effective systems are in place to properly administer federal programs. View of Responsible Officials: Management partially agrees with this finding. DPA communicated with FNS regarding manual benefit issuance for Alaska expressing timelines would be affected and FNS did not request an updated timeline. Communication with FNS regarding issuance remained consistent, with no indication to alter the issuance plan. Address verifications were conducted at the time of benefit payment, because addresses are subject to change from the date of eligibility. Updates to addresses were made when more recent information became available. DPA has no control over DEED eligibility records including the addresses they have on file. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management asserts that the division has no control over Department of Education and Early Development (DEED) eligibility records and that beneficiary addresses were verified at the time of benefit payment. Auditors noted benefit payments were based on DEED eligibility records and DOH did not maintain support for address changes.

Prior Year Finding: 2022-031 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: DPA management instructed staff to extend SNAP six-month certification periods after an approved waiver expired bypassing required eligibility recertifications. Furthermore, DPA continued to extend six-month certifications for consecutive periods without recertifying eligibility after being notified by the federal award agency that the practice was unallowable. Context: A state must certify each SNAP-eligible household for a definite time period. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month a household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period. Eligibility must be redetermined before a household receives benefits for a new period. In response to the COVID-19 disaster, USDA’s FNS issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications or back-to-back six-month extensions were not allowable. The final FNS COVID-19 waiver allowing certification period extensions expired July 31, 2022. Cause: The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled by DPA management during the COVID-19 public health emergency and was not reactivated until June 2023. DPA management directed staff to automatically extend certification periods to help reduce a backlog of SNAP benefit applications. Criteria: Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers’ calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to: all household members’ names, addresses, dates of birth, social security numbers, and individual household members’ earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households’ circumstances. Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska’s approved SNAP Plan of Operation. Title 7 CFR 273.14(a) prescribes that no household may participate beyond the expiration of the certification period assigned in accordance with 273.10(f) without a determination of eligibility for a new period. Furthermore, the State must establish procedures for notifying households of expiration dates, providing application forms, scheduling interviews, and recertifying eligible households prior to the expiration of certification periods. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities for the State to obtain a full understanding of a household’s circumstances and make necessary adjustments. Effect: The lack of regular eligibility recertification increases the likelihood of ineligible recipients receiving unallowable SNAP benefits. Continued extensions of certification periods without accompanying reviews erodes the accuracy and relevance of eligibility data over time. If FNS concludes that the State was negligent in household certification, FNS may invoice the State for an amount equivalent to the benefits issued due to such negligence. Moreover, the adoption of extensive certification period extensions could lead to substantial rises in case processing backlogs when the extensions conclude and the State returns to standard operations. Questioned Costs: AL 10.551: Indeterminate Recommendation: DPA’s director should ensure SNAP benefit recertifications are performed in accordance with federal regulation. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and Provisions Condition: The amount of FY 23 SNAP benefits reported as issued by the State’s EBT contractor was $19,689,126 more than the amount of authorized benefits reported in data from DPA EIS. Context: DPA relies on the legacy eligibility system, EIS, to determine eligibility for SNAP and calculate monthly benefit amounts. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. Each day EIS transmits an issuance batch file, including authorized beneficiaries and benefit amounts to FIS, which maintains accounts for each beneficiary. When an EBT card is utilized by a beneficiary, FIS functions as the intermediary between the State’s U.S. Treasury benefit account and the retailers by settling SNAP benefit transactions with retailers before drawing down federal reimbursement. The State is required to ensure its automated data processing systems accurately and completely process and store all case file information for eligibility determinations and benefit calculations and provide the data necessary to meet federal issuance and reconciliation reporting requirements. A reconciliation of FIS issuance records with EIS authorized beneficiaries and benefit amounts demonstrates the completeness and accuracy of the EBT process. In FY 23, the EIS benefit data provided by DPA could not be reconciled to the amount of SNAP benefits issued per FIS. As a result, the audit could not verify the accuracy and completeness of benefit calculations nor evaluate the eligibility and benefit determination information stored in EIS. Cause: DPA management could not identify the cause of the variance. DPA’s outdated legacy eligibility system and a lack of daily reconciliations (see Finding No. 2023-035) contributed to the inability to maintain adequate supporting records. Criteria: Title 7 CFR 274.1(h) requires that the state agency create and maintain a master issuance file that consolidates records of all certified SNAP households, records participation activity for each household, and supplies all information necessary to fulfill the reporting requirements outlined in Title 7 CFR 274.4. Title 7 CFR 274.4(a)(1) requires the State to reconcile benefits posted to household accounts on the central computer against benefits on the issuance authorization file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Significant discrepancies between EIS benefit data and the EBT contractor’s issuance records undermines confidence in the eligibility system and may be indicative of significant unidentified processing errors. Inadequate system processing increases the risk of incorrect or ineligible benefits. Questioned Costs: AL 10.551: $19,689,126 Recommendation: DPA’s director should identify the cause of the discrepancies between EBT contractor issuance data and the State’s eligibility system, and take action necessary to ensure SNAP benefit payments are supported by eligibility and benefit data. View of Responsible Officials: Management disagrees with this finding. DPA performs monthly reconciliations and balancing efforts to ensure accuracy with FIS, EIS, and reporting. No discrepancies have been identified by DPA. None of the parties involved in the audit have been able to pinpoint the origin of the discrepancy described in this finding. DPA’s monthly reconciliation processes are rigorous, consistent, and thorough, ensuring accuracy and alignment with USDA data from AMA Bank. The reconciliation efforts encompass federal SNAP reports: FNS 388, FNS 46, and the EIS Balance Issuance report, all of which consistently reconcile. The reconciliation extends to ASAP and AMA batch values, with annual certification further validating accuracy. Monthly, the AMA raw data is meticulously balanced in the 388/46 reports, with only the P-EBT and EA issuances requiring manual entry from the 292B report. With this steadfast commitment to monthly reconciliation and alignment with AMA data, management is confident in the absence of errors or discrepancies. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. DOH management states that the monthly reconciliation of summary EIS and benefit issuance data suggests the absence of errors or discrepancies; however, DPA management could not demonstrate that eligibility determinations and benefit payment details in EIS supported the benefit issuance data.

Prior Year Finding: 2022-033 Federal Awarding Agency: USDA Impact: Material Weakness, Material Noncompliance AL Number and Title: 10.551, 10.561 SNAP Cluster Federal Award Number: 22AK35050292301, 23AK35050292301 Applicable Compliance Requirement: Special Tests and Provisions Condition: Daily SNAP EBT reconciliations were not performed in FY 23. Context: A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with a state’s US Treasury benefit account, and FIS’s records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions. In FY 23, required daily reconciliations were not performed. However, according to DPA management, monthly reconciliations were performed as part of the federal reporting process. Cause: According to DPA management, daily reconciliations were not performed due to staff turnover, inadequate procedures, and the lack of trained staff. In addition, management indicated monthly reconciliations provide sufficient assurance of accurate processing. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 7 CFR 274.4(a) requires that State agencies account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows: • Verification of retailer's credits against deposit information entered into the automated clearinghouse network; and • Reconciliation of total funds entered into, exiting from, and remaining in the system each day. Effect: An inconsistent reconciliation process increases the risk of unidentified processing errors and unallowable costs. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these requirements may result in a suspension or disallowance of the federal share of the State’s administrative funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement daily reconciliation and monitoring procedures, and train staff to ensure daily reconciliations are conducted in accordance with federal regulations. DPA should consult FNS for program guidance regarding reconciliation requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDA Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children Federal Award Number: 227AKAK7W1003, 227AKAK7W1006, 237AKAK7W1003, 237AKAK7W1006 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition: For one of five procurement contracts selected for testing, the State could not provide documentation of the procurement method chosen and the procurement exceeded the threshold required for competitive bidding procedures. Context: The State is required to follow its own procurement policies and procedures as outlined in the Alaska Administrative Manual (AAM) Section AAM 81 “Procurement”. The Alaska Administrative Manual Section AAM 81.020 requires procurements more than $10,000 and less than $50,000 to involve obtaining at least three quotes or informal proposals. Cause: The vendor provided services that were previously under the micro-purchase threshold for procurement, which did not require competitive bidding procedures. The level of activity with the vendor increased and exceeded the threshold for competitive bidding procedures to be completed by the State. Criteria: 2 CFR, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart C, §200.317 requires states to follow their procurement policies and procedures. Effect: It is important for the Department to obtain and maintain appropriate documentation to support procurement decisions. Otherwise, a procurement decision would be unsupported and could lead to questioned costs. Questioned Costs: None Recommendation: The State should provide training to employees to ensure that goods and services procured are done so in accordance with the State’s procurement policy. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.268 Immunization Cooperative Agreements (ICA) Federal Award Number: NH23IP922592 Applicable Compliance Requirement: Reporting Condition: One of two annual ICA SF-425 Federal Financial Reports tested (50 percent) had inaccurate information reported on two separate line items. Context: The annual SF-425 report includes cumulative federal cash receipts and disbursements, total federal funds authorized, and the federal share of expenditures and unliquidated obligations. USDHHS’s Centers for Disease Control and Prevention requires the submission of an annual SF-425 report for each open grant subaccount. During FY 23, DOH submitted six ICA SF-425 reports, of which two were tested. The audit identified two separate line items on one report that were not supported by the accounting records. DOH staff underreported the federal share of expenditures by $160,471 and the federal share of unliquidated obligations by $2.8 million. Cause: Errors were due to staff turnover and insufficient training. Review procedures were insufficient to identify incorrect data prior to report submission. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Title 45 CFR 75.341 requires states to report financial information on the forms approved by the federal Office of Management and Budget, with the frequency required by the federal award. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. Questioned Costs: None Recommendation: DOH’s DFMS director should improve training for federal reporting and strengthen review procedures to ensure compliance over ICA financial reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-038 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Two of sixty TANF recipient case files tested lacked documentation supporting the eligibility of the recipient. The following errors were noted: • One case did not include child support documentation in the case file. • One case was for a person who was part of a family who had received assistance under TANF for more than the 60 months in another state and moved to Alaska and continued to receive assistance. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. The State reviews applications, identifies income and financial resources, and makes a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, IEVS, unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. The State’s TANF manual provides guidance on how to calculate income. Once the information is received, reviewed, and calculated, it is entered into EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly. DOH’s DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. Cause: Turnover, staffing shortages, and inadequate training contributed to not performing and/or documenting all required components of eligibility determinations and not accurately terminating benefit amounts. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 264.1 stipulates that no State may provide assistance to a family that includes an adult head-of-household or a spouse of the head-of-household who has received Federal assistance for a total of five years (i.e., 60 cumulative months, whether or not consecutive). Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Effect: Ineligible recipients may have received benefits. Questioned Costs: $7,909 Recommendation: DOH should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-039 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF’s level of effort and earmarking requirements. Context: The State was unable to provide documentation to show how the State was monitoring the level of effort and earmarking requirements throughout the year. This monitoring is normally done as a part of reporting for the program. Cause: DOH lacked adequate monitoring procedures due to staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements. Criteria: Title 45 CFR 263 states that a state must maintain an amount of “qualified state expenditures” for eligible families at least at the applicable percentage of the state’s historic state expenditures. For the Pandemic Emergency Assistance Fund, must only use the funds to supplement and not supplant other federal, state or local funds. It also states that a state may not spend more than 15 percent for administrative purposes, excluding certain types of expenditures, of the total combined amounts available. Title 45 CFR 264.1 states that the average monthly number of families that include an adult head-of-household or a spouse of the head-of-household who has received federal assistance for a total of five years (60 countable months, whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state has provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Lack of monitoring level of effort and earmarking requirements creates a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DOH should develop procedures to ensure that monitoring procedures are in place for level of effort and earmarking. This may include allocating resources to correct the supporting documentation used to monitor these requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-040, 2022-042 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting, Special Test and Provisions Condition: One of the sixty cases tested (1.6 percent) had reported work activities that could not be supported by appropriate documentation which resulted in these work activities being reported inaccurately in the ACF-199 report. Context: The State reports the work verification data through the quarterly ACF-199 reports. The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. Cause: The State continues to unwind procedures used during the Public Health Emergency (PHE) and restore monitoring procedures to catch errors in reporting and documentation. Criteria: Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 265.7(a) requires each state’s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems. Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual’s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: The State could be subject to a penalty if reported data is not supported by accurate documentation. Questioned Costs: None Recommendation: The State should implement procedures to ensure supporting documentation is complete to support data reported on the ACF-199. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-043 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: The audit reviewed 60 TANF case files for clients that were not engaged in work activities. Of the 60 cases, there were exceptions noted with 9 of them (15 percent). The following errors were noted: • Five were not assessed a penalty timely even though documentation showed that a penalty should have been assessed. • Two cases lacked sufficient documentation to determine whether a penalty should have been assessed. • Two cases’ benefit payments were incorrectly calculated based on the documentation. Context: The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experience that lead directly to employment, and increase the family’s self-sufficiency. To comply with the work first goal, State staff, with the assistance of contracted case managers, identify the work activities for the TANF recipients to help them move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment. Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of childcare, no childcare funds, or no transportation funds. Where applicable, exemptions must be documented by a physician or other licensed medical professional. Cause: The State’s turnover, shortages and lack of training contributed to the State not issuing penalties. The State is also addressing the unwinding of procedures used when the PHE was in place. Criteria: Title 45 CFR 261.14 requires the State to reduce or terminate the amount of public assistance to families of individuals who refuse to engage in work. Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: According to 45 CFR 261.54, the State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for failing to assess penalties when individuals refuse to engage in work activities. Questioned Costs: None Recommendation: DOH should improve training and supervision to ensure TANF recipients’ refusal to work penalties are processed and benefits are adjusted accordingly. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-044 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Reporting Condition: The State could not provide evidence the FFY 22 ACF-204 annual report was completed or submitted to the federal agency. Context: The State must complete and file an annual report containing information on the TANF program and the State’s maintenance of effort (MOE) programs for that year. Cause: DOH experienced staffing shortages and unreliable data impeded the staff’s ability to monitor compliance with federal requirements. Criteria: Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state’s maintenance of effort program(s) for that year. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Unreliable federal reporting limits transparency and may impair the federal oversight agency’s ability to properly oversee the program. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Questioned Costs: None Recommendation: DOH should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed MOE expenditures. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANF, 2301AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: The audit reviewed 25 TANF case files for beneficiaries who were single custodial parents caring for a child who is under 6 years of age and had their benefits reduced or terminated. Of the 25 cases, there were exceptions noted with 4 of them (16 percent). The following errors were noted: • Two were assessed a penalty for too long due to untimely review of the case. • Two cases lacked sufficient documentation to support the penalty decision. Context: The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experience that lead directly to employment, and increase the family’s self-sufficiency. To comply with the work first goal, State staff, with the assistance of contracted case managers, identify the work activities for the TANF recipients to help them move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment. Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of childcare, no childcare funds, or no transportation funds. Where applicable, exemptions must be documented by a physician or other licensed medical professional. Cause: The State’s turnover, shortages and lack of training contributed to the State not issuing penalties. Although the State had procedures for monitoring the case files, this monitoring was not always catching the errors. Criteria: Title 45 CFR 261.15 stipulates that the State may not reduce or terminate the amount of public assistance based on an individual's refusal to engage in required work if the individual is a single custodial parent caring for a child under age six who has a demonstrated inability to obtain needed child care. Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: According to 45 CFR 261.57, the State could be subject to a penalty by reducing the State Family Assistance Grant payable to the State by no more than five percent for the immediately succeeding fiscal year. Questioned Costs: None Recommendation: DOH should improve training and supervision to ensure TANF recipients’ are not assessed a penalty when such a penalty is not required. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency Assistance Listing Number and Title: 93.568 Low-Income Home Energy Assistance Program (LIHEAP) Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Internal control weaknesses were identified over logical access to the system used to process energy assistance applications. Context: The details related to this control weakness and relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Details related to the cause of the control weaknesses are being withheld from this report to prevent the weaknesses from being exploited. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. State of Alaska Information Security Policies provide specific criteria related to the identified deficiencies. Effect: Deficiencies in internal controls increase the risk of unauthorized system use which may lead to inaccurate eligibility determinations or unallowable costs. Questioned Costs: None Recommendation: DPA’s director should strengthen controls over logical access to the system used to process energy assistance applications. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-046 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA, 2301AKLIEA Applicable Compliance Requirement: Eligibility Condition: Twenty-two of 60 LIHEAP applicant case files tested (37 percent) had eligibility errors. Some of the cases had more than one of the following errors: • Eight cases (13 percent) had the benefit amount incorrectly calculated based on incorrect data input by an eligibility technician (ET) in the Energy Community Online System (ECOS). The errors resulted in overpayments or underpayments to beneficiaries. In three of the eight cases, system defects caused or contributed to the errors, which were not identified by ETs during processing. • Five cases (eight percent) lacked documentation supporting the income used by an ET to determine eligibility. • Six cases (10 percent) lacked documentation showing the applicant’s income was verified by an ET. • Four cases (seven percent) lacked proof of the applicant’s heating costs. • Five applications (eight percent) could not be located by DPA staff. • Four cases (seven percent) had incorrect income used by an ET when determining eligibility. The four errors did not impact the eligibility determination. Context: The State is required to only make payments to low-income households that pay a high proportion of income for home energy needs. DPA is responsible for determining eligibility for heating assistance payments. DPA employs ETs who review applications; identify and verify income, financial resources, and heating costs; verify identity, residency, citizenship and/or alien status of applicants and household members; and make determinations whether individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal and state regulations. Procedures are documented in the DPA Administrative Procedures Manual and the Heating Assistance Policy (HAP) Manual. A central document repository system stores all documents DPA obtained to verify eligibility in FY 23. Applications are processed by DPA ETs through ECOS. To ensure that the highest level of assistance will be furnished to households with the lowest incomes and highest energy costs in relation to income, ECOS assigns points to applications based on information entered by ETs in ECOS such as income, household size and composition, dwelling type and size, and heating source. The number of points is multiplied by a predetermined rate to determine the heating assistance payment. ETs review and certify the point and payment amount calculated by ECOS. Cause: According to DPA management, deficiencies were due to human error, staffing shortages, inadequate training, and system defects. In addition, the DOH commissioner approved a simplified process to address a backlog of applications, which led ETs to not consistently confirm income and other eligibility requirements. Further, there was no case review quality control process in place during FY 23. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The DPA Administrative Procedures Manual requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness and accuracy of the determination. The HAP Manual requires ETs to maintain records, including applications for certification and recertification, worksheets used in the computation of income for eligibility and the basis of issuance, documentation including verification methods used by the ET, and any other data that affects a household’s eligibility or basis of issuance. Title 42 U.S. Code 8624(b)(2)(B) requires states make payments to households with incomes which do not exceed the greater of (i) an amount equal to 150 percent of the poverty level for such state; or (ii) an amount equal to 60 percent of the state median income; except that a state may not exclude a household from eligibility in a fiscal year solely on the basis of household income if such income is less than 110 percent of the poverty level for such state, but the state may give priority to those households with the highest home energy costs or needs in relation to household income. Effect: Inadequate internal controls increase the risk that ineligible recipients received heating assistance payments and that eligible recipients received incorrect payments. Auditors found eight recipients had benefits incorrectly calculated, resulting in overpayments and underpayments. The errors resulted in questioned costs totaling $8,685. Questioned costs for the population are projected to be $1,324,997 based on the dollar of noncompliance observed in the sample projected over the tested population. Questioned Costs: $8,685 Recommendation: DPA’s director should strengthen internal controls by improving employee training, resolving system defects, and implementing a case review process to ensure LIHEAP eligibility determinations are accurate. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-047 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: DPA did not maintain adequate controls to monitor and ensure compliance with the following earmarking requirements: no more than 10 percent of a state’s LIHEAP funds for a federal award may be used for planning and administrative costs and no more than 15 percent of the greater of the funds allotted or funds available may be used for low-cost residential weatherization or other energy-related home repairs. Context: The federal LIHEAP grant was awarded for a two-year grant period. The State may use an amount not to exceed 10 percent of the funds payable to the State under the award for planning and administering the use of LIHEAP funds. The State may also allocate up to 15 percent of LIHEAP grant funds to weatherization and energy conservation measures. Planning and administrative costs, as well as weatherization costs, not used in the first year may be used in the second year for administrative and weatherization purposes as long as the 10 and 15 percent limits, respectively, are not exceeded, and as long as the costs do not exceed the amount carried over (capped at 10 percent of the award). As of June 30, 2023, DPA had expended more than 10 percent of the FFY 22 grant award for planning and administrative costs. FFY 22 grant awards totaled $11,817,255 and DPA expended $1,759,827 (15 percent) for planning and administration through June 30, 2023. Although the federal grant compliance period for earmarking was outside the audit period, auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement and there would likely be noncompliance in FY 24. Further, for the FFY 22 grant award, DPA staff reported obligating $1,969,014 (17 percent) for weatherization costs through September 30, 2022. Auditors’ review of accounting records showed the amount reported was incorrect and DPA obligated only $600,000 (five percent). Auditors noted that DPA lacked effective internal controls to monitor compliance with the earmarking requirement. Cause: DPA lacked procedures to monitor and track funds. According to management, the lack of procedures was the result of staff turnover and a lack of training regarding internal control requirements over federal programs. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per 42 U.S.C. 8624, each state desiring to receive an allotment for Low-Income Home Energy Assistance must submit an application to the Secretary of USDHHS that certifies the state agrees to meet the following: • the state may use for planning and administering the use of funds under this title an amount not to exceed 10 percent of the funds payable to such state under this title for a fiscal year; and the state will pay from non-federal sources the remaining costs of planning and administering the program assisted under this title and will not use federal funds for such remaining cost; and • not more than 15 percent of the greater of the funds allotted to a state under this title for any fiscal year, or the funds available to such state under this title for such fiscal year, may be used by the state for low-cost residential weatherization or other energy-related home repair for low-income households, particularly those low-income households with the lowest incomes that pay a high proportion of household income for home energy. Effect: The lack of procedures to ensure compliance with LIHEAP earmarking requirements could result in unallowable expenditures. Auditors noted the 10 percent threshold for planning and administration for the FFY 22 awards had already been exceed by $578,101 as of June 30, 2023. Funds exceeding the 10 percent threshold will need to be returned to the federal government at the end of the grant period. Further, the lack of procedures could lead to ineffective management of grant awards and increase the risk of noncompliance. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve staff training to ensure compliance with LIHEAP earmarking requirements. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Period of Performance Condition: DPA obligated more than 10 percent of the FFY 22 grant award during the second fiscal year of the award. Context: The LIHEAP federal grant award was awarded for a two-year grant period, of which a maximum of 10 percent may be carried over or obligated in the second year. FFY 22 grant awards totaled $11,817,255, of which $1,181,726 (10 percent) was allowed to be carried over to the second year of the award. DPA obligated $1,203,167 during the second year of the award through June 30, 2023, which exceeded the allowable amount by $21,441. Cause: DPA lacked procedures for monitoring and ensuring compliance with period of performance requirements. According to DPA management, the lack of procedures was the result of staff turnover and inadequate oversight. Criteria: Title 45 CFR 96.14(a)(2) establishes the following time period for obligation and expenditure of LIHEAP grant funds: beginning with allotments for fiscal year 1994, a maximum of 10 percent of the amount payable to a grantee may be held available for the next fiscal year. No funds may be obligated after the end of the fiscal year following the fiscal year for which they were allotted. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The lack of procedures increases the risk of noncompliance with LIHEAP period of performance requirements, which could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: DPA’s director should develop and implement procedures and improve oversight to ensure compliance with LIHEAP period of performance requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-049 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.568 LIHEAP Federal Award Number: 2201AKLIEA Applicable Compliance Requirement: Reporting Condition: Key line items for the FFY 22 LIHEAP Performance Data Form, FFY 22 Annual Report on Households Assisted by LIHEAP, and Quarterly Performance and Management Reports were not accurate or not supported by accounting or other records. In addition, the FFY 22 LIHEAP Carryover and Reallotment Form was not submitted within required timeframes. Context: LIHEAP grant awards include reporting requirements for financial, performance, and special reports. Except for Quarterly Performance and Management Reports, all reports are required to be submitted on an annual basis with varying due dates. The LIHEAP Carryover and Reallotment Form for FFY 22 grant awards was due on December 30, 2022, and submitted by DPA staff in July 2023. DPA staff rely on ECOS data for performance and special reporting. DPA staff’s ability to generate reports from ECOS was limited, necessitating DPA staff to work with the vendor to obtain data necessary for reporting. In FY 23 there were no established procedures to dictate the steps necessary to compile data from ECOS for each reporting line, and to create, review, and submit required reports. Cause: Errors were due to a lack of procedures for preparing the reports, as well as the absence of review by an individual other than the preparer of the reports. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Low-Income Home Energy Assistance Act of 1981 (Title XXVI of the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, as amended) section 2610 requires the collection of data, including information concerning home energy consumption, the amount, cost, and type of fuels used for households eligible for assistance under this title, the type of fuel used by various income groups, the number and income levels of households assisted by this title, the number of households that received such assistance and include one or more individuals who are 60 years or older or disabled or include young children and any other information determined to be reasonably necessary to carry out the provisions of this title. Collection of this data is facilitated through the LIHEAP performance data form and quarterly performance and management reports. Title 45 CFR 96.81 requires the State to submit a report by August 1st of each year, containing the amount of funds that the State requests to hold available for obligation in the next (following) fiscal year, not to exceed 10 percent of the funds payable to the grantee; a statement of the reasons that this amount to remain available will not be used in the fiscal year for which it was allotted; a description of the types of assistance to be provided with the amount held available; and the amount of funds, if any, to be subject to reallotment. USDHHS shall make no payment to a state for a fiscal year unless the state has complied with this paragraph with respect to the prior fiscal year. A LIHEAP Action Transmittal issued by USDHHS required grantees to submit estimated and final versions of the FFY 22 Carryover and Reallotment Report by November 1, 2022, and December 30, 2022, respectively. Title 45 CFR 96.82 requires the State to submit data on the number and income levels of households that apply and the number that are assisted with funds for the 12-month period corresponding to the federal fiscal year (October 1–September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance. Effect: Inaccurate federal reporting may impair the federal oversight agency’s ability to properly oversee the program. In addition, noncompliance with the LIHEAP reporting requirements could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds. Questioned Costs: None Recommendation: The DPA director should develop and implement procedures to ensure compliance with LIHEAP performance and special reporting requirements. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-052 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children’s Health Insurance Program 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies. An examination was not performed in FY 23, however certain deficiencies noted in the FY 22 report have not been alleviated in FY 23. Context: ARIES is an eligibility system developed for Medicaid and CHIP. Cause: Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls. Effect: The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs. Questioned Costs: None Recommendation: The State should continue to formalize procedures and dedicate the resources necessary to strengthen ARIES system controls. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-053 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Testing revealed the following errors: Medicaid: • Twelve of the sixty recipients tested (20 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 46 days to 279 days as of June 30, 2023. CHIP: • Six of the sixty recipients tested (10 percent), the State did not process applications in a timely manner or redetermine eligibility. The delays for completion of processing of the applications ranged from 56 days to 225 days as of June 30, 2023. • One of the sixty recipients tested (1.6 percent), the beneficiary was due to have eligibility redetermined, however no information was submitted to the State for review and staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, the State should have attempted to redetermine eligibility through electronic interfaces. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient. Due to the COVID-19 pandemic, the federal government enacted the FFCRA on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the PHE. In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. The PHE ended during the year ended June 30, 2023. Cause: Staffing and resource shortages adversely impacted application processing timeliness. Also, the State is working through the unwinding of the PHE (public health emergency) flexibilities. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual’s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: None Recommendation: The State should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and continue to re-instate procedures in place prior to the PHE. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-054 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2205AK5021, 2305AK5021 2205AKMAP, 2305AK5MAP Applicable Compliance Requirement: Eligibility, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Condition: Sixty Medicaid and sixty CHIP recipients were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by State staff for 5 percent of Medicaid cases tested and 6 percent of CHIP cases tested. Testing revealed the following errors: Medicaid: • One case was ineligible for the whole year and benefits were available the whole year. • Two cases lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. CHIP: • One case’s application hasn’t been processed as of 6/30/2023 but benefits were paid during the year ended June 30, 2023. • One case was a child that had turned 19 in a previous year but benefits continued to be paid during the year ended June 30, 2023. • Two cases had unresolved help desk tickets about how to close a case, which led to the cases remaining open and benefits to be paid for one of the cases during the year ended June 30, 2023. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DOH responsible for determining Medicaid and CHIP eligibility. DPA’s employees review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility. Cause: The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts to support the agency’s decision. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: AL 93.767: $ 167 AL 93.778: $ 960 Recommendation: The State should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions. View of Responsible Officials: Management agrees with this finding, but not the questioned costs. CMS has notified the State that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS’s Payment Error Rate Measurement program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states: Questioned cost means a cost that is questioned by the auditor because of an audit finding: • Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including for funds used to match federal funds; • Where the costs, at the time of the audit, are not supported by adequate documentation; or • Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Federal Awarding Agency: U.S. Department of Transportation (USDOT) Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 Airport Improvement Program (AIP) Federal Award Number: Indeterminate Applicable Compliance Requirement: Reporting Condition: One of four randomly selected (25 percent) and two of three judgmentally selected (67 percent) 5100-126 reports tested did not tie to support, resulting in an overstatement of expenditures. One of three judgmentally selected 5100-127 reports tested (33 percent) had multiple lines in error, resulting in overstatements of revenue and net assets. Context: Commercial service airports that enplane 2,500 or more passengers in a calendar year and provided commercial service in the preceding calendar year are required to annually file financial reports with the Federal Aviation Administration (FAA). Each commercial service airport must file: (1) The Financial Government Payment Report, FAA Form 5100-126. The form reports payments the airport makes to government entities, the service the airport performs for governmental entities, and the land and facilities that the airport provides to such entities. (2) The Operating and Financial Summary, FAA Form 5100-127. The form reports airport revenues, expenses, and other financial information. The State of Alaska filed multiple 5100-126 reports for each airport that met the criteria above for payments to governmental entities. Errors on the tested 5100-126 reports included overstatements of expenditures as shown in the table below. [See Schedule of Findings and Questioned Costs for chart/table.] The State of Alaska filed 5100-127 reports for Anchorage International Airport, Fairbanks International Airport, Lake Hood Airport, and an Alaska Consolidated report encompassing all other State-owned airports that met the above criteria. All FY 23 5100-127 reports were tested, except for Lake Hood Airport. Errors were identified on the 5100-127 Alaska Consolidated report as shown below. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The Alaska Consolidated 5100-126 report expenditure overstatement was due to a clerical error when DOTPF staff added information for an airport that was not previously reported. Supervisory review procedures were insufficient to detect and correct the error. According to Alaska International Airport (AIA) management, a lack of written procedures for the preparation and review of the annual 5100-126 reports and staff turnover resulted in the overreporting of expenditures for the Anchorage and Fairbanks International Airport 5100-126 reports. Additionally, AIA management lacked written procedures for the preparation and review of the annual 5100-127 report. The Alaska Consolidated 5100-127 report overstatement errors were due to insufficient review procedures by DOTPF staff of information provided from an external source for the Ketchikan and Sitka airports, which are State-owned. Criteria: Title 2 CFR 200.328 requires states to report financial information on the forms approved by the federal Office of Management and Budget (OMB), with the frequency required by the terms and conditions of the federal award. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: The ineffective internal controls resulted in inaccurate federal reporting. Inaccurate federal reporting may impair federal decision-making and may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should ensure report preparation procedures are followed and updated to include supervisory review of documentation prior to report submission. AIA’s controller should develop and implement written procedures for the 5100 126 and 5100-127 reports. View of Responsible Officials: Management agrees with this finding. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.106 AIP Federal Award Number: 270 Federal Award Identification Numbers Applicable Compliance Requirement: Reporting Condition: DOTPF management lacked internal controls to ensure the annual SF-271 equivalent report was supported, accurate, and complete. Context: The annual SF-271 is the outlay and request for reimbursement for construction projects report. Due to the large number of construction projects DOTPF administers and reports, DOTPF does not submit the OMB SF-271 report. Instead, as permitted by the Airport Improvement Program Grant Payment and Sponsor Financial Report Policy issued by the Office of Airport, FAA, December 31, 2015, DOTPF submits an approved equivalent report. The equivalent SF-271 report consists of Excel spreadsheets that are submitted to the FAA. The SF-271 report is supported by the same expenditure and revenue data from IRIS as the SF-425 financial report. However, DOTPF staff perform additional analysis of the SF-425 data to identify revenues by project and expenditures by project and by categories such as planning, design, right of way, utilities, and construction for presentation on the SF-271 equivalent report. Cause: DOTPF management stated that since the data used for the annual SF-271 is the same data that is reported on the SF-425, which is reviewed, approved, and signed by an authorized certifying official, DOTPF management does not believe separate procedures are necessary for the SF 271 equivalent report. Auditors noted that additional analysis is performed on the SF-425 data so that it can be presented on the SF-271 equivalent report, yet no additional supervisory review or approval is performed on the additional analysis. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Lack of internal controls increases the risk of inaccurate federal reporting, which may impair federal decision-making and could result in reduced transparency. Further, noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s DAS director should develop and implement written procedures for the preparation and review of the SF-271 equivalent report to ensure the report is complete, accurate, and reviewed prior to submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.106 AIP Federal Award Number: 3-02-0199-029-2020, 3-02-0199-030-2020, 3-02-0016-201-2021, 3-02-0016-205-2021, 3-02-0029-028-2021, 3-02-0029-029-2021, 3-02-0176-007-2021, 3-02-0150-005-2021, 3-02-0016-216-2022, 3-02-0016-217-2022 Applicable Compliance Requirement: Special Tests and Provisions Condition: Contractor certified payrolls tested for six construction projects were not submitted timely. Late payroll submission dates ranged from eight days to 189 days after the payroll payment date for the 158 certified payrolls tested. Context: All laborers and mechanics employed by contractors or subcontractors who perform work on construction contracts in excess of $2,000 financed by federal funds must be paid wages not less than the prevailing wage rates established for a project’s locality. The rates are established by the Department of Labor and Workforce Development. To ensure compliance with federal regulations, DOTPF requires contractors and subcontractors submit a certified copy of payrolls for each week of contract work within seven days after the regular payment date of the payroll period. Cause: DOTPF procedures to monitor contractors and subcontractors were inadequate to ensure certified payrolls were submitted within seven days after the payroll period. In addition, during FY 20, DOTPF transitioned to a new system for electronic submission of certified payrolls for all contracts awarded after January 1, 2021. DOTPF management stated that inadequate training on the new system contributed to the lack of compliance. Criteria: Title 29 CFR 3.4(a) requires each certified payroll must be delivered by the contractor or subcontractor within 7 days after the regular payment date of the payroll period. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Federal agencies may suspend future payments, advances, or guarantee of future funds if a state does not comply with prevailing wage rate requirements. Questioned Costs: None Recommendation: DOTPF’s Division of Statewide Design and Engineering Services director should modify certified payroll monitoring procedures and provide training to ensure project staff perform timely review of contractors and subcontractors’ payroll submission. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency AL Number and Title: 20.509 Formula Grants for Rural Areas (FGRA) Federal Award Number: AK-2016-008, AK-2018-020, AK-2019-028, AK-2020-027, AK-2020-048, AK-2021-044, AK-2022-006, AK-2022-008, AK-2022-018, AK-2022-019 Applicable Compliance Requirement: Allowable Costs/Cost Principles, Subrecipient Monitoring Condition: DOTPF’s Division of Program Development (DPD) does not have a formal process for managing user access to its transit data management system. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Turnover in key positions contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over a federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. State of Alaska (SOA) Information Security Policy 171 requires a formal process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. Access requests to SOA applications must be authorized by a designated data owner and be based on a business need related to the user’s duties. Users must also attest to a written statement of job responsibility and conditions of access. Finally, personnel tasked with network user administration must ensure that changes to user privileges are promptly applied (e.g. hiring, termination, reassignment of users). Effect: Lack of adequate internal controls over user access increases the risk of unauthorized system use, including data manipulation, which may result in ineligible recipients and unallowed expenditures. Questioned Costs: None Recommendation: DPD’s director should develop and implement written procedures for managing user access to the transit data management system. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2018-020, AK-2019-028, AK-2020-027, AK-2021-044, AK-2022-019, Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subrecipient subawards tested did not have a quarterly report specific to the subaward as required for monitoring purposes. Context: DOTPF’s Alaska Community Transit (ACT) office enters into subaward grant agreements with subrecipients for the FGRA program, as well as other federal programs. A subrecipient can have multiple open subawards. Each FGRA subaward grant agreement requires quarterly reports to be submitted. Subrecipients submit the required quarterly reports via the BlackCat system and ACT staff use BlackCat to monitor subrecipients. The audit reviewed five of 36 active FY 23 subawards in BlackCat and found that, instead of an individual quarterly report for each FGRA subaward, subrecipients filed one consolidated quarterly report for all subawards. Cause: The BlackCat system limits subrecipients’ ability to file quarterly reports for each subaward. Therefore, subrecipients filed one consolidated quarterly report for all subawards. Criteria: Title 2 CFR 200.332(d) requires the State to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward, and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include reviewing financial and performance reports required by the pass-through entity. Effect: The lack of quarterly reports for each subaward grant agreement limited ACT staff’s ability to effectively monitor subrecipients to ensure subawards were used for authorized purposes. Questioned Costs: None Recommendation: DPD’s director should implement system changes to BlackCat to allow quarterly reports to be filed for each subaward. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-019 Applicable Compliance Requirement: Subrecipient Monitoring Condition: All five FY 23 FGRA subaward grant agreements tested did not include all federally required information. Context: In FY 23 DPD entered into 15 FGRA subaward grant agreements with 12 subrecipients. The audit reviewed a random sample of five subaward grant agreements. All grant agreements tested did not include the federal award date, assistance listing title, and indirect cost rate. Cause: DPD grant administration staff were unaware of the federal award information required to be included in the subaward grant agreement due to staff turnover and a lack of written procedures. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 CFR 200.332(a) requires the State to ensure every subaward agreement includes the required federal award information at the time of the subaward. Effect: Not providing the required award information increases the risk of subrecipient noncompliance with the terms and conditions of the federal award. Questioned Costs: None Recommendation: DPD’s director should amend all active FGRA subaward grant agreements to include the missing federally required information. Furthermore, management should develop written procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DOTPF. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: USDOT Impact: Significant Deficiency, Noncompliance AL Number and Title: 20.509 FGRA Federal Award Number: AK-2022-027 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DOTPF management did not issue a management decision for the one single audit finding requiring follow-up in FY 23 within six months as required by federal law. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Cause: DOTPF has no procedures to ensure a management decision is issued in a timely manner for a subrecipient’s single audit finding. DOTPF management believed it was not necessary to track subrecipients that require single audit follow-up as there was only one subrecipient with a finding during FY 23. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities’ monitoring of subrecipients must include issuing a management decision for audit findings that relate to the federal award provided to the subrecipient from the pass-through entity. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effect: Untimely management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DOTPF’s Division of Administrative Services (DAS) director should develop and implement procedures to ensure management decisions for all subrecipient single audit findings are issued within six months of the audit report’s acceptance by the federal audit clearinghouse. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: Housing and Urban Development (HUD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 14.881 Moving to Work Demonstration Program Federal Award Number: Multiple Applicable Compliance Requirement: Reporting Condition: In our testing of 60 tenants for the Moving to Work program, four instances were noted where the required 50058 report was not submitted to HUD, by AHFC, within the required 60‐day timeline. Context: Nonstatistical sampling was used. Sample size was 60 participants of 250+ participants. No dollar amount is associated. Cause: Internal controls and design are such, that the process for report submission does not always detect the timeliness of those submissions. Criteria: Management should have an internal control system in place designed to provide for the preparation of and submission of required reports in a timely manner in compliance with timelines as defined in the grant agreement and compliance supplement. Effect: Not all required 50058 reports were submitted in a timely manner. Questioned Costs: None reported Recommendation: Management and those charged with governance should analyze the current control system and ensure report submissions are submitted in a timely fashion, in line with relevant compliance requirements.   View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Agriculture Impact Significant Deficiency, Noncompliance AL Number and Title: 10.511 Research and Development Cluster Federal Award Number: NI22SLBCXXXXG054 Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, one grant from the University of Alaska Fairbanks Campus (UAF) has three covered lease contracts that did not have EPLS checks performed. These were existing vendors who previously were not funded with federal dollars. Once the contracts were funded with federal dollars, an EPLS check was not performed. Cause: UAF did not have a process to review existing contracts for suspension and debarment if they were initially not funded with federal dollars. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Interior Impact: Significant Deficiency, Noncompliance AL Number and Title: 15.800 Research and Development Cluster Federal Award Number: G22AC00562-00 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition and Context: During testing of Indirect Cost Rate calculations, one grant from the University of Alaska Southeast campus (UAS) had one instance of an incorrect indirect cost rate calculation. UAS had two different applicable rates for on-campus and off-campus activity. The campus used the on-campus rate for both activities resulting in a higher calculated indirect cost. Cause: The internal control process for the creation of new funds auto-populated the indirect cost rate incorrectly by using the on-campus rate of 59.7 for both on-campus and off-campus research activities. Criteria: Per 2 CFR 200.414 the indirect cost methodology must be consistent with the cost accounting policy and negotiated rate agreement. Effect: An incorrect indirect cost was calculated and charged to the grant. Questioned Costs: $1,630 Recommendation: UAS should review the indirect cost rates populated for new grant funds to ensure correct rates are used. View of Responsible Officials: Management agrees with this finding.

Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425L Higher Education Emergency Relief Fund Federal Award Number: N/A Applicable Compliance Requirement: Procurement and Suspension and Debarment Condition and Context: During the testing of Suspension and Debarment, UAF has two covered lease contracts that did not have EPLS checks performed. Cause: UAF failed to retain documentation to support the date on which EPLS checks were performed. Criteria: Per Uniform Guidance 2 CFR 180.300 nonfederal entities entering into covered transactions must verify the party is not suspended or debarred from conducting business by the federal government. This can be performed by: Checking SAM exclusions, collecting a certification from the party, or adding a clause or condition to the covered transaction. Effect: Potentially suspended or debarred vendors may have been contracted with federal funds. Questions costs: None Recommendation: UAF should perform EPLS checks on all covered transactions paid with federal funds. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2022-083 Federal Awarding Agency: U.S. Department of Education Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.007, 84.038, 84.063, 84.268, 84.379 Student Financial Assistance Cluster Federal Award Number: N/A Applicable Compliance Requirement: Cash Management Condition and Context: UAS had twenty-two stale Title IV checks greater than 240 days. Cause: Staffing issues in the student financial aid office at all three campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days. Criteria: The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Effect: Funds are not returned to the Department of Education in a timely manner. Questioned Costs: None Recommendation: UAS should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy. View of Responsible Officials: Management agrees with this finding.

Prior Year Finding: 2021-023Federal Awarding Agency: U.S. Department of Education (USED)Impact: Material Weakness, Material NoncomplianceAL Number and Title: 84.425D Elementary and Secondary School Emergency Relief Fund (ESSER) ? COVID-1984.425U American Rescue Plan ? Elementary and Secondary School Emergency Relief Fund (ARP ESSER) ? COVID-19Federal Award Number: S425D210020, S425U210020Applicable Compliance Requirement: ReportingCondition:FY 22 Federal Funding Accountability and Transparency Act (FFATA) subaward reporting for ESSER and ARP ESSER did not occur for 72 subawards.Context:FFATA requires information on federal awards be made available to the public via a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. According to DEED procedures, on a monthly basis DEED staff prepares a submission to FSRS to identify initial subaward obligations greater than $30,000. This submission is reviewed and entered into FSRS. The FSRS printout is compared to the FSRS submission to verify the data was accurately captured.Auditors determined DEED staff did not retain documentation of the FSRS printout or verify the input was accurate. Auditors tested all subawards issued during FY 22 for the ESSER and ARP ESSER subprograms. Of the 75 subawards tested, 72 subawards were not reported, including 48 ARP ESSER subawards totaling $319,460,805 and 24 ESSER subawards totaling $8,854,035.[See Schedule of Findings and Questioned Costs for chart/table.]Cause:The ARP ESSER funding was established in the State?s accounting system as a capital appropriation. Subawards issued under the ARP ESSER appropriation were not reported to FSRS due to a flaw in DEED?s FFATA reporting tool, which was not designed to capture capital appropriations. According to DEED management, resolving prior and current year issues through the FFATA help desk has been difficult. As a result, DEED discontinued FFATA reporting after the April 2022 submission.Criteria:Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards.Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public.Effect:Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding.Questioned Costs:NoneRecommendation:DEED?s Division of Administrative Services (DAS) director should ensure FFATA reporting procedures are followed and that the FFATA reporting tool is updated to ensure subaward reports are complete.Views of Responsible Officials:The department partially agrees with Finding 2022-026. The department agrees with the count of 72 separate awards not being reported, however the department disagrees with the specific dollar amount listed as ESSER II subawards were not reported. The amount listed is missing $5,483. This amount was awarded to a school district that also received ESSER II SEA Reserve funding under the same grant award and the FFATA reporting system has no mechanism to differentiate between mandatory funding and SEA Reserve funding. Per 2 CFR ? 170.220(b) and FFATA guidance documents, if an award increases to greater than the $30,000 reporting threshold, the full amount of the award must be reported, not just the portion that exceeded the threshold.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. DEED management stated the finding amount is missing $5,483. A subaward to the school district totaling $61,165 was included in the finding. Subsequently, an additional subaward was made totaling $5,483, which was not included in the finding because it did not meet the threshold for reporting under Title 2 Code of Federal Regulations Part 170 Appendix A.

Prior Year Finding: 2021-024Federal Awarding Agency: USEDImpact: Significant Deficiency, NoncomplianceAL Number and Title: 84.425D ESSER ? COVID-1984.425U ARP ESSER Fund ? COVID-19Federal Award Number: S425D210020, S425U210020Applicable Compliance Requirement: Subrecipient MonitoringCondition:DEED staff did not document risk assessments for non-Local Educational Agency (LEA) subrecipients.Context:Prior to the ESSER program, DEED rarely made subawards to entities that were not LEAs. Under the ESSER program DEED must subgrant 90 percent of funding to LEAs. The remaining 10 percent of funding can be allocated by DEED with greater discretion and includes subawards to non-LEAs. DEED staff did not conduct ESSER-specific risk assessments for LEAs. Instead, DEED staff relied on risk assessments performed for a different federal program, which was limited to LEAs.Cause:Risk assessments were not performed for non-LEA subrecipients because DEED utilized a risk assessment created for a different federal program, which only made grants to LEAs. According to DEED staff, formalized monitoring tools for non-LEA subrecipients will be implemented beginning in FY 23.Criteria:Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards.Title 2 CFR 200.332(b) requires the State to evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining appropriate subrecipient monitoring.Effect:Not performing risk assessments and not implementing formalized monitoring tools for all subrecipients could potentially result in inappropriate use of federal awards.Questioned Costs:NoneRecommendation:DEED?s DAS director should update risk assessment and monitoring procedures to include non-LEAs to ensure all ESSER subrecipients receive an appropriate level of monitoring.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USEDImpact: Significant Deficiency, NoncomplianceAL Number and Title: 84.027A Special Education Grants to States84.027X Special Education Grants to States ? COVID-1984.173A Special Education Preschool Grants84.173X Special Education Preschool Grants ? COVID-19Federal Award Number: H027A210016; H027X210016; H173A210019; H173X210019Applicable Compliance Requirement: Matching, Level of Effort, EarmarkingCondition:Twenty-one of 53 LEAs received FY 22 Special Education (SPED) subgrant allocations that were not calculated in accordance with federal regulations.Context:The federal SPED grant award includes a summary table that directs the allocation of amounts for various funding categories, such as maximum amounts available for state administration and state-level activities. Based on funding amounts found on the summary table, DEED staff utilized a spreadsheet to calculate payments to be distributed to each LEA. Along with calculating a base payment subject to criteria set in Title 34 CFR ? 300.705(b)(1) & (2), DEED staff calculated an allocation of all remaining funds to be disbursed to LEAs based on criteria set out in Title 34 CFR ? 300.705(b)(3). Per this criteria, 85 percent of the remaining funds must be based on an LEA?s count of students enrolled in elementary and secondary schools, and the remaining 15 percent is based on a count of children living in poverty.Auditors identified that two of the seven LEAs selected for testing had improper allocation amounts. Expanded testing identified that a total of 21 LEAs had spreadsheet formulas that referenced a different LEA?s poverty-child count.Cause:Due to human error, the FY 22 SPED allocation spreadsheet contained an incorrect formula. Supervisory review procedures were insufficient to detect the error.Criteria:Title 2 CFR ? 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards.Title 32 CFR ? 300.705(b)(3) requires 85 percent of any remaining funds to be allocated to LEAs based on the relative number of children enrolled in public and private elementary schools and secondary schools within an LEA?s jurisdiction. The remaining 15 percent is allocated based on the relative number of children living in poverty.Effect:The formula error and inadequate review procedures resulted in overpayments to nine LEAs totaling $357,269, with equivalent offsetting underpayments to 12 LEAs.Questioned Costs:Assistance Listing (AL) 84.027A: $270,805AL 84.027X COVID-19: $86,464Recommendation:DEED?s DAS director should improve procedures for reviewing the calculation of SPED allocations to LEAs. Additionally, the DAS director should work with the affected LEAs to correct the erroneous payments.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: United States Department of Agriculture (USDA)Impact: Material Weakness, Material NoncomplianceAL Number and Title: 10.551, 10.561 Supplemental Nutrition Assistance Program (SNAP) ClusterFederal Award Number: 21AK3505029230, 22AK35050292301Applicable Compliance Requirement: Allowable Costs/Costs PrinciplesSpecial Tests and ProvisionsCondition:The Division of Public Assistance (DPA) Eligibility Information System (EIS) did not automatically cut off households from receiving SNAP benefits at the end of the certification period during FY 22.Context:A state must certify each eligible household for a definite period of time. Alaska households are certified for a six-month period. The first month of the certification period begins in the first month for which the household is determined eligible to participate. The State is required by federal law to ensure EIS automatically cuts off participation for households that have not been recertified at the end of the certification period.In response to the COVID-19 disaster, USDA?s Food and Nutrition Service (FNS) issued COVID-19 waivers and flexibilities, which included extending SNAP certification periods. In a letter dated April 30, 2021, FNS allowed states to automatically extend benefit certification periods for up to six months. In a subsequent letter dated December 8, 2021, FNS clarified the April 30, 2021, letter directing that state agencies may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. Consecutive certifications, or back-to-back six-month extensions were not allowable, as it may exceed FNS?s waiver authority provided by the Families First Coronavirus Act and reduce the opportunity for a state to obtain a full understanding of a household?s circumstances. Furthermore, the FNS letter made various recommendations for reducing the backlogs that may occur when states provide certification period extensions.Cause:The EIS control to automatically cut off households from receiving SNAP benefits at the end of the certification period was disabled based on DPA management?s misinterpretation of FNS guidance regarding certification period extensions. DPA management?s erroneous interpretation and lack of response to FNS?s clarifying guidance led eligibility technicians to not perform recertifications of SNAP households in FY 22.Criteria:Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers? calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to, all household members' names, addresses, dates of birth, social security numbers, individual household members' earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households' circumstances.Title 7 CFR 273.10(f) requires the State to certify each eligible household for a definite period of time. Alaska households are certified for a six-month period per Alaska?s approved SNAP Plan of Operation.Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.USDA FNS SNAP guidance, issued December 8, 2021, titled, Extension of SNAP COVID-19 Administrative flexibilities January 2022 and Beyond, provided that States may only extend certification periods for up to six months from the initial expiration date assigned at the last certification or recertification. The guidance reiterated that the State should not extend certification periods consecutively, as it reduces the opportunities the State has to obtain a full understanding of a household?s circumstances and make necessary adjustments.Effect:The lack of periodic eligibility recertifications increased the risk that ineligible recipients received SNAP benefits. State agencies are responsible for preventing loss of federal funds in the certification of households. If FNS makes a determination the State was negligent in the certification of households, FNS is authorized to bill the State for an amount equal to the benefits issued as a result of the negligence. Furthermore, the utilization of broad-based certification period extensions may result in significant increases in case processing backlogs once the extensions expire and the State transitions back to regular operations.Questioned Costs:AL 10.551: IndeterminateRecommendation:DOH?s commissioner and DPA's director should reactivate the system control that automatically cuts off beneficiaries outside of the certification period and take timely action to recertify SNAP recipients.Views of Responsible Officials:Management agrees with the finding.[See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDAImpact: Significant Deficiency, NoncomplianceAL Number and Title: 10.551, 10.561 SNAP ClusterFederal Award Number: 21AK3505029230, 22AK35050292301Applicable Compliance Requirement: Allowable Costs/Cost PrinciplesFederal Awarding Agency: USDAImpact: Material Weakness, Material NoncomplianceAL Number and Title: 10.551, 10.561 SNAP ClusterFederal Award Number: 21AK3505029230, 22AK35050292301Applicable Compliance Requirement: Special Tests and ProvisionsCondition:Testing of 51 SNAP recipient cases to verify the accuracy of EIS benefit calculations found five (10 percent) were incorrect. Testing of 26 SNAP recipient cases to verify the adequacy of case information stored in EIS and the DHSS?s document management system, ILINX, found 11 (42 percent) had insufficient information in ILINX or inaccurate data input into EIS, and four (15 percent) recipients? applications or report of changes were not processed within federally required timeframes.Context:The State is required to ensure only eligible households receive supplemental nutrition assistance. Benefit amounts are calculated based on household size, income, and other financial resources of all qualifying members of a household less specific allowable deductions. The State is required to ensure its automated data processing systems: accurately and completely process and store all case file information for eligibility determinations and benefit calculations; automatically cuts off households at the end of a certification period unless recertified; and provides the data necessary to meet federal issuance and reconciliation reporting requirements.DPA eligibility technicians (ET) review applications, verify income and resources, and make a determination whether a household is eligible to receive benefits. ETs obtain and upload source documentation into ILINX, and manually update EIS with information from source documentation. As part of determining benefit eligibility, the State is required to coordinate the exchange of data with other agencies such as the federal Social Security Administration, State employment security agency, and current employers to verify the household?s identity, income, resources, and other eligibility criteria. ET actions taken, verifications performed, and contacts made are recorded using the EIS?s case note screen. Source documentation supporting the eligibility determination is retained in ILINX. To help ensure the accuracy and completeness of EIS information, DPA conducts training and requires supervisors to perform quality control reviews.The EIS legacy system relies on manual processes to adequately support the eligibility and benefit determinations, and ensure the determinations are accurate. The audit identified multiple errors including:? Five recipients? income or financial resources were not adequately supported or verified by the ET as evidenced by information stored in ILINX.? Six recipients? EIS-calculated payments were not adequately supported by case file information stored in ILINX.? Four recipients? applications and/or report of changes were not processed within the allowable time period.? Five recipients received incorrect benefit amounts.Cause:Human error by the ETs during application processing was the primary cause of the deficiencies. According to DPA management, pandemic related monthly emergency allotment benefits added to each recipient?s EIS-calculated benefit required extensive manual inputs, which increased workloads and impacted ETs? ability to accurately process applications. Furthermore, due to competing priorities, no quality control reviews were performed during FY 22.Criteria:Title 7 CFR 272.10(b) requires the State to use an automated data processing system for SNAP. The system is to be used to determine eligibility and calculate benefits or validate eligibility workers? calculations by processing and storing all casefile information necessary for the eligibility determination and benefit computation including, but not limited to, all household members' names, addresses, dates of birth, social security numbers, individual household members' earned and unearned income by source, deductions, resources, and household size. Also, the system must be used to redetermine or revalidate eligibility and benefits based on notices of change in households' circumstances.Title 7 CFR 272.8(a)(1) requires the State maintain and use an income and eligibility verification system to request wage and benefit information from various agencies and use that information in verifying eligibility for and the amount of SNAP benefits due to eligible households.Title 7 CFR 273.2 (f)(6) requires that case files be documented to support eligibility, ineligibility, and benefit level determinations. Documentation shall be in sufficient detail to permit a reviewer to determine the reasonableness and accuracy of the determination.Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Effect:The accuracy of SNAP benefit calculations is reliant on the case file information entered into and stored in DPA?s automated data processing systems. Inadequate or unsupported case file information increases the risk of incorrect or ineligible benefits. The deficiencies resulted in three SNAP recipients receiving incorrect benefits totaling $2,636 in overpayments and two recipients with $702 in underpayments.Questioned Costs:AL 10.551: $2,636Recommendation:DPA?s director should increase staff training and quality control reviews to help ensure procedures are followed for calculating benefits and retaining SNAP documentation, including the documentation to support compliance with verification of income through required data exchanges.Views of Responsible Officials:Management agrees with the finding.[See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDAImpact: Significant Deficiency, NoncomplianceAL Number and Title: 10.551, 10.561 SNAP ClusterFederal Award Number: 21AK3505029230, 22AK35050292301Applicable Compliance Requirement: Special Tests and ProvisionsCondition:Testing of 25 daily SNAP Electronic Benefit Transfer (EBT) reconciliations found that six (24 percent) lacked evidence of review and four (16 percent) included discrepancies that were not followed up on.Context:A state must have a system in place to reconcile, on a daily basis, all of the funds entering into, exiting from, and remaining in the system each day with the state?s US Treasury benefit account, and the EBT contractor?s (Fidelity National Information Services) records. States must also have systems in place to reconcile retailer credit activity as reported into the banking system to client transactions maintained by the processor and to the funds drawn down from the EBT benefit account with the US Treasury. The reconciliation process ensures that a state only draws federal funds for authorized transactions.The sample population totaled 249 daily reconciliations performed by DPA staff during FY 22, of which 25 were selected for testing. Auditors verified that retailer credit activity reconciled to SNAP client transactions, to its issuance files of posting to recipient accounts with the EBT contractor and to posting to and drawdown activity from the State?s benefit account with the US Treasury. The four reconciliations that included discrepancies were resolved over the subsequent day?s reconciliations. However, there was no documentation identifying the cause of the discrepancies or evidence demonstrating follow-up.Cause:According to DPA management, supervisory reviews of the daily reconciliations were not performed April through June 2022 due to significant staff turnover.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award.Title 7 CFR 274.4(a) requires that State agencies shall account for all issuance through a reconciliation process. The EBT system must provide reports and documentation pertaining to reconciliation. Reconciliations must be conducted and records kept as follows:? Verification of retailer's credits against deposit information entered into the automated clearinghouse network.? Reconciliation of total funds entered into, exiting from, and remaining in the system each day.Effect:Inconsistent review of the EBT reconciliations and lack of discrepancy resolution increases the risk of unidentified processing errors. Account balance inconsistencies between the three systems impedes the State?s ability to ensure all SNAP benefits are adequately reconciled and accounted for. States are responsible for efficiently and effectively administering SNAP in accordance with federal laws, regulations, and FNS approved Plan of Operations. A determination by FNS that the State has failed to comply with any of these provisions may result in a suspension or disallowance of the federal share of the State?s administrative funds.Questioned Costs:NoneRecommendation:DOH?s DPA director should ensure review procedures are followed and staff are appropriately trained to ensure monthly reconciliation packets are reviewed for accuracy and completeness, and discrepancies are properly identified and resolved.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-029Federal Awarding Agency: United States Department of the Treasury (USTreasury)Impact: Significant Deficiency, NoncomplianceAL Number and Title: 21.019 Coronavirus Relief Fund (CRF) ? COVID-19Federal Award Number: SLT0031, SLT0073Applicable Compliance Requirement: ReportingCondition:DHSS staff used inconsistent methods of accounting when reporting federal expenditures for the CRF program on FY 22 quarterly financial progress reports. As a result, amounts reported were inaccurate.Context:Each prime recipient of the CRF is required by Treasury to submit quarterly financial progress reports that identify COVID-19 related costs incurred during the reported period. The progress reports detail the total amount of CRF payments the prime recipient received from Treasury; the amount of funds received that were expended or obligated for each project or activity; all projects and activities for which funds were expended or obligated; and information on any loans issued, contracts and grants awarded, transfers made to other government entities, and direct payments made by the prime recipient in excess of $50,000. Aggregated information was required for direct payments made by the prime recipients that were less than $50,000. Reports must be submitted through the federal GrantSolutions portal and be supported by the accounting records.The CRF program was primarily administered for the State of Alaska by the Department of Commerce, Community, and Economic Development (DCCED) and DHSS. The CRF program administered by DHSS during FY 22 included issuing awards to subrecipients for non-profit support, transfers to other State agencies, and other initiatives related to the public health emergency. Subawards and transfers were issued as advances.DHSS?s reporting data was prepared for submission by its DFMS staff. When ready for submission, the complete reports were certified by the Department of Administration?s state accountant. DHSS reported CRF expenditures on either the cash or modified accrual basis, depending upon the activity being reported. For example, DHSS used the modified accrual basis to report DHSS?s public health related expenditures, but used the cash basis to report CRF monies it transferred to other State agencies. Using the cash basis of accounting resulted in DHSS staff reporting the amount of CRF monies advanced instead of the amount expended on allowable activities. Auditors noted that the DCCED portion of the CRF reports were prepared using the modified accrual basis of accounting.Beginning in FY 23, DHSS was split into two departments: DOH and DFCS.Cause:Expenditures were misreported due to a misunderstanding of CRF reporting requirements. DHSS review procedures were insufficient to ensure the accuracy and consistency of the information prior to inclusion in the State?s quarterly CRF report.Criteria:Per Treasury?s Office of Inspector General Memo OIG-CA-20-028, Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), Frequently Asked Question #32, a prime recipient must report CRF expenditures on the accrual basis of accounting, unless the prime recipient?s traditional practice is to report on a cash basis of accounting for all its financial reporting.Effect:Inaccurate federal reporting reduces transparency and may impair the federal oversight agency?s ability to properly oversee the program.Questioned Costs:NoneRecommendation:DOH and DFCS?s DFMS directors should coordinate efforts to improve training and strengthen procedures to ensure federal reports are accurate and prepared using the appropriate basis of accounting.Views of Responsible Officials:Management partially agrees with the finding. The written procedures were developed in collaboration with both OMB and the Division of Finance in June of 2020 to comply with the Treasury Office?s guidance for federal reporting. The department reported the amounts advanced in accordance with these procedures and two emails from June 2020 were previously provided supporting the arrangement agreed upon specific to federal reporting.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. Management states the agency followed procedures developed to comply with USTreasury guidance for federal reporting. However, as noted in the finding, staff did not report in accordance with USTreasury guidance that required the modified accrual basis of accounting for quarterly financial reports. Additional training may be necessary to ensure accounting staff can effectively identify and apply accounting principles.

Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS)Impact: Significant Deficiency, NoncomplianceAL Number and Title: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC)Federal Award Number: 6 NU50CK000509-01-06Applicable Compliance Requirement: Allowable Costs/Cost PrinciplesCondition:Seven of 25 timesheets that charged FY 22 personal services to the ELC program were not supported in compliance with federal requirements.Context:The audit tested a sample of 25 timesheets and identified seven instances of noncompliance. Four errors were personal and holiday leave charged to the grant award when the timesheets did not indicate time worked on the ELC program. Two timesheets lacked positive time keeping or biennial certifications attesting that the employees worked 100 percent of the time on ELC. One timesheet was inaccurately entered into the payroll system.Cause:According to Division of Public Health (DPH) management, staff turnover and inadequate training for temporary employees on how to complete, review, and approve timesheets contributed to the timesheet errors.Criteria:Per Title 45 CFR 75.303(a), the State 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.Title 2 CFR 200.430(i)(1) states charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;(ii) Be incorporated into the official records of the non-Federal entity;(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities?(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.Effect:The errors resulted in questioned costs totaling $9,778. Questioned costs for the population are projected to be $608,618 based on the dollar of noncompliance observed in the sample projected over the tested population. Noncompliance with federal regulations may result in the federal award agency imposing additional conditions or taking corrective action, including reduced federal funding.Questioned Costs:$9,778Recommendation:DPH?s director should provide training for completing and reviewing timesheets, and ensure personal service costs charged to the ELC program are allowable and supported by required documentation.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.323 ELCFederal Award Number: 6 NU50CK000509-01-06, 6 NU50CK000509-02-02, 6 NU50CK000509-02-04Applicable Compliance Requirement: Procurement and Suspension and DebarmentCondition:For nine of 13 ELC contracts and awards, DFMS procurement staff did not conduct suspension and debarment searches, require self-certification, or include a clause or condition to ensure compliance with federal suspension and debarment requirements.Context:Nine out of the 13 ELC contracts and awards issued to municipalities, school districts, and other vendors tested by auditors did not have sufficient evidence DFMS staff verified compliance with suspension and debarment requirements. However, no instances of funds being paid to a suspended or debarred vendor or organization were identified.Cause:DFMS management suspended certain grants and procurement processes and procedures while under national and state public health emergency declarations in order to expedite distribution of emergency funds across the state.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.Title 2 CFR 180.300 requires an organization to verify that the person with whom they intend to do business is not excluded or disqualified. This may be accomplished by:(a) Checking for exclusions in the federal system for award management; or(b) Collecting a certification from that person; or(c) Adding a clause or condition to the covered transaction with that person.Effect:The lack of effective internal controls may result in awarding federal funds to a suspended or debarred contractor.Questioned Costs:NoneRecommendation:DOH?s DFMS director should follow established federal grant management procedures to ensure funds are not awarded to suspended or debarred contractors.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.323 ELCFederal Award Number: 6 NU50CK000509-01-06, 6 NU50CK000509-02-02, 6 NU50CK000509-02-04Applicable Compliance Requirement: ReportingCondition:Auditors could not obtain sufficient and appropriate evidence to verify the accuracy of the data reported in the monthly ELC special report for FY 22 COVID tests conducted by school districts. In addition, for two ELC grant awards, Enhancing Detection and Reopening Schools, inception to date expenditures were overstated by $4,436,595 and $725,221, respectively, in the June 30, 2022, financial reports.Context:During FY 22, school districts that received ELC funds from DPH submitted weekly COVID testing information to the National Electronic Disease Surveillance Base System (NBS). DPH staff gathered the information submitted to NBS and summarized the COVID test data by date range, test type, tests conducted, positive cases, and school district. The information was reported monthly to the federal award agency. Each ELC grant award required monthly financial reports for FY 22.Cause:According to DPH staff, documentation was not retained for the summary level data reported in the monthly special report. The lack of documentation was attributed to employee turnover and insufficient procedures.DPH staff review of the ELC financial reports was insufficient to identify the incorrect data. Further, expenditure reports for financial reporting were improperly designed.Criteria:Title 45 CFR 75.303(a) requires the State 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.ELC federal award terms and conditions for reporting required monthly financial reports. The ELC grant award, Reopening Schools, terms and conditions also required monthly reports on the number of COVID tests conducted.Effect:Inaccurate federal reporting reduces transparency and may impair the federal oversight agency?s ability to properly oversee the program.Questioned Costs:NoneRecommendation:DPH?s director should develop and implement procedures to ensure compliance over ELC reporting requirements.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-032Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF)Federal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Eligibility, Special Tests and ProvisionsPrior Year Finding: 2021-030Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAssistance Listing Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Allowable Activities/Allowable CostsCondition:Ten of 25 TANF recipient case files tested lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS) for determining eligibility and benefits. Further, the following eligibility errors were identified:? Eight TANF applicants did not have eligibility redetermined within 12 months and eligibility was automatically extended.? Three TANF applications were not reviewed within 30 days of receipt.? Three applications either did not fill out the felony conviction disclosures or the section was not retained in the case file.? Three applications did not have adequate income verification support.? Three benefit payment amounts were not calculated accurately.? One application did not include child support documentation in the case file.? One renewal application was not reviewed for an eligibility redetermination.Additionally, 24 of the TANF recipient cases received Pandemic Emergency Assistance Fund (PEAF) payments, of which 20 did not have IEVS documentation to support the eligibility determination prior to DHSS making the PEAF payments.Context:The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. DPA employs ETs who review applications, identify income and financial resources, and make a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, IEVS, unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services.DPA?s Alaska Temporary Assistance manual provides ETs guidance on how to calculate income. Once the information is received, reviewed, and calculated, ETs enter the information into EIS. EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If eligibility factors are not entered accurately, benefit amounts are paid incorrectly.DPA?s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files.On April 9, 2021, the USDHHS Administration for Children and Families (ACF) issued TANF Program Instruction No. TANF-ACF-PI-2021-02, which provided guidance regarding the newly established PEAF. The instructions allowed states to provide non-recurrent, short-term benefits to needy families with children and allowed states to determine the definition of ?needy? families. DPA management sent a letter to TANF recipients during May 2022 stating the division planned to issue a PEAF payment to each household who currently received TANF or received TANF during the past 12 months.Cause:According to DPA management, eligibility redeterminations were not performed because system-generated certification period extensions were granted during the public health emergency. DPA management stated a pending State plan amendment, submitted during FY 22, will allow retroactive flexibilities for eligibility redeterminations during the public health emergency. Auditors reviewed the pending State plan amendment and noted the requested flexibilities expired on August 31, 2020, which is prior to the FY 22 period under audit.Turnover, staffing shortages, and inadequate training contributed to ETs not performing and/or documenting all required components of eligibility determinations and not accurately calculating benefit amounts.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award.Title 45 CFR 206.10(a)(3)(i) requires that a decision be made promptly on applications, pursuant to reasonable State-established time standards not in excess of 45 days. PerSection 4.1 of the Alaska State Plan for TANF, dated December 31, 2020, applications are required to be processed within 30 days of receipt.Title 45 CFR 264.10 specifies states must meet the requirements of IEVS and request certain information from the Internal Revenue Service, the State Wage Information Collection Agency, the Social Security Administration, and the Immigration and Naturalization Service to perform computer match data records to verify recipient information.Pursuant to Title 45 CFR 206.10, DPA?s federally approved TANF State Plan outlines specific State requirements for applications and eligibility determinations, including:? Section 4.1 Application ? Program applicants must complete an application form in writing. To be considered complete, the application must provide all requested information and be supported by documentation the department determines necessary to establish eligibility.? Section 4.3 Reporting Requirements ? Participants must also take part in periodic reviews of the family?s situation. DPA redetermines eligibility and benefit amount based on the information provided during the reviews and any other changes that are reported between reviews.? Section 13 Family Need ? The department establishes whether a child is financially needy. Financial need is determined to exist if the family resources and income are below the need standards set by the department.Title 45 CFR 206.10(a) (9) (iii) requires that at least one face-to-face redetermination must be conducted for each case once every 12 months. However, TANF Program Instruction No. TANF-ACF-PI-2020-01 allowed for telephonic or other virtual/electronic communication platforms to be used during the COVID-19 pandemic.TANF Program Instruction No. TANF-ACF-PI-2021-02 requires the use of IEVS to determine eligibility for families who receive PEAF.Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements.Effect:The State may be penalized for up to two percent of the federal grant award for failure to participate in IEVS. As a result of not redetermining eligibility during FY 22 and the other errors identified, ineligible recipients may have received benefits. Additionally, TANF benefit payments were calculated incorrectly resulting in overpayments.Questioned Costs:$138,024Recommendation:DPA?s director should improve training and monitoring of staff to ensure staff comply with TANF eligibility and document retention procedures and eligibility determinations are performed accurately and timely.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-033Federal Awarding Agency: USDHHSImpact: Significant DeficiencyAL Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Matching, Level of Effort, EarmarkingCondition:Auditors could not obtain reliable evidence to verify compliance with TANF?s earmarking requirement.Context:DHSS staff monitored compliance with TANF?s earmarking requirement through compiling Monthly Caseload and Benefit Summary reports from EIS data. The summary reports identify the number of TANF recipients that have received more than 60 months of benefit payments. According to DPA management, the monthly report is reviewed for accuracy.The monthly EIS data is also compiled as part of the ACF-199 report that includes the number of countable months TANF recipients used assistance. Testing of ACF-199 data found the EIS data reported in the ACF-199 was not supported by a manual count of monthly benefit payments for 11 of 30 cases tested (37 percent). Based on this testing, auditors concluded the EIS monthly caseload data was not reliable.Cause:DHSS staff review of the Monthly Caseload and Benefit Summary reports was insufficient to identify whether the data was supported. In addition, there was a system programming error in EIS causing the compilation of countable monthly benefit payments to return incorrect data.Criteria:Title 45 CFR 264.1 states that, subject to exceptions, no state may use any of its federal TANF funds to provide assistance 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 (60 cumulative months, whether or not consecutive).Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Effect:Unreliable data impeded DPA staff?s ability to monitor compliance with federal requirements and created a risk that unallowable benefits were paid. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits.Questioned Costs:NoneRecommendation:DPA's director should develop procedures to ensure the monthly benefit count in EIS is accurate. Additionally, DOH's commissioner should allocate resources to correct the EIS programming error.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-035Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: ReportingCondition:Twelve of 25 TANF cases tested (48 percent) had inaccurate information reported in the ACF-199 data file.Context:The quarterly ACF-199 report is compiled monthly from information that is either entered in EIS by an ET or interfaced into EIS through the case management system. The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance.Review by auditors found that several key line items for family-level and person-level data were not reported accurately in the data file that was transmitted for the ACF-199 reports for the quarters ended September 2021, December 2021, March 2022, and June 2022 (see table below).[See Schedule of Findings and Questioned Costs for chart/table.]Cause:DPA management lacked procedures for ensuring the accuracy of the information queried from EIS, which supports the ACF-199 report. The completed ACF-199 report was not reviewed for accuracy before being transmitted to ACF. Due to a cyberattack, the case management system was unavailable and work service providers were not able to upload data. DPA management could not explain the cause of the inaccurate data (items 17, 28, 44, 48, 49).Criteria:Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State's quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty.Title 45 CFR 265.7(a) requires each state?s quarterly reports to be complete and accurate. Federal regulations further state a complete and accurate report means the reported data accurately reflect information available to the state in case records, financial records, and automated data systems.Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Effect:Reporting incorrect data may impair the federal oversight agency's ability to properly oversee the program. Further, the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report.Questioned Costs:NoneRecommendation:DPA's director should implement procedures to ensure data reported on the ACF-199 is complete and accurate.Views of Responsible Officials:Management agrees with the finding.[See Schedule of Findings and Questioned Costs for footnote.]

Prior Year Finding: 2021-036Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAL Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Special Tests and ProvisionsCondition:Five of the eight child support noncooperation alerts tested (63 percent) were not assessed a penalty to reduce TANF benefits when determined necessary.Context:Department of Revenue, Child Support Services Division, sends DPA a weekly listing of public assistance clients that are not cooperating with establishing paternity, or in establishing, modifying, or enforcing a support order with respect to a child. The weekly listing is used to create an alert for each client in DPA?s EIS. When an alert is received by an ET, DPA procedures require that the ET assess a TANF benefit penalty, enter a case note within EIS, and print a notice for the client. The alerts are not retained in EIS after this process has been completed. DPA does not maintain a log or tracking sheet of the weekly alerts to confirm alerts are processed timely or accurately. This finding was first identified when auditing the program during FY 19.Cause:DPA management lacked adequate monitoring procedures to ensure alerts were processed. Further, DPA management stated that competing priorities and staffing shortages prevented the development of procedures.Criteria:Title 45 CFR 264.30 requires the State to deduct from the assistance that would otherwise be provided to the family of the individual not cooperating with the child support enforcement requirements an amount equal to, but not less than, 25 percent of the amount of such assistance, or deny the family any assistance under the program.Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards.Effect:Delays in assessing, or failing to assess, child support noncooperation penalties resulted in clients receiving unallowable benefits.Questioned Costs:$4,542Recommendation:DPA's director should develop and implement procedures to monitor processing of child support noncooperation alerts to ensure notices and penalties are processed timely.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-037Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAssistance Listing Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Special Tests and ProvisionsCondition:Nineteen of 25 cases tested (76 percent) reported work activities on the ACF-199 report that were inaccurate, unsupported or unverified.Context:DPA reports the work verification data through the quarterly ACF-199 reports. The ACF-199 reports are compiled from information that is either entered in EIS by ETs or through interfacing with the case management system. The information is electronically captured through a data file and transmitted to ACF. The data transmitted for the ACF-199 report allows ACF to determine whether the State has met the required work participation rates under the TANF work verification plan.Cause:DPA lacked internal control procedures to ensure work activities reported were verified, supported by documentation in the case file, and accurate. According to DPA management the case management system was unavailable for work services providers to enter work activities until May 2022 due to a cyberattack.Criteria:Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, per 45 CFR 261.61(a) a state must support each individual?s hours of participation through documentation in the case file and 45CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures.Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards.Effect:Per Title 45 CFR 261.65 the State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for not maintaining adequate work participation support.Questioned Costs:NoneRecommendation:DPA?s director should develop and implement internal control procedures to ensure work activities reported by TANF recipients are retained, verified, supported, and accurately entered into the case management system. Further, DOH?s commissioner should strengthen procedures to ensure continuity of business processes in the event that information systems do not function.Views of Responsible Officials:DOH does not agree with the finding. The availability of the system due to the cyberattack is outside the control of the division.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. DOH management states the availability of the system due to the cyberattack was outside the control of the division; however, hard copy case management file support provided by DPA management was utilized for the audit. The documentation provided by DPA management was insufficient as TANF recipient work activities were not retained, not verified, unsupported, or inaccurate.

Prior Year Finding: 2021-038Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAssistance Listing Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: Special Tests and ProvisionsCondition:The audit reviewed 13 FY 22 TANF case files for clients that were not engaged in work activities and did not have a good cause exemption. Of the 13 cases, four were assessed a penalty, two were not assessed a penalty even though documentation showed that a penalty should have been assessed, and seven cases lacked sufficient documentation to determine whether a penalty should have been assessed.Context:The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experience that lead directly to employment, and increase the family?s self-sufficiency.To comply with the work first goal, DPA staff, with the assistance of contracted case managers, identify the work activities for the TANF recipients to help them move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment.Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of childcare, no childcare funds, or no transportation funds. Where applicable, exemptions must be documented by a physician or other licensed medical professional.Cause:DPA staff turnover and shortages contributed to ETs not issuing penalties. Although DPA had procedures, supervisors were not adequately monitoring ETs to ensure procedures were performed. Additionally, DPA used a case management system in conjunction with hard copy case management files to track the work activities of the TANF recipients. According to DPA management, support for work activities could not be entered into the case management system as the system was unavailable until May 2022 due to the cyberattack.Criteria:Title 45 CFR 261.14 requires the State to reduce or terminate the amount of public assistance to families of individuals who refuse to engage in work.Title 45 CFR 75.303(a) requires the State establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards.Effect:According to 45 CFR 261.54, the State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for failing to assess penalties when individuals refuse to engage in work activities.Questioned Costs:NoneRecommendation:DPA?s director should improve training and supervision of ETs to ensure TANF recipients? refusal to work penalties are processed. Further, DPA?s director should strengthen procedures to ensure continuity of business processes in the event information systems do not function.Views of Responsible Officials:DOH does not agree with the finding. A State Plan Amendment is pending approval with ACFand will be applicable retroactively.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. DOH management states the TANF state plan amendment pending approval will allow retroactive application and carry forward program flexibilities. Per review of the state plan amendment, the requested flexibilities ended August 31, 2020, which is prior to the FY 22 audit scope. Further, DOH did not receive federal approval during FY 22 for an amended state plan.

Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.558 TANFFederal Award Number: 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: ReportingCondition:The FFY 21 ACF-204 annual report was incomplete.Context:The State must complete and file an annual report containing information on the TANF program and the State?s maintenance of effort (MOE) programs for that year. The report filed in FY 22 did not contain all the programs for which the State claimed MOE expenditures. DPA staff could not provide evidence that an amended, complete report was filed.Cause:Due to staff turnover, DPA management could not provide an explanation as to why the ACF-204 was incomplete.Criteria:Title 45 CFR 265.9(a) requires each state to file an annual report containing information on the TANF program and the state?s maintenance of effort program(s) for that year.Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Effect:Unreliable federal reporting limits transparency and may impair the federal oversight agency?s ability to properly oversee the program. According to 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report.Questioned Costs:NoneRecommendation:DPA's director should strengthen reporting procedures to ensure the ACF-204 report is complete and includes all programs for which the State claimed MOE expenditures.Views of Responsible Officials:DOH partially agrees with the finding. DPA submitted a complete copy of the report into the ACF system, which was confirmed via email by the federal representative. However, due to limitations within ACF?s system, which is out of the control of the Division, the supporting documents that were gathered to verify this lacked certain information.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. DOH management states a complete FFY 21 ACF-204 report was submitted into the ACF system, which was confirmed via email by the federal representative; however, auditors were not provided a copy of the federal representative?s email confirmation, or other support to verify a complete report was submitted, despite multiple requests.

Prior Year Finding: 2021-031Federal Awarding Agency: USDHHSImpact: Significant DeficiencyAL Number and Title: 93.558 TANF, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AKMAP, 2205AKMAP, 2001AKTANF, 2101AKTANF, 2201AKTANFApplicable Compliance Requirement: EligibilityCondition:DHSS?s information technology (IT) staff did not properly limit user access to DPA?s EIS during FY 22.Context:The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document.Cause:DHSS staff relied on information that was either not being provided or not provided timely. Significant turnover caused delays in user account management.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award.State of Alaska Information Security Policies provide specific criteria related to the identified deficiencies.Effect:Lack of adequate internal controls increases the risk of unauthorized system use, including data manipulation, which may result in ineligible benefit recipients or unallowable costs.Questioned Costs:NoneRecommendation:DOH?s DFMS director should work with DPA?s director to improve controls over the eligibility system.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.568 Low-Income Home Energy Assistance Program (LIHEAP)Federal Award Number: 2101AKLIEAApplicable Compliance Requirement: EligibilityCondition:Three (5 percent) of 60 LIHEAP applicant case files tested had eligibility errors.Context:The audit tested a sample of 60 applications for heating assistance. Auditors identified three instances of eligibility noncompliance. Two were for incomplete applications determined eligible for benefits. One was for an eligible application that was denied incorrectly based on income level.Cause:According to DPA staff, the case review quality control process was not completely in place during FY 22. Case reviews were suspended for all of FY 22 for experienced eligibility technicians (ET) and suspended for three months for inexperienced ETs.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.The DPA Administrative Procedures Manual requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness and accuracy of the determination.Title 42 U.S. Code 8624(b)(2)(B) requires states make payments to households with incomes which do not exceed the greater of (i) an amount equal to 150 percent of the poverty level for such State; or (ii) an amount equal to 60 percent of the State median income; except that a State may not exclude a household from eligibility in a fiscal year solely on the basis of household income if such income is less than 110 percent of the poverty level for such State, but the State may give priority to those households with the highest home energy costs or needs in relation to household income.Effect:Ineligible recipients received benefits and an individual that qualified for program benefits was denied. The errors resulted in questioned costs totaling $6,490. Questioned costs for the population are projected to be $664,400 based on the dollar of noncompliance observed in the sample projected over the tested population.Questioned Costs:$6,490Recommendation:DPA?s director should strengthen internal controls by reinstituting a robust quality control case review process to ensure LIHEAP eligibility determinations are accurate.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Significant DeficiencyAL Number and Title: 93.568 LIHEAPFederal Award Number: 2101AKLIEAApplicable Compliance Requirement: Matching, Level of Effort, EarmarkingCondition:Internal controls over FY 22 LIHEAP earmarking requirements for planning and administrative costs were ineffective.Context:Auditors found that DPA staff complied with the percent limits for the FY 22 LIHEAP earmarking requirements, however, DPA lacked procedures to reduce the risk of noncompliance. Internal controls are an integral part of ensuring federal programs are managed according to program requirements. An effective internal control system helps an entity adapt to shifting environments, evolving demands, changing risks, and new priorities.Cause:According to DPA program management, the lack of procedures for the LIHEAP earmarking requirement was the result of staff turnover and a lack of training regarding internal control requirements over federal programs.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Effect:The lack of procedures for the LIHEAP earmarking requirements could result in unallowable expenditures.Questioned Costs:NoneRecommendation:DPA?s director should develop and implement procedures and improve staff training to ensure compliance with LIHEAP earmarking requirements.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Material WeaknessAL Number and Title: 93.568 LIHEAPFederal Award Number: 2101AKLIEAApplicable Compliance Requirement: Period of PerformanceCondition:Auditors could not obtain sufficient and appropriate evidence to verify compliance with LIHEAP?s period of performance requirements.Context:DPA staff did not maintain evidence to demonstrate compliance with period of performance requirements.Cause:According to DPA staff, employee turnover and inadequate procedures resulted in the lack of documentation supporting compliance with LIHEAP period of performance requirements. In addition, accounting structures were not in place to differentiate between normal project period expenditures or obligations and expenditures related to carryover of the FFY 21 award.Criteria:Title 45 CFR 96.14(a)(2) establishes the following time period for obligation and expenditure of LIHEAP grant funds: beginning with allotments for fiscal year 1994, a maximum of 10 percent of the amount payable to a grantee may be held available for the next fiscal year. No funds may be obligated after the end of the fiscal year following the fiscal year for which they were allotted.Title 45 CFR 75.303(a), requires the State 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.Effect:Noncompliance with the LIHEAP period of performance requirement could result in the federal awarding agency imposing conditions or taking corrective actions, including additional requirements or withholding/terminating funds.Questioned Costs:NoneRecommendation:DPA?s director should develop and implement procedures and modify accounting structures to ensure compliance with LIHEAP period of performance requirements.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Material Weakness, NoncomplianceAL Number and Title: 93.568 LIHEAPFederal Award Number: 2101AKLIEA, 2101AKEC6Applicable Compliance Requirement: ReportingCondition:Auditors could not obtain sufficient and appropriate evidence to verify accuracy of the data reported in the FFY 21 LIHEAP Performance Data Form and the FFY 21 Annual Report on Households Assisted by LIHEAP. In addition, the SF-425 LIHEAP financial report for the FFY 21 grant award misreported two of six key line items. One line was misstated by $1,189,130, and the second by $689,186.Context:LIHEAP grant awards include reporting requirements for financial, performance, and special reports. In FY 22 there were no established procedures for LIHEAP reporting to dictate the procedures necessary to compile data, and to create, review and submit required reports.Cause:According to DPA staff, documentation was not retained to support the data reported in the FFY 21 performance and special reports due to staff turnover and a lack of procedures. DPA staff review of the SF-425 was insufficient to identify incorrect data.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 45 CFR 75.341 requires financial reporting be collected with the frequency required by the terms and conditions of the federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting.The Low-Income Home Energy Assistance Act of 1981 (Title XXVI of the Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, as amended) section 2610 requires the collection of data, including information concerning home energy consumption, the amount, cost and type of fuels used for households eligible for assistance under this title, the type of fuel used by various income groups, the number and income levels of households assisted by this title, the number of households that received such assistance and include one or more individuals who are 60 years or older or disabled or include young children, and any other information determined to be reasonably necessary to carry out the provisions of this title. Collection of this data is facilitated through the LIHEAP performance data form.Title 45 CFR 96.82 requires the State to submit data on the number and income levels of households that apply and the number that are assisted with funds for the 12-month period corresponding to the federal fiscal year (October 1?September 30) preceding the fiscal year for which funds are requested. The data shall be reported separately for LIHEAP heating, cooling, crisis, and weatherization assistance.Effect:Auditors were unable to verify the accuracy of data reported in the performance and special reports. Inaccurate federal reporting may impair the federal oversight agency?s ability to properly oversee the program.Questioned Costs:NoneRecommendation:The DPA and DFMS directors should work together to develop and implement procedures to ensure compliance with LIHEAP financial, performance, and special reporting requirements.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-043Federal Awarding Agency: USDHHSImpact: Significant DeficiencyAL Number and Title: 93.767 Children?s Health Insurance Program (CHIP)Federal Award Number: 2105AK5021, 2205AK5021Applicable Compliance Requirement: Allowable Costs/Cost PrinciplesPrior Year Finding: 2021-043Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: Allowable Costs/Cost PrinciplesCondition:Testing of 40 behavioral health claims paid during FY 22 identified 27 (68 percent) with errors:? Three providers were not enrolled in the Medicaid program at the time medical services were rendered.? Three providers that billed for and received payment for the claims were not associated with the individual medical provider that rendered the medical services.? Three claims were paid even though the claims were submitted with an incorrect National Provider Identifier. The providers were validly enrolled.? Thirteen claims did not identify the provider who rendered medical services. State regulations specifically outline requirements for providers who are qualified to render the services.? Five claims identified the provider who rendered the medical service, but the provider had not met qualification requirements.Context:Senate Bill 74 (SLA 2016) directed DHSS to apply for a Section 1115 waiverunder 42 U.S.C. 1315(a) to establish one or more demonstration projects focused on improving the State?s behavioral health system for Medicaid recipients. The demonstration project allowed DHSS to expand Medicaid behavioral health and substance use disorder services for Alaskans and provide additional services not outlined in the Medicaid State plan.As part of the Centers for Medicare and Medicaid Services? approval of Alaska?s waiver application, DHSS contracted with an Administrative Services Organization (ASO) to provide administrative support, process claims, and manage data. DHSS and the ASO implemented the OptumHealth Behavioral Services Facets Medicaid Management Information System (MMIS) in February 2020. The processing of behavioral health claims was fully transitioned from the Alaska Health Enterprise (AHE) MMIS to the new Facets MMIS during FY 21. In FY 22, the Facets MMIS processed and paid approximately $250 million in claims.Medicaid provider enrollment records are maintained in the AHE MMIS, which is administered by the Division of Health Care Services (DHCS) and its fiscal agent. Reports containing provider data are transmitted to the Facets MMIS on a weekly basis.Cause:Prior to the 1115 waiver demonstration project, DHSS did not require that all behavioral health providers rendering medical services be enrolled in the Medicaid program and screened. Management could not provide a reason why this was not required for services provided under the State plan. DHSS also waived this requirement for services provided under the waiver demonstration project beginning April 1, 2021, through the end of FY 22. According to management, this requirement was waived in order to allow providers sufficient time to enroll and maintain continuity of care for vulnerable Medicaid recipients, including children. Provider-related system edits and checks were not in place during FY 22 due to the lack of a requirement for providers to enroll. There was no federal approval to waive the enrollment requirement.Known flaws in system logic used in the processing of provider enrollment data shared between the AHE MMIS and Facets MMIS also contributed to some of the errors.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the performance of the federal award.Title 42 CFR 455.410 states that the State 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. Further, the State must require all enrolled providers to be screened under 42 CFR 455 Subpart E.Effect:Inadequate controls increase the risk of Medicaid recipients receiving services from unqualified medical providers and led to unallowable payments to ineligible Medicaid providers likely exceeding $25,000.Questioned Costs:AL 93.767: NoneAL 93.778: $1,406Recommendation:The Division of Behavioral Health?s (DBH) director should implement procedures to ensure behavioral health providers are enrolled in Medicaid and that medical services are rendered by qualified providers. DBH?s director should continue working with the ASO to correct the system deficiencies and strengthen internal controls over behavioral health expenditures processed in the Facets MMIS.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.767 CHIP, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: Allowable Costs/Cost PrinciplesCondition:DHSS staff claimed inaccurate federal reimbursement for behavioral health costs.Context:During FY 21 the department transitioned the processing of behavioral health claims from the AHE MMIS to the new Facets MMIS. Medicaid individual eligibility enrollment records are maintained in ARIES and EIS, which are administered by DPA. Reports containing eligibility data are transmitted to the Facets MMIS on a monthly basis.DBH staff?s internal monitoring identified inconsistencies between Facets MMIS eligibility data and eligibility data in ARIES and EIS. As a result, risks exist that eligible members are not receiving services and ineligible members are inappropriately receiving services, or that the federal portion of paid benefits are calculated incorrectly. DBH staff brought this to auditors? attention in December 2022 and, at that time, were in the process of identifying all affected claims. For several claims identified by DBH staff, auditors confirmed the system paid claims based on old eligibility enrollment records instead of eligibility information effective during the claims? dates of service.Cause:The root cause is not known and DBH staff were working with the ASO to identify and correct the issue.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the performance of the federal award.Effect:Inadequate controls led to an unknown amount of federal overpayments and underpayments.Questioned Costs:AL 93.767: IndeterminateAL 93.778: IndeterminateRecommendation:DBH?s director should continue to work with the ASO to correct the system deficiencies and strengthen internal controls over behavioral health expenditures processed in the Facets MMIS.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-044Federal Awarding Agency: USDHHSImpact: Significant DeficiencyAL Number and Title: 93.767 CHIP, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: EligibilityCondition:An examination of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 22 identified significant internal control deficiencies.Context:ARIES is an eligibility system developed for Medicaid and CHIP.Cause:Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Per Title 45 CFR 155.260(a)(5) the State must monitor, periodically assess, and update the security controls and related system risks to ensure the continued effectiveness of those controls.Effect:The internal control weaknesses increase the risk of noncompliance with State and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients or unallowed costs.Questioned Costs:NoneRecommendation:DPA?s director should formalize procedures and dedicate the resources necessary to strengthen ARIES system controls.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-045Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAL Number and Title: 93.767 CHIP, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: EligibilityCondition:Thirty Medicaid and 20 CHIP recipients with paid medical claims during FY 22 were randomly selected for eligibility testing. Auditors found DPA staff did not process applications in a timely manner or redetermine eligibility when required for 87 percent of Medicaid cases and 90 percent of CHIP cases tested.Specifically, the errors included the following:? Twenty Medicaid cases and 17 CHIP cases were due to have eligibility redetermined; however, no information was submitted to DPA for review and DPA staff did not independently conduct a redetermination. For recipients following the Modified Adjusted Gross Income (MAGI) methodology, DPA should have attempted to redetermine eligibility through electronic interfaces.? Eligibility determinations for five Medicaid cases and two CHIP cases were not processed in a timely manner. The delays in completing the review ranged from 64 days to 279 days.? For one Medicaid case, a renewal application was received by DPA staff but it was not reviewed or acted upon. This renewal was received by DPA in January 2021 and had not been processed as of the end of FY 22, a period totaling 520 days.Context:The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients. Eligibility is redetermined at least every 12 months or when new information is provided from the recipient.Due to the COVID-19 pandemic, the federal government enacted the Families First Coronavirus Response Act (FFCRA) on March 18, 2020, which required health insurance coverage for individuals validly enrolled on or after this date to continue during the public health emergency (PHE). In accordance with FFCRA, the State is allowed to receive an enhanced reimbursement rate for Medicaid and CHIP, and may not terminate Medicaid coverage for most individuals found to no longer meet eligibility requirements until the end of the month in which the PHE ends. As of June 30, 2022, the PHE was ongoing. Per federal guidelines, the continuous enrollment requirement did not impact a state?s obligation to continue to conduct renewals and act on changes in beneficiary circumstances, but it did prohibit a state from disenrolling a beneficiary who is determined ineligible, except under certain circumstances.Cause:Staffing and resource shortages adversely impacted application processing timeliness. Due to a system deficiency, cases were also excluded from ARIES-generated reports that were used to track and process renewals.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants.Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility.Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual?s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency.Title 42 CFR 457.340 and 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP.Effect:Failure to determine Medicaid and CHIP eligibility timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits.Questioned Costs:NoneRecommendation:DPA?s director should dedicate the resources necessary to determine Medicaid and CHIP eligibility in a timely manner and ensure the accuracy of ARIES-generated monitoring reports.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-046Federal Awarding Agency: USDHHSImpact: Material Weakness, Material NoncomplianceAL Number and Title: 93.767 CHIP, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: EligibilityCondition:Thirty Medicaid and 20 CHIP recipients with paid medical claims during FY 22 were randomly selected for eligibility testing. Auditors found inaccurate or unsupported eligibility determinations by DPA staff for 33 percent of Medicaid cases tested and 10 percent of CHIP cases tested.Specifically, the errors included the following:? Eight Medicaid cases and nine CHIP cases did not have active eligibility periods that qualified them to be continuously enrolled under the FFCRA. In these cases, DPA staff had not performed redeterminations to renew their eligibility periods, which ended prior to March 18, 2020.? Two Medicaid cases were eligible for continuous enrollment under the FFCRA but their enrollment was not continued.? One CHIP case had income incorrectly calculated.? One CHIP case?s supporting documentation could not be located by DPA staff.Context:The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DHSS responsible for determining Medicaid and CHIP eligibility. DPA employs ETs who review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits.DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. DPA utilizes an electronic document management system to store the documents that DPA staff obtained to verify eligibility.The FFCRA requires health insurance coverage for individuals validly enrolled on or after March 18, 2020, to continue during the public health emergency period.Cause:The deficiencies were due to staff and resource shortages, inadequate training, human error, and system errors.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 42 CFR 435.914(a) states the agency must include in each application?s case record facts to support the agency?s decision.Title 42 CFR 435.603(c) requires the agency to determine financial eligibility for Medicaid based on ?household income?. Title 42 CFR 435.948 requires the State to verify financial information including wages, net earnings from self-employment, unearned income and other resources, and to use available electronic services if available.Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP.Effect:Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits.Questioned Costs:AL 93.767: $20,115AL 93.778: $16,945Recommendation:DPA?s director should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the case management system includes all relevant documentation supporting eligibility decisions.Views of Responsible Officials:DHSS concurs with the finding but not the questioned costs. CMS has notified the state that financial recoveries based on eligibility errors can only be pursued when identified by programs operating under CMS? Payment Error Rate Measurement (PERM) program, under section 1903(u) of the Social Security Act and regulations at 42 CFR Part 431, Subpart Q.Auditor?s Concluding Remarks:Management?s response did not persuade the auditor to revise the finding. Management concurs with the finding, but not the questioned costs, based on communication received from a federal agency indicating the agency will not pursue recovery of the questioned costs for a similar prior year finding. Questioned costs are defined by Title 45 CFR 75.2, which states:Questioned cost means a cost that is questioned by the auditor because of an audit finding:(a) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds;(b) Where the costs, at the time of the audit, are not supported by adequate documentation; or(c) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances.Based on the Uniform Guidance, benefits paid associated with the finding are reported as questioned costs.

Prior Year Finding: 2021-047Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.767 CHIP, 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: EligibilityCondition:Seven of 30 (23 percent) Medicaid eligibility cases and two of 20 (10 percent) CHIP eligibility cases tested were sent written eligibility notices that contained inconsistent or incorrect information regarding the eligibility period and application date.Context:Notices for Medicaid eligibility decisions are created through DHSS?s two eligibility systems, ARIES and EIS. DPA procedures state that approval notices must include information about the level of benefits and approved services. The notices must also include the date eligibility is set to begin and end.ARIES is programmed to automatically generate system notices; however, due to system defects, the notices do not always contain correct information. As a work-around, the ETs can manually enter the correct information in the additional information section of the notice.Cause:ARIES has known system logic issues that result in incorrect or incomplete notices. This defect was first identified by auditors in FY 19 and has not been addressed by DPA due to lack of resources and competing priorities. Additionally, DPA staff did not monitor the accuracy and completeness of the notices and add clarifying text when necessary.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 42 CFR 435.917 requires the State to provide all Medicaid applicants and beneficiaries with timely and adequate written notice of any decision affecting their eligibility. Additionally, such notices must contain clear information including the basis and effective date of the eligibility and the circumstances in which the individual must report any changes that may affect the individual?s eligibility.Effect:Due to inconsistent or incorrect information within eligibility notices, Medicaid beneficiaries were misinformed regarding benefit coverage.Questioned Costs:NoneRecommendation:DPA?s director should dedicate the resources necessary to fix the ARIES system logic that created the incorrect notices. Additionally, DPA?s director should implement procedures to monitor the accuracy and sufficiency of Medicaid eligibility notices.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2021-048Federal Awarding Agency: USDHHSImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.767 CHIP , 93.775, 93.777, 93.778 Medicaid ClusterFederal Award Number: 2105AK5021, 2205AK5021, 2105AKMAP, 2205AKMAPApplicable Compliance Requirement: Allowable Costs/Cost Principles, Special Tests and ProvisionsCondition:Certain behavioral health providers were not screened and enrolled in accordance with federal eligibility requirements.Context:Screening is a required element of the provider enrollment process and is used to determine whether an individual and/or entity is eligible to participate as a Medicaid/CHIP provider. Examples of screening activities include, but are not limited to, license verification, site visits, identity confirmation, and exclusion status assessment.Forty newly enrolled behavioral health providers were randomly selected for testing. Auditors found 73 percent of providers lacked documentation to support that professional licensing, minimum education, or experience requirements were met prior to enrollment in the Medicaid program. The sample consisted of mental health professional clinicians, peer support specialists, substance use disorder counselors, and behavioral health clinical associates. Errors were found for the following enrollments:? Five of eight mental health professional clinicians;? Eleven of 12 substance use disorder counselors; and? Fourteen of 16 behavioral health clinical associates.As of the end of FY 22, there are approximately 2,500 mental health professional clinicians, substance use disorder counselors, and behavioral health clinical associates enrolled in the Medicaid program.Cause:Deficiencies were due to inadequate procedures and training for enrolling new provider types.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 42 CFR 455.410 requires that the State must require all enrolled providers to be screened under 42 CFR 455 Subpart E.Title 42 CFR 455.450 requires the State Medicaid agency to verify that a provider meets any applicable federal regulations or State requirements for the provider type prior to making an enrollment determination.Effect:Inadequate controls over provider eligibility increase the risk of unqualified providers delivering services to Medicaid recipients.Questioned Costs:AL 93.767: $1,669AL 93.778: $425,224Recommendation:The DHCS director should strengthen training and implement procedures to ensure providers are enrolled in accordance with federal and State requirements.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USTreasuryImpact: Significant Deficiency, NoncomplianceAL Number and Title: 21.019 Coronavirus Relief Fund (CRF) ? COVID-19Federal Award Number: SLT0031, SLT0073Applicable Compliance Requirement: Subrecipient MonitoringCondition:DCCED staff did not issue timely management decisions for three of the four CRF single audit findings requiring follow-up during FY 22.Context:Federal regulations require pass-through entities to issue a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient?s proposed corrective actions to address the findings.Of the three untimely management decisions, two were issued past the six month requirement and one has not been issued as of the end of FY 22. For the two management decisions issued past the six month requirement, one was two months and the other was 11 months past the requirement as of the end of FY 22.Cause:Due to staff oversight, DCCED?s single audit procedures did not require management decisions to be issued within the six month requirement. Further, the procedures did not require a supervisory review.Criteria:Title 2 CFR 200.332(d)(3) states that pass-through entities? monitoring of subrecipients must include issuing a management decision for audit findings that relate to federal awards provided to subrecipients.Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse.Effect:The lack of timely management decisions may result in subrecipients not taking appropriate corrective action. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements.Questioned Costs:NoneRecommendation:DCCED?s DAS director should revise single audit procedures to ensure management decisions are issued within six months. Further, procedures should include adequate supervisory review.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USTreasuryImpact: Significant Deficiency, NoncomplianceAL Number and Title: 21.027 SLFRFFederal Award Number: SLFRP0006, SLFRP2633, SLFRP4544Applicable Compliance Requirement: Subrecipient MonitoringCondition:For one of two subrecipients, DCCED staff did not identify all federally required information on the FY 22 SLFRF subaward or conduct a risk assessment.Context:DCCED entered into a contract with the Juneau Economic Development Council (JEDC) to assist in administering the Grants to Tourism and Other Businesses for the Negative Economic Impacts portion of the SLFRF program. Under the contract, JEDC determined eligibility, sent payments to eligible grantees, and provided disbursement reports to DCCED for monitoring. This activity created a subrecipient relationship.The audit reviewed the form used to contract with JEDC and determined that none of the federally required information was included on the form. Additionally, the audit found that a risk assessment was not conducted for JEDC.Cause:Due to staff turnover in the program manager position, JEDC was not initially identified as a subrecipient since a contract was used instead of a grant award document.Criteria:Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award.Title 2 CFR 200.332 requires the State to perform annual risk assessments and ensure every subaward includes the required information at the time of the subaward.Effect:Absent risk assessments, subrecipients may not be sufficiently monitored, increasing the risk of inappropriate use of SLFRF monies and noncompliance with federal laws. Not providing the required information in the subaward document increases the risk of subrecipient noncompliance with the terms and conditions of the federal award and could result in the State repaying SLFRF monies to the federal government.Questioned Costs:NoneRecommendation:DCCED?s DAS director should strengthen training of program manager staff to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: U.S. Department of Health and Human ServicesImpact: Significant Deficiency, NoncomplianceAL Number and Title: 93.423 1332 State Innovation WaiversFederal Award Number: 1 SIWIW180004-01-00Applicable Compliance Requirement: ReportingCondition:The subaward issued for the 1332 State Innovation Waivers program subject to Federal Funding Accountability and Transparency Act (FFATA) requirements was not reported to the FFATA Subaward Reporting System (FSRS).Context:FFATA requires information on federal awards be made available to the public via a single website (www.usaspending.gov). FSRS is the reporting tool federal awardees, such as the State of Alaska, use to report subaward and executive compensation data regarding first-tier subawards.The audit found that the DCCED, Division of Insurance (DOI) failed to report to FSRS the one FY 22 subaward, totaling $100,000,000.[See Schedule of Findings and Questioned Costs for chart/table.]Cause:DCCED program staff?s internal controls over the review of the federal notice of award terms and conditions were insufficient to identify FFATA reporting requirements.Criteria:Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards.Title 2 CFR 170 states in part that federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made, and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public.Effect:Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding.Questioned Costs:NoneRecommendation:DCCED?s DOI director should improve procedures over the review of grant awards? standard terms and conditions to ensure DCCED is in compliance with all reporting requirements.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: United States Environmental Protection AgencyImpact: Significant Deficiency, NoncomplianceAL Number and Title: 66.202 Congressionally Mandated ProjectsFederal Award Number: 01J81201, 01J96801Applicable Compliance Requirement: ReportingCondition:Testing of five subawards subject to Federal Funding Accountability and Transparency Act (FFATA) requirements had obligated amounts incorrectly reported to the FFATA Subaward Reporting System (FSRS), or not reported at all.Context:FFATA requires information on federal awards be made available to the public via a single searchable website (www.usaspending.gov). FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards.The audit tested all five subawards totaling $1,477,260 issued to five Remote Maintenance Worker (RMW) subrecipients. RMW subawards, which have performance periods on a state fiscal year basis, are funded by two federal awards with consecutive award periods. Once the earlier federal award period has ended, DEC staff obligates funds from the new federal award for the remaining subaward amounts that have not been spent.Amounts for the five subawards tested had incorrect amounts reported to the FSRS. When DEC staff obligated funds from the new federal award, the obligated amounts were not reported to the FSRS. DEC staff made the corrections in the FSRS after auditors brought the errors to their attention.Cause:Per DEC staff, DEC lacks formal procedures for FFATA reporting.Criteria:Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards.Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $30,000 or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and executive compensation is not available to the public.Effect:Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding.Questioned Costs:NoneRecommendation:DEC?s Division of Water director should implement written procedures to ensure all subawards subject to FFATA reporting are entered into the FSRS accurately and timely.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: United States Department of Transportation (USDOT)Impact: Significant Deficiency, NoncomplianceAL Number and Title: 20.205, 20.219, 20.224 HPCCFederal Award Number: VariousApplicable Compliance Requirement: Special Tests and ProvisionsCondition:Four of 12 consultants? indirect cost rates (33 percent) were incorrect in eight professional service agreements reviewed.Context:If an indirect cost rate has not been established by a federal cognizant agency, DOTPF staff must evaluate a consultant?s indirect cost rate and calculate an appropriate rate.Consultants submit financial information to DOTPF?s Internal Review section where staff perform an audit to establish an audited indirect cost rate. The audited indirect cost rate is sent to a consultant who either accepts or rejects the audited rate. Once a consultant accepts the rate, the signed certificate of indirect cost rate is forwarded to DOTPF?s central region procurement staff for dissemination to other regional procurement offices for inclusion in the procurement process. Contracts must be amended to reflect the newly approved rate.Cause:DOTPF lacked adequate procedures to ensure contracts were amended to reflect the audited rate when indirect cost rate certifications were received by regional offices.Criteria:Title 23 CFR 172.11(b)(1) requires indirect cost rates to be updated on an annual basis in accordance with the consultant's annual accounting period and in compliance with the federal cost principles. Once an indirect cost rate is accepted, contracting agencies must apply such indirect cost rates for the purposes of contract estimation, negotiation, administration, reporting, and contractor payments. A consultant's accepted indirect cost rate for its one-year applicable accounting period must be applied to contracts.Title 2 CFR 303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.Effect:Incorrect indirect cost rates result in underpayments or overpayments to consultants.Questioned Costs:NoneRecommendation:DOTPF?s contracting officer should improve procedures to ensure contracts are updated annually to reflect a consultant?s audited indirect cost rate.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USDOTImpact: Significant Deficiency, NoncomplianceAL Number and Title: 20.205, 20.219, 20.224 HPCCFederal Award Number: 0657(0003)Applicable Compliance Requirement: Special Tests and ProvisionsCondition:One of five construction projects (20 percent) tested did not have a required value engineering (VE) analysis performed.Context:State transportation departments are required to ensure that a VE analysis is performed on projects that are located on the national highway system (NHS) with an estimated total project cost of $50 million or more that utilize federal highway funding; bridge projects located on the NHS with an estimated total cost of $40 million or more that utilize federal highway program funding; and any other projects that the Federal Highway Administration (FHWA) determined to be appropriate.DOTPF?s VE program is overseen by the State VE coordinator; however, identifying, tracking, and monitoring the VE analysis of projects is a coordinated effort between regional VE coordinators and project managers. VE data is forwarded to the State VE coordinator who prepares a schedule of projects with VE analysis, including the number of approved project recommendations, and forwards the schedule to FHWA.Cause:DOTPF?s VE program policies and procedures did not require the State VE coordinator to monitor regional VE coordinators to ensure VE analyses were conducted on all applicable projects.Criteria:Title 23 CFR 627.5(a) requires a VE analysis be conducted prior to the completion of the final design on each applicable project that utilizes federal-aid highway funds.Title 23 CFR 627.7(a)(5) requires the State?s VE program to establish and document policies, procedures, and controls to ensure a VE analysis is conducted.Title 23 CFR 627.7(c) requires the State to designate a VE program coordinator to promote and advance VE program activities and functions. The VE coordinator?s responsibilities should include establishing and maintaining the VE policies and procedures; ensuring VE analyses are conducted on applicable projects; and monitoring, assessing, and reporting on the VE program and project reviews.Effect:Projects without a VE analysis could result in unrealized cost savings and/or technology advancements, and safety improvements not being implemented.Questioned Costs:NoneRecommendation:DOTPF?s Design and Engineering Services Division director should revise the VE policy and procedures to require the State VE coordinator monitor all applicable projects to ensure a VE analysis is conducted.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: U.S. Department of Education (USED)Impact: Significant Deficiency, NoncomplianceAL Number and Title: 84.425F HEERF Minority Serving Institution (MSI) PortionFederal Award Number: P425L200248Applicable Compliance Requirement: Allowable Costs/Cost PrinciplesCondition and Context:During the testing of the University of Alaska Fairbanks (UAF) MSI expenditures there was an observed instance, among the forty that were tested, of an interdepartmental transaction being claimed as a reimbursable expenditure. Students from the MacClean House dorm, which is operated by the UAF Residence Life unit, were required to quarantine in the MacLean House dorm, which is operated by the College of Rural and Community Development (CRCD) unit. This resulted in the UAF Residence Life unit paying the CRCD unit for the students' housing costs. This transaction was included as a reimbursable expenditure, despite having a net $0 impact on the income statement.Cause:UAF had not considered the possibility that interdepartmental transactions could be disallowed. Due to a lack of authoritative guidance at the time, the campus relied on the Frequently Asked Questions (FAQ) to determine allowability which made no mention of lost revenue related to interdepartmental transactions.Criteria:Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. In addition, Per Uniform Guidance 200.34 expenditures on the accrual basis may be: cash disbursements for direct charges for property and services, the value of third-party in-kind contributions applied, and the net increase or decrease in the amounts owed by non-federal entity.Effect:The University claimed costs that were not allowable.Questioned Costs:$2,100.97 - ALN 84.425F - Grant Award P425L200248Recommendation:We recommend the University of Alaska Fairbanks should not claim interdepartmental expenditures as institutional expenditures.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USEDImpact: Significant Deficiency, NoncomplianceAL Number and Title: 84.007, 84.033, 84.063, 84.268, 84.379 Student Financial Assistance ClusterFederal Award Number: P063P210010Applicable Compliance Requirement: Cash ManagementCondition and Context:During the testing of the outstanding Title IV student check listing we observed nine instances of stale checks at the University of Alaska Southeast (UAS) and three stale checks at UAF that were aged greater than 240 days and not returned to the Department of Education.Cause:Staffing issues in the student financial aid office at the UAS and UAF campuses have made it difficult for the student financial aid departments to perform their monthly review of uncashed checks in a timely manner. The delays in this process caused several instances of outstanding checks to age beyond 240 days.Criteria:The Code of Federal Regulations, 34 CFR 668.164(h)(2) states that an institution that attempts to disburse funds by check and the check is not cashed, the institution must return the funds to the Secretary no later than 240 days after the date it issued that check. Additionally, 2 CFR 200.303 states that nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements.Effect:Funds are not returned to the Department of Education in a timely manner.Questioned Costs:NoneRecommendation:UAS and UAF should continue working with the Statewide Office of Finance and Accounting to better enforce the monthly review of uncashed checks policy.Views of Responsible Officials:Management agrees with the finding.

Federal Awarding Agency: USEDImpact: Significant Deficiency, NoncomplianceAL Number and Title: 84.007, 84.033, 84.063, 84.268, 84.379 Student Financial Assistance ClusterFederal Award Number: P063P210010Applicable Compliance Requirement: Special Tests and ProvisionsCondition and Context:The enrollment effective date reported to the National Student Loan Database System (NSLDS) for five of the ten sampled students from the UAS campus was incorrect and did not match the correct last dates of attendance on file in the institution?s records.Cause:At the UAS campus, there is a process that is run by the registrar for unofficial withdrawals at the end of every semester that overrides the correct institutional last date of attendance with the last date of the semester. This incorrect date is then reported to the Clearinghouse and ultimately NSLDS.Criteria:The Code of Federal Regulations, 34 CFR 685.309(b), states the school is required to report changes in the student?s enrollment status, the effective date of the status, and an anticipated completion date. Additionally, 2 CFR 200.303 states that nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements.Effect:UAS was not in compliance with the requirements to properly report student enrollment data correctly. Incorrect dates submitted to NSLDS may be used to determine the grace period for the repayment and interest of outstanding Title IV student loans.Questioned Costs:NoneRecommendation:We recommend that UAS work with the campus registrar?s office to develop an alternative process that will enable the student financial aid office to review and correct the last dates of attendance prior to being reported to the Clearinghouse.Views of Responsible Officials:Management agrees with the finding.

Prior Year Finding: 2020-023 Federal Awarding Agency: U.S. Department of Education (USED) Impact: Significant Deficiency AL Number and Title: 84.425C Governor?s Emergency Education Relief (GEER) Fund ? COVID-19 84.425D Elementary and Secondary School Emergency Relief (ESSER) Fund ? COVID-19 Federal Award Number: S425C200011, S425D200020, S425D210020 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: Testing of 28 new user roles added to the Grants Management System (GMS) in FY 21 identified three user roles added prior to a user access agreement form being completed. Additionally, one user access agreement form was completed after auditors requested the form. Context: DEED uses the web-based GMS to administer several federal programs, such as Assistance Listing 84.425 Education Stabilization Fund (ESF), and programs authorized under the Elementary and Secondary Education Act of 1965 (ESEA). DEED is responsible for managing GMS, which is utilized by employees at State agencies and local educational agencies (LEA). LEA employees submit grant applications, receive grant award notifications, and submit reimbursement requests through GMS. State employees view, modify, and approve LEA grant awards and reimbursements through GMS. Cause: According to DEED management, staff did not follow GMS access control procedures due to competing priorities. The control deficiency was not followed up timely due to insufficient monitoring of GMS user access. awards. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Section 171, 5.4.1 of the State of Alaska (SOA) Information Security Policies (ISP) requires management to use a formal request process for all access requests (e.g. additions, changes, or deletions) to SOA computers, networks, or applications. ISP-171, 5.4.4 requires management to ensure that all user accounts for SOA computers, networks, or applications meet the following criteria: ? be authorized by a designated data owner; ? be based on a business need related to the user?s duties; and ? be supported by a written statement of job responsibilities and conditions of access. Effect: The absence of signed and approved user access forms prior to granting access to GMS increases the risk of unnecessary access, which could result in the manipulation or loss of data. Questioned Costs: None Recommendation: DEED?s Finance and Support Services (FSS) director should improve GMS access monitoring controls to ensure all user accounts are established using DEED?s formal request process, only authorized individuals have access to the system, and access is based on a valid business need.

Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425C GEER Fund ? COVID-19 84.425D ESSER Fund ? COVID-19 Federal Award Number: S425C200011, S425D200020, S425D210020 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in FY 21 Federal Funding Accountability and Transparency Act (FFATA) subaward reporting. Four of 10 tested subawards were not reported and three contained inaccurate data elements. Of the subawards with incorrect data elements, one reported an incorrect subaward amount and two had inaccurate Data Universal Numbering System (DUNS) numbers. Context: FFATA requires information on federal awards be made available to the public via a single searchable website (www.usaspending.gov). The FFATA Subaward Reporting System (FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. According to DEED procedures, on a monthly basis DEED staff prepares a submission to FSRS, which is reviewed before submission. Once entered into FSRS the information is compared to an FSRS printout to verify the data was accurately captured. Auditors determined DEED did not retain documentation of the input to FSRS or verify the input was accurate. The audit tested 10 subawards totaling $79,135,819 that were issued to six of the 49 total subrecipients that received ESF subawards. Of the 10 subawards tested, four were not reported. Of the six reported subawards, one was overstated by $138,335,039 and two did not report the correct DUNS numbers. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: The FFATA procedures that ensure the submission to FSRS is input accurately were not followed due to documentation difficulties associated with teleworking during the pandemic. Additionally, according to DEED staff the FSRS system is difficult to use and frequently requires manual data inputs, increasing the potential for entry errors. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $25,000 ($30,000 effective November 12, 2020) or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DEED?s FSS director should strengthen procedures to ensure data elements comply with federal reporting requirements and all subawards subject to FFATA reporting are entered into the FSRS.

Federal Awarding Agency: USED Impact: Significant Deficiency AL Number and Title: 84.425C GEER Fund ? COVID-19 84.425D ESSER Fund ? COVID-19 Federal Award Number: S425C200011, S425D200020 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of DEED?s FY 21 subrecipient monitoring risk assessments found that DEED staff did not document risk assessments for non-LEA subrecipients. Additionally, DEED?s risk determinations did not affect the monitoring process. Context: DEED issued ESF subawards to 67 subrecipients, of which 14 were non-LEAs that received approximately $632 thousand. The majority of the non-LEA subawards were competitive grants funded by the GEER fund portion of the ESF program. The purpose of the GEER fund is to provide LEAs, institutions of higher learning, and other education-related entities with emergency assistance as a result of the COVID-19 pandemic. According to DEED staff, risk assessments for GEER competitive grants were performed during the application review process. However, these assessments were not documented. DEED staff considered all non-LEA subrecipients as ?high risk? due to the grantees? lack of experience with the grants, the speed at which the grants were expected to be disbursed, and the changing guidance from USED. The 53 LEA subrecipients were issued subawards under either or both GEER and ESSER. The purpose of ESSER is to provide the State and LEAs with emergency relief funds to address the impact of the COVID-19 pandemic on elementary and secondary schools. The State has allocated approximately $34.5 million in ESSER funds under the Coronavirus Aid, Relief, and Economic Security Act to LEAs. DEED staff did not conduct ESF specific risk assessments for LEAs. Instead, DEED staff relied on risk assessments already performed for ESEA programs. Monitoring procedures performed by DEED staff were the same for all ESF subrecipients and consisted of reviewing and approving program budgets and periodic reimbursement requests, and providing support and technical assistance via webinars and newsletters. Cause: Risk assessments were not performed for non-LEA subrecipients because DEED utilized a risk assessment created for a different federal program, which only made grants to LEAs. As a result non-LEA subrecipients were not included in the risk assessment. Monitoring procedures performed by DEED staff were the same for all ESF subrecipients regardless of risk, because procedures were not customized to address the risks associated with a new program. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the grant awards. Title 2 CFR 200.332(b) requires the State to evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining appropriate subrecipient monitoring. Effect: Not performing risk assessments for all subrecipients and not designing monitoring tools based on the risk determination could potentially result in higher risk subrecipients not being sufficiently monitored, inefficient program administration, and increased risk of inappropriate use of federal awards. Questioned Costs: None Recommendation: DEED?s FSS director should update risk assessment procedures to ensure the risk assessment process includes non-LEAs and is used in determining the appropriate level of monitoring.

Federal Awarding Agency: United States Department of the Treasury (USTreasury) Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.019 Coronavirus Relief Fund (CRF) - COVID-19 Federal Award Number: SLT0031, SLT0073 Applicable Compliance Requirement: Reporting Condition: DHSS staff used inconsistent methods of accounting when reporting federal expenditures for the CRF program on FY 21 quarterly financial progress reports. As such, amounts reported were inaccurate. Context: Each prime recipient of the CRF is required by USTreasury to submit quarterly financial progress reports that identify COVID-19 related costs incurred during the reported period. The progress reports detail the total amount of CRF payments the prime recipient received from USTreasury; the amount of funds received that were expended or obligated for each project or activity; all projects and activities for which funds were expended or obligated; and information on any loans issued, contracts and grants awards, transfers made to other government entities, and direct payments made by the prime recipient in excess of $50,000. Aggregated information was required for direct payments made by the prime recipients that were less than $50,000. Reports must be submitted through the federal GrantSolutions portal and be supported by the accounting records. The CRF program was primarily administered for the State of Alaska by the Department of Commerce, Community, and Economic Development (DCCED) and DHSS. DCCED administered the Small Business Relief Program and Direct Municipal Relief Program projects with assistance from the State?s Office of Management and Budget (OMB). OMB collected CRF expenditure data via monthly spending reports from municipalities and prepared DCCED?s reporting data for submission. The State OMB reported CRF expenditures on the quarterly financial progress reports using the modified accrual basis of accounting. CRFs administered by DHSS included issuing awards to subrecipients for nonprofit support, transfers to other State agencies, and other initiatives related to the public health emergency. Subawards and transfers were issued as advances and were not reimbursement based. DHSS?s reporting data was prepared for submission by its DFMS staff. When ready for submission, the complete reports were certified by DOA?s state accountant. DHSS reported CRF expenditures on either the cash or modified accrual basis, depending upon the activity being reported. For example, DHSS used the modified accrual basis to report DHSS?s public health related expenditures, but used the cash basis to report CRF monies it transferred to other State agencies and monies provided to subrecipients. Using the cash basis of accounting resulted in DHSS staff reporting the amount of CRF monies advanced instead of the amount expended on allowable activities. Cause: Expenditures were misreported due to a misunderstanding of CRF reporting requirements. DHSS review procedures were insufficient to ensure the accuracy and consistency of the information prior to inclusion in the State?s overall quarterly report. Criteria: Per USTreasury?s Office of Inspector General Memo OIG-CA-20-028, Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked Questions Related to Reporting and Recordkeeping (Revised), Frequently Asked Question #32, prime recipients must report CRF expenditures on the accrual basis, unless the prime recipient?s traditional practice is to report on a cash basis for all its financial reporting. Alaska uses the modified accrual basis for financial reporting. Effect: Inaccurate federal reporting reduces transparency and may impair the federal oversight agency's ability to properly oversee the program. Questioned Costs: None Recommendation: DHSS's DFMS director should improve training and strengthen procedures to ensure federal reports are accurate and prepared using the appropriate basis of accounting.

Prior Year Finding: 2020-030 Federal Awarding Agency: U.S. Department of Health and Human Services (USDHHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 Temporary Assistance for Needy Families (TANF) Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Allowable Costs/ Cost Principles Condition: Testing of 45 TANF benefit payments identified eight payments made incorrectly due to missing documentation or reports of change not being entered into TANF?s eligibility system, EIS, in a timely manner. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. TANF monthly benefit amounts are calculated based on various program eligibility requirements, including monthly income, household composition, and other factors. According to the Division of Public Assistance?s (DPA) Alaska Temporary Assistance manual, caseworkers have 10 days to report TANF beneficiary requirement changes to DPA. Once the information is reviewed, eligibility technicians (ET) enter the information into the Eligibility Information System (EIS). EIS automatically calculates the monthly benefit amount based on the eligibility factors entered. If changes are not entered in a timely manner, or are not entered accurately, benefit payments are paid incorrectly. DPA?s Administrative Procedures Manual requires that all public assistance cases have documentation that supports the benefit-level determinations. At the beginning of the COVID-19 pandemic, Administration for Children and Families (ACF) issued TANF Program Instruction No. TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program. States were instructed to seek ACF guidance to determine whether a TANF program change was allowable and to amend the state plan for program changes not specifically mentioned in the instructions. After making a change, a state had 30 days to submit a TANF plan amendment. During the COVID-19 pandemic, DPA staff transitioned to remote working and DPA management implemented a new electronic case file system to accommodate the remote working environment. Cause: During FY 20, DPA management misinterpreted ACF program instructions and directed ETs not to reduce benefits or close cases in response to reports of change. A State plan amendment was not submitted for the program change during FY 20 or FY 21. Missing documentation was due to implementation of an electronic documentation system and the failure to scan all necessary documentation into the new system. Criteria: Title 45 CFR 75.2 defines improper payments to include payments that were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan amendment within 30 days of a program change. Effect: TANF benefit payments were calculated incorrectly or unsupported, resulting in overpayments. Questioned Costs: $25,283 Recommendation: DPA?s director should improve monitoring of benefit payments to ensure reports of change are acted upon timely. DPA should also improve records retention procedures to ensure complete TANF case files are uploaded to the electronic case file system.

Prior Year Finding: 2020-032 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.558 TANF 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 1701AKTANF, 1801AKTANF, 1901AKTANF, 2001AKTANF, 2101AKTANF, 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Eligibility Condition: DHSS?s information technology (IT) staff did not properly limit user access to DPA?s EIS during FY 21. Context: The details related to this control weakness and the relevant audit criteria are being withheld from this report to prevent the weakness from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Cause: Limited resources and competing priorities contributed to the finding. Further, DHSS relied on information from other sources that is no longer provided or not provided timely. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. State of Alaska Information Security Policies provide specific criteria related to the identified deficiencies. Effect: Lack of adequate internal controls increases the risk of unauthorized system use, including data manipulation, which may result in ineligible benefit recipients or unallowable costs. Questioned Costs: None Recommendation: DFMS?s director should work with DPA?s director to improve controls over the eligibility system.

Prior Year Finding: 2020-033 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Eligibility, Special Tests and Provisions Condition: Thirteen of 45 TANF recipient case files tested lacked documentation supporting the request and use of income and benefit information through the Income Eligibility and Verification System (IEVS), and other data exchanges necessary for determining eligibility and benefits. Further, the following eligibility errors were identified in eight cases: ? Five TANF applications were not reviewed within 30 days of receipt. ? One application did not include shelter cost verification. ? Two applicants either did not fill out the felony convictions portion of the application or the section was illegible. ? Two recipients reported additional income, but the additional income was not evaluated in a timely manner to determine whether the recipients exceeded income or resource limits. ? One adult not included case did not have support showing relationship of the relative caregiver to the child. The case file was also missing date of birth documentation for the child. ? Three cases did not have an eligibility redetermination within the federally required 12 months. Auditors also identified that eligibility was not redetermined within 12 months for all TANF recipients. Context: The State is required to ensure only financially needy families consisting of a minor child living with a parent or other caretaker relatives receive TANF assistance. DPA employs ETs who review applications, identify income and financial resources, and make a determination whether a family is eligible to receive benefits, including the amount of the benefits. As part of verifying TANF eligibility, the State is required to coordinate data exchanges when making eligibility determinations, including, but not limited to: wage information from the State Wage Information Collection Agency, unemployment compensation information from the Department of Labor, all available information from the Social Security Administration, and information from the United States Citizenship and Immigration Services. DPA?s Administrative Procedures Manual, Section 109 requires that all public assistance cases have documentation that supports eligibility, ineligibility, and benefit-level determinations. The documentation must be in sufficient detail to allow a reader or reviewer to determine the reasonableness of each action taken, verification used, and contacts made using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard copy case files. At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No. TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program. For example, the program instructions allowed for eligibility redeterminations to take place telephonically, or by other digital means, in order to reduce face-to-face contact. Changes that were not specifically mentioned in the program instructions required an amendment to an approved state plan. While the request for a plan amendment did not need to be submitted before making program changes, ACF instructed states to seek guidance from ACF on whether a program change was allowable under program requirements. A state had 30 days to submit a TANF plan amendment. Cause: Inadequate training, quality control staffing shortages, and staff working remotely contributed to ETs not performing and/or documenting all required components of eligibility determinations. Further, DPA management misinterpreted ACF Program Instructions and automatically rolled forward recipient eligibility determinations during FY 21, regardless of the need for an eligibility recertification, and did not submit a TANF plan amendment to ACF for the changes made. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 45 CFR 206.10(a)(3)(i) requires that a decision be made promptly on applications, pursuant to reasonable State-established time standards not in excess of 45 days. Per Section 4.1 of the Alaska State Plan for TANF, dated December 31, 2019, applications are required to be processed within 30 days of receipt. Title 45 CFR 205.55 requires the State to coordinate data exchanges with other federally assisted benefits programs, and to request and use income and benefit information when making eligibility determinations. Pursuant to Title 45 CFR 206.10, DPA?s federally approved TANF State Plan outlines specific State requirements for applications and eligibility determinations, including: ? Section 4.1 Application ? Program applicants must complete an application form in writing. To be considered complete, the application must provide all requested information and be supported by documentation the department determines necessary to establish eligibility. ? Section 4.3 Reporting Requirements ? Participants must also take part in periodic reviews of the family?s situation. DPA redetermines eligibility and benefit amount based on the information provided during the reviews and any other changes that are reported between reviews. ? Section 13 Family Need ? The department establishes whether a child is financially needy. Financial need is determined to exist if the family resources and income are below the need standards set by the department. Title 45 CFR 206.10(a)(9)(iii) requires that at least one face-to-face redetermination be conducted for each case once every 12 months. However, TANF Program Instruction No. TANF-ACF-PI-2020-01 allowed for telephonic or other virtual/electronic communication platforms to be used during the COVID-19 pandemic. Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan amendment within 30 days of program changes. Effect: The State may be penalized for up to two percent of the federal grant award for failure to participate in IEVS. As a result of not redetermining eligibility during FY 21 and the other errors identified, ineligible recipients may have received benefits. Questioned Costs: Indeterminate Recommendation: DPA?s director should improve training, ensure quality control staff vacancies are filled in a timely manner, and adequately monitor staff working remotely to ensure eligibility and document retention procedures are followed.

Prior Year Finding: 2020-034 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Matching, Level of Effort, Earmarking Condition: Auditors could not obtain reliable evidence to verify compliance with TANF?s earmarking requirement. Context: DHSS staff monitors compliance with TANF?s earmarking requirement through compiling Monthly Caseload and Benefit Summary reports from EIS data. The summary reports identify the number of TANF recipients that have received more than 60 months of benefit payments. According to DPA management, the monthly report is reviewed for accuracy. The monthly EIS data is also compiled as part of the ACF-199 that includes the number of countable months TANF recipients used assistance. Testing of ACF-199 data found the EIS data reported in the ACF-199 report was not supported by a manual count of monthly benefit payments for 63 of 90 cases tested (70 percent). Based on this testing, auditors concluded the EIS monthly caseload data was not reliable. Cause: DHSS staff review of the Monthly Caseload and Benefit Summary reports was insufficient to identify the data was not supported. In addition, there was a system programming error in EIS causing the compilation of countable monthly benefit payments to return incorrect data. Criteria: Title 45 CFR 264.1 states that subject to exceptions, no state may use any of its federal TANF funds to provide assistance 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 (60 cumulative months, whether or not consecutive). Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: Unreliable data impedes DPA staff?s ability to monitor compliance with federal requirements. Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding the 60-month limit on benefits. Questioned Costs: None Recommendation: DPA?s director should develop procedures to ensure the monthly benefit count in EIS is accurate. Additionally, DHSS?s commissioner should allocate resources to correct the programming error within EIS that causes the incorrect number of countable monthly TANF benefit payments.

Prior Year Finding: 2020-035 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Reporting Condition: The ACF-196R TANF financial report for the FFY 20 grant award misreported expenditures for the quarter ending September 30, 2020. Expenditures totaling $2,320,073 were reported on the filed ACF-196R report as federal expenditures, on line 6a, but should have been reported as state maintenance of effort expenditures on the same line. Further, the ACF-196R TANF financial report for the FFY 21 grant award misreported expenditures for the quarter ending March 31, 2021. Federal expenditures totaling $335,096 were excluded on the filed ACF-196R report. Context: The State is required to file ACF-196R quarterly reports containing expenditure data on the TANF program. The report is compiled based on classification of expenditures in the accounting system. The erred expenditures were allowable for the federal program, but the nature of the expenditures was incorrectly reported or excluded in the ACF-196R report. Cause: Expenditures were misreported due to an input error and supervisory review of the report prior to submission was insufficient to identify the error. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain internal controls over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Additionally, Title 45 CFR 265.3(c)(1) requires the State to file quarterly expenditure data on the State?s use of federal TANF funds. Effect: Inaccurate federal reporting may impair the federal oversight agency?s ability to properly oversee the program. Questioned Costs: None Recommendation: DHSS?s DFMS director should strengthen review procedures to ensure expenditures are accurately reported on federal reports. [See Schedule of Findings and Questioned Costs for footnote.]

Prior Year Finding: 2020-036 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Reporting Condition: Thirty-five of 45 TANF cases tested (78 percent) had inaccurate information reported in the ACF-199 data file. Context: The quarterly ACF-199 report is compiled monthly from information that is either entered in the EIS by an ET or interfaced into EIS through the case management system (CMS). The information is transmitted to ACF in a data file. ACF uses the transmitted data to determine whether states have met the required work participation rates and to confirm the State is meeting the earmarking requirement that no more than 20 percent of families received more than 60 months of TANF assistance. Review by auditors found several key line items for family-level and person-level data that were not reported accurately in the data file that was transmitted for the ACF-199 reports for the quarters ended September 2020, December 2020, and March 2021 (see table below). [See Schedule of Findings and Questioned Costs for chart/table.] Cause: DPA management lacked procedures for ensuring the accuracy of the information queried from EIS, which supports the ACF-199 report. The completed ACF-199 report was not reviewed for accuracy before being transmitted to ACF. According to DPA management, there was a system programming error in EIS that caused the compilation of countable monthly benefit payments to return incorrect data (line item 44: number of months countable toward the federal time limit). DPA management could not explain the cause of the other inaccurate data (items 17, 28, 44, 49). Criteria: Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4 further specify the State?s quarterly ACF-199 must be complete, accurate, and filed within 45 days, or be subject to a penalty. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: In accordance with 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent of the federal grant award for each quarter the State fails to submit an accurate, complete, and timely required report. Further, reporting incorrect data may impair the federal oversight agency?s ability to properly oversee the program. Questioned Costs: None Recommendation: DPA?s director should implement procedures to ensure data reported on the ACF-199 is complete and accurate. Additionally, DHSS?s Commissioner should allocate resources to correct the EIS programming error that causes the incorrect number of countable monthly TANF benefit payments. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Six of 12 child support noncooperation alerts tested (50 percent) were not assessed a penalty to reduce benefits when determined necessary. Context: Department of Revenue, Child Support Services Division sends DPA a weekly listing of public assistance clients that are not cooperating with establishing paternity, or in establishing, modifying, or enforcing a support order with respect to a child. The weekly listing is used to create an alert for each client in EIS. When an alert is received by an ET, DPA procedures require that the ET assess a benefit penalty, enter a case note within EIS, and print a notice for the client. The alerts are not retained in EIS after this process has been completed. DPA does not maintain a log or tracking sheet of the weekly alerts to confirm alerts are processed timely and accurately. At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No. TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program. States were instructed to seek ACF guidance to determine whether a TANF program change was allowable and to amend the state plan for program changes not specifically mentioned in the instructions. After making a change, a state had 30 days to submit a TANF plan amendment. During FY 20, DPA management suspended child support noncooperation penalties due to the COVID-19 pandemic. The suspension ended September 2020; however, auditors found evidence that penalties continued to be waived after September. Cause: DPA?s management misinterpreted the ACF Program Instructions and directed staff to suspend child support noncooperation penalties, did not seek ACF guidance regarding the change, and did not submit a TANF plan amendment. Additionally, DPA management lacked adequate monitoring procedures to ensure alerts were processed. Further, DPA management stated that staff working remotely contributed to the errors. Criteria: Title 45 CFR 264.30 requires the State to deduct from the assistance that would otherwise be provided to the family of the individual not cooperating with the child support enforcement requirements an amount equal to but not less than 25 percent of the amount of such assistance, or deny the family any assistance under the program. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan amendment within 30 days of program changes. Effect: Delays in assessing, or failure to assess, child support noncooperation penalties resulted in clients receiving unallowable benefits. Questioned Costs: $8,913 Recommendation: DPA?s director should develop and implement procedures to monitor processing of child support noncooperation alerts to ensure notices and penalties are processed timely.

Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: Thirty-seven of the 45 cases tested (82 percent) reported work activities that were inaccurate, unsupported, or unverified. Context: DPA reports the work verification data through the quarterly ACF-199 reports. The ACF-199 reports are compiled from information that is either entered in EIS by ETs or through interfacing with the CMS. The information is electronically captured through a data file and transmitted to ACF. The data transmitted for the ACF-199 report allows ACF to determine whether the State has met the required work participation rates under the TANF work verification plan. Cause: DPA lacked internal control procedures to ensure work activities reported via CMS were verified, supported by documentation in the case file, and accurate. According to DPA management, a majority of the support for the cases tested was retained in CMS and was unavailable due to a cyberattack. Criteria: Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual participates in an activity. Furthermore, in section 45 CFR 261.61(a), a state must support each individual?s hours of participation through documentation in the case file and 45 CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and employing procedures for determining how to count and verify reported work activities. Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls to ensure compliance with procedures. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: Per Title 45 CFR 261.65, the State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for not maintaining adequate work participation support. Questioned Costs: None Recommendation: DPA?s director should implement procedures to ensure work activity documentation is retained and accurately entered into CMS. Further, DHSS?s commissioner should strengthen procedures to ensure continuity of business processes in the event information systems do not function.

Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.558 TANF Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF Applicable Compliance Requirement: Special Tests and Provisions Condition: The audit reviewed 15 FY 21 TANF case files for clients that were not engaged in work activities and did not have a good cause exemption. Of the 15 cases, four were assessed a penalty, eight were not assessed a penalty even though documentation showed that a penalty should have been assessed, and three cases lacked sufficient documentation to determine whether a penalty should have been assessed. Context: The goal of the TANF program is to transition TANF recipients into jobs or other work activities to support families. To attain this goal, the TANF program uses the "work first" approach. TANF recipients are required to look for paid employment. Individuals who cannot find immediate paid employment participate in activities that focus on gaining skills and experiences that lead directly to employment and increase the family?s self-sufficiency. To comply with the work first goal, DPA staff, with the assistance of contracted case managers, identify work activities for TANF recipients to help move toward obtaining employment. TANF recipients must take part in assigned work activities. TANF recipients who fail to take part in assigned work activities incur a penalty that reduces the assistance payment. Per federal guidance, states can establish good cause or other exemptions for TANF recipients not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or parent, medical reasons, family hardship, lack of child care, no child care funds, or no transportation funds. At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No. TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program. States were instructed to seek ACF guidance to determine whether a TANF program change was allowable and to amend the state plan for program changes not specifically mentioned in the instructions. The program instructions included additional good cause exemptions for work requirements to include: if clients are ill, caring for a child whose school or daycare is closed due to the pandemic, or because the work or training site is closed. After making a change, a state had 30 days to submit a TANF plan amendment. During FY 20, DPA management suspended penalties for refusal to work or engage in work activities. The suspension ended September 2020; however, auditors found evidence that penalties continued to be waived after September. Cause: During FY 20, DPA management misinterpreted the ACF Program Instructions and directed staff to suspend work services penalties without establishing good cause exemption criteria and did not submit a TANF plan amendment. DPA management lacked adequate monitoring procedures to ensure staff working remotely assessed penalties as federally required. Additionally, DPA uses CMS in conjunction with hard copy case management files to track the work activities for TANF recipients. According to DPA management, support for work activities retained in CMS was unavailable due to a cyberattack. Criteria: Title 45 CFR 261.14 requires the State to reduce or terminate the amount of public assistance to families of individuals who refuse to engage in work. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of grant awards. Effect: The State could be subject to a penalty equal to not less than one percent and not more than five percent of the federal grant award for failing to assess refusal to work penalties. Questioned Costs: None Recommendation: DPA?s director should implement monitoring procedures to ensure TANF recipients? refusal to work penalties are processed. Further, DPA?s director should strengthen procedures to ensure continuity of business processes in the event information systems do not function.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 Child Care and Development Fund (CCDF) Cluster Federal Award Number: 2001AKCCDF, 2101AKCCDF Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: Testing of 60 FY 21 CCDF provider transactions identified 11 transactions that did not have supporting documentation and one transaction that did not improve the quality of care as defined by federal program guidelines. Context: Providers enrolled in the CCDF program submit payment requests to DPA?s Child Care Program Office (CCPO) for child care services provided to eligible families and for reimbursement of expenses to improve child care quality under the Child Care Grant (CCG) program. The request forms are processed by CCPO staff who check calculations for accuracy, ensure children are authorized, and verify CCG reimbursements are adequately supported and allowed. Cause: Per DPA management, pandemic related office closures and community mandates made it difficult for CCPO supervisors to ensure established procedures for digital file naming conventions were followed. Transaction support could not be located due to inaccurate file names. Monitoring procedures were insufficient to identify the errors. Criteria: Title 45 CFR 98.67 requires lead agencies to implement fiscal controls and accounting procedures that are sufficient to permit the tracing of CCDF funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. In addition, Title 45 CFR 98.90(d) requires lead agencies and subgrantees to retain all CCDF records and any other records of lead agencies and subgrantees that are needed to substantiate compliance with CCDF requirements. Per Title 45 CFR 75.403, to be allowable under federal awards, costs must be necessary, reasonable, and adequately documented. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Effect: Auditors were unable to verify the accuracy and allowability for $8,219 of costs charged to the CCDF program. Based on the sample error rate and population size, the projected likely questioned costs totaled $1.27 million. Inadequate supervision increases the risk of improper payments. Questioned Costs: Assistance Listing 93.575: $2,292 Assistance Listing 93.596: $5,927 Recommendation: DPA?s director should improve monitoring procedures to ensure expenditure documentation procedures are followed.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Cluster Federal Award Number: 2001AKCCDF, 2101AKCCDF Applicable Compliance Requirement: Eligibility Condition: Testing of 91 eligibility case files identified eight errors in calculating family income and contribution amounts due to subrecipient staff using incorrect earned income conversion factors or incorrect pay information. Context: DPA provides grants to subrecipients to determine eligibility for the Child Care Assistance Program (CCAP). Subrecipients are responsible for adhering to program procedures and the CCPO provides guidance to subrecipients as needed. A family?s monthly income is used to determine eligibility and the monthly child care contribution. Earned income is calculated based on the average earnings received per pay period multiplied by a conversion factor dependent upon the frequency of pay (weekly, bi-monthly, bi-weekly, or monthly). Cause: Per DPA management, procedures that subrecipients are required to follow regarding the use of conversion factors in calculating income for eligible families were not descriptive enough to ensure income was calculated correctly. In addition, management stated human error contributed to the discrepancies. Auditors noted subrecipient monitoring procedures were not sufficient to identify and correct the calculation issues. Criteria: Title 45 CFR 98.13(c) requires the State to provide a CCDF Plan. Title 45 CFR 98.16(k) requires the State Plan for CCDF to contain a description of the sliding fee scale for cost-sharing by the families that receive child care services for which assistance is provided under the CCDF. Title 45 CFR 98.45(k) requires the State to establish a sliding fee scale for families that receive CCDF child care services that is based on income and the size of the family to provide for an affordable family co-payment. Per the federally approved State Plan section 3.4, family contributions are based on a sliding fee scale established by the State. Alaska Statute 47.25.031 requires the department to determine the eligibility of families for day care benefits. In addition, AS 47.25.041 requires the department to develop a sliding fee scale for the purposes of determining the amount to be contributed by the parent or guardian for child care. Section 4080 of the CCAP Policies and Procedures Manual details the process for calculating a family?s monthly income, including the conversion factors to be used. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control over the federal award that provides reasonable assurance that the State is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Effect: Incorrect family income and contribution calculations increase the risk of improper eligibility and family contribution determinations for participating families, which may lead to unallowable costs. Questioned Costs: Indeterminate Recommendation: DPA?s director should revise CCPO procedures to help ensure income calculations are performed correctly by subrecipients. In addition, DPA?s director should improve subrecipient monitoring to ensure compliance with program guidelines.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.575, 93.596 CCDF Cluster Federal Award Number: 2001AKCCDF, 2101AKCCDF Applicable Compliance Requirement: Reporting Condition: Two of five CCDF FY 21 subawards tested subject to Federal Funding Accountability and Transparency Act (FFATA) requirements were not reported to the FFATA Subaward Reporting System (FSRS). Context: FFATA requires information on federal awards be made available to the public via a single website (www.usaspending.gov). FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. According to DHSS procedures, staff prepare a monthly FFATA submission and, once entered into FSRS, print and retain a hard copy from the system for each subaward reported. However, no supervisory review was required to be performed on the information prior to or after submission to FSRS to ensure completeness. The audit tested five subawards totaling $4,259,662 that were issued to four CCDF subrecipients. Of the five subawards tested, two were not reported to FSRS. DHSS staff attempted to report the two subawards, but FSRS returned an error message indicating the Federal Award Identification Number and Assistance Listing combination was not valid. DHSS did not sufficiently follow up with the federal FSRS oversight agency to determine the corrective action necessary to enter the subawards into the system. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: According to the DHSS staff, competing priorities and inadequate staffing contributed to the finding. Further, DHSS?s FFATA procedures did not provide for supervisory review of subaward data prior to or after submission to FSRS to ensure the accuracy and completeness of the information being reported. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $25,000 ($30,000 effective November 12, 2020) or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may potentially jeopardize future federal funding. Questioned Costs: None Recommendation: DHSS?s DFMS director should strengthen procedures for FFATA reporting to include a review process to ensure FFATA reporting is accurate and complete. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 Children?s Health Insurance Program (CHIP) Federal Award Number: 2005AK5021, 2105AK5021 Applicable Compliance Requirement: Allowable Costs/Cost Principles Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A Medicaid Management Information System (MMIS) processed and paid claims with invalid procedure code and modifier combinations. Context: Senate Bill 74 (SLA 2016) directed DHSS to apply for a Section 1115 waiver under 42 U.S.C. 1315(a) to establish one or more demonstration projects focused on improving the State?s behavioral health system for medical assistance recipients. As part of the Centers for Medicare and Medicaid Services? approval of Alaska?s waiver application, DHSS contracted with an Administrative Services Organization (ASO) to provide administrative support, process claims, and manage data. DHSS and the ASO implemented the OptumHealth Behavioral Services Facets MMIS in February 2020. The processing of behavioral health claims was fully transitioned from the Alaska Health Enterprise (AHE) MMIS to the new Facets MMIS during FY 21. Review of a judgmental sample of six procedure codes for claims processed in the Facets MMIS identified one procedure code for which claims were inaccurately priced due to a system defect. Division of Behavioral Health (DBH) staff conducted an analysis of all affected claims to identify overpayments by the federal government after auditors brought the error to management?s attention. Auditors reviewed DBH staff?s analysis and determined the overpayment amount to be reasonable. DBH management reported that the defect was fixed during FY 22. Cause: Errors were caused by a system defect in the new Facets MMIS. DHSS?s monitoring of ASO activities and behavioral health expenditures was inadequate to detect the system error. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the performance of the federal award. Effect: The system defect led to unallowable federal expenditures. Questioned Costs: Assistance Listing 93.767: None Assistance Listing 93.778: $148,808 Recommendation: DBH?s director should continue to work with the ASO to improve system controls to ensure only valid procedure codes and modifiers are paid by the system. DBH?s director should improve monitoring of ASO activities and behavioral health expenditures to ensure system defects are identified and corrected.

Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 CHIP Federal Award Number: 2005AK5021, 2105AK5021 Applicable Compliance Requirement: Allowable Costs/Cost Principles Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: Review of FY 21 behavioral health claims determined DHSS did not maintain adequate internal controls over behavioral health expenditures. The following errors, when considered together, indicate a significant deficiency in internal controls: ? Testing of 40 claims identified four (10 percent) paid in error. In two instances the system paid a provider that did not bill for or rendered the services. The other two errors involved providers that were not enrolled in the Medicaid program at the time medical services were rendered. ? Analysis of providers and claims data identified that the system incorrectly reimbursed claims rendered by an individual who was not enrolled as a Medicaid provider at the time the services were rendered. ? Three of 78 newly enrolled autism behavior technicians tested (4 percent) had expired or inactive certifications and the providers continued to remain active in the system. No claims were paid for services provided by the three individuals during FY 21. Context: During FY 21 the department transitioned the processing of behavioral health claims from the AHE MMIS to the new Facets MMIS. Medicaid provider enrollment records continued to be maintained in the AHE MMIS. A report containing provider data was transmitted to the Facets MMIS weekly. Cause: Errors were due to flaws in system logic used in the processing of provider enrollment data shared between the two systems. Additionally, DHSS staff did not have procedures to ensure claims were denied in the Facets MMIS for providers with expired or inactive certifications. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the performance of the federal award. Effect: Inadequate controls led to an unknown amount of payments to ineligible providers. Questioned Costs: Assistance Listing 93.767: None Assistance Listing 93.778: $12,358 Recommendation: DBH?s director should work with the ASO to correct the system deficiencies and strengthen internal controls over behavioral health expenditures processed in the Facets MMIS.

Prior Year Finding: 2020-044 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AK5021, 2105AK5201 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Eligibility Condition: An evaluation of the Alaska Resource for Integrated Eligibility Services (ARIES) system during FY 21 identified significant internal control deficiencies. Details related to the control weaknesses and the relevant audit criteria are being withheld from this report to prevent the weaknesses from being exploited. Pertinent details have been communicated to agency management in a separate confidential document. Context: ARIES is an eligibility system developed in multiple phases by DHSS. The Modified Adjusted Gross Income (MAGI) methodology was implemented in Phase 1 and is used for eligibility determinations for the Medicaid and CHIP programs. Cause: According to management, additional work created by the COVID-19 pandemic and a 2021 cybersecurity incident adversely impacted DHSS?s IT resources, limiting DHSS?s ability to resolve the control deficiencies that had been identified in previous years. Management also stated that inadequate training and a lack of resources contributed to the finding. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 42 CFR 435.912(b), consistent with guidance issued by the Secretary, the agency must establish in its State plan timeliness and performance standards for, promptly and without undue delay ? (1) determining eligibility for Medicaid for individuals who submit applications to the single State agency or its designee. According to MAGI Medicaid Eligibility Manual 806-2 A, if an application cannot be worked right away, the agency must process the application within 45 days. Effect: The internal control weaknesses increase the risk of noncompliance with state and federal regulations, unauthorized system use (including data manipulation), and incorrect eligibility determinations, which may result in ineligible recipients receiving benefits. Questioned Costs: None Recommendation: DPA?s director should dedicate resources to resolve ARIES system defects.

Prior Year Finding: 2020-045 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AK5021, 2105AK5201 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Eligibility Condition: Forty Medicaid and 25 CHIP recipients with paid medical claims during FY 21 were randomly selected for eligibility testing. Auditors found DPA staff did not process applications in a timely manner or redetermine eligibility when required for 32.5 percent of Medicaid cases tested and 72 percent of CHIP cases tested. Specifically, the errors included the following: ? Ten Medicaid cases and 16 CHIP cases were due to have eligibility redetermined; however, no information was submitted to DPA for review and DPA staff did not independently conduct a redetermination. For recipients following the MAGI methodology, DPA staff should have attempted to redetermine eligibility through electronic interfaces. ? Eligibility determinations for one Medicaid case and one CHIP case were not processed in a timely manner. The delays in completing the review were 62 days and 124 days respectively. ? Renewal applications for two Medicaid cases and a new application for one CHIP case were not reviewed nor acted upon by DPA staff. Context: The State is required to ensure applications are reviewed and eligibility determinations are made timely for Medicaid and CHIP recipients, and eligibility is redetermined at least every 12 months or when new information is received from the recipient. The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA employs ETs who review applications, identify income and financial resources, and make determinations of whether individuals are eligible to receive benefits. Cause: Due to human error and inadequate training, applications were not consistently uploaded to the workflow management system and were therefore not worked. Due to a system deficiency, cases were also incorrectly excluded from ARIES-generated reports used to track and process renewals. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over the federal award that provides reasonable assurance that the State is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.912(c) states the determination of eligibility for any application may not exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days for all other applicants. Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For renewals based on MAGI, a redetermination is required once every 12 months, and no more frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is required to make a redetermination of eligibility at least every 12 months. The State is required to take action on information about changes between regular eligibility renewals and promptly redetermine eligibility. Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility without requiring information from the individual if able to do so based on reliable information contained in the individual?s account or other more current information available to the agency, including but not limited to information accessed through any databases accessed by the agency. Title 42 CFR 457.340 and Title 42 CFR 457.343 require the timely determination of eligibility and renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to determine Medicaid and CHIP eligibility determination timely increases the risk that ineligible beneficiaries receive Medicaid and CHIP benefits. Questioned Costs: Assistance Listing 93.767: $18,900 Assistance Listing 93.778: $81,382 Recommendation: DPA?s director should improve employee training and dedicate adequate resources to determine Medicaid and CHIP eligibility in a timely manner.

Prior Year Finding: 2020-046 Federal Awarding Agency: USDHHS Impact: Material Weakness, Material Noncompliance AL Number and Title: 93.767 CHIP 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AK5021, 2105AK5201 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Eligibility Condition: Forty Medicaid and 25 CHIP recipients with paid medical claims during FY 21 were randomly selected for eligibility testing. Auditors found inaccurate eligibility determinations by DPA staff for 20 percent of Medicaid cases tested and eight percent of CHIP cases tested. Specifically, for Medicaid cases: ? Applications for two cases could not be located by DPA. ? Four cases had insufficient documentation to support eligibility determinations. ? One case had income incorrectly calculated. ? DPA staff did not obtain nor verify the applicant had a valid social security number for one case. For CHIP cases: ? One case had eligibility incorrectly determined. ? DPA staff did not obtain nor verify the applicant had a valid social security number for one case. Context: The State is required to ensure only financially needy individuals receive Medicaid or CHIP assistance. DPA is the primary division within DHSS responsible for determining Medicaid and CHIP eligibility. DPA employs ETs who review applications, identify income and financial resources, obtain social security numbers and verify the numbers through a federal database, and make determinations whether the individuals are eligible to receive benefits. DPA has established internal control procedures to help staff determine eligibility in accordance with federal regulations and the State plan. Procedures are documented in the DPA Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. At the end of FY 20 DPA also implemented an electronic document system as a central document depository. This system stores all the documents that DPA obtained to verify eligibility in FY 21. Cause: According to DPA management, the errors were caused by inadequate training for application review following the MAGI eligibility methodology. Management also stated the missing case file documents occurred before the agency implemented an electronic documentation management system and the agency is working on adding older files to the system. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.914(a) states the agency must include in each application?s case record facts to support the agency?s decision. Title 42 CFR 435.407 requires states to obtain a social security number and perform a data match with the Social Security Administration. Title 42 CFR 435.603(c) requires the agency to determine financial eligibility for Medicaid based on ?household income?. Title 42 CFR 435.948 requires the State to verify financial information includes wages, net earnings from self-employment, unearned income and resources and to use available electronic services if available. Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in administering CHIP. Effect: Failure to accurately determine eligibility and maintain complete case records for Medicaid and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits. Questioned Costs: Assistance Listing 93.767: $193 Assistance Listing 93.778: $14,774 Recommendation: DPA?s director should improve eligibility training, ensure procedures are followed for determining Medicaid and CHIP eligibility, and ensure the electronic document management system includes all relevant documentation supporting eligibility decisions.

Prior Year Finding: 2020-047 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Eligibility Condition: Seven of 40 (17.5 percent) Medicaid recipients tested were sent written eligibility notices that contained inconsistent or incorrect information regarding the eligibility period. Context: Notices for Medicaid eligibility decisions are created through DHSS?s two eligibility systems, ARIES and EIS. DPA procedures state that approval notices must include information about the level of benefits and approved services. The notices must also include the date eligibility is set to begin and end. ARIES is programmed to automatically generate system notices; however, due to system defects the notices do not always contain correct information. As a workaround the ETs can manually enter the correct information in the ?additional information? section of the notice. Cause: According to DPA staff, incorrect or incomplete notices were due to inaccurate ARIES system logic and human error. Additionally, procedures did not require DPA staff to monitor the accuracy and completeness of the notices. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Title 42 CFR 435.917 requires the State to provide all Medicaid applicants and beneficiaries with timely and adequate written notice of any decision affecting their eligibility. Additionally, such notices must contain clear information, including the basis and effective date of the eligibility and the circumstances in which the individual must report any changes that may affect the individual?s eligibility. Effect: Due to inconsistent or incorrect information within eligibility notices, Medicaid beneficiaries were misinformed regarding the coverage of the medical benefits. Questioned Costs: None Recommendation: DPA?s director should implement procedures to monitor the accuracy and sufficiency of Medicaid eligibility notices. Additionally, DPA?s director should dedicate resources to fix the ARIES system logic that created the incorrect notices.

Prior Year Finding: 2020-049 Federal Awarding Agency: USDHHS Impact: Significant Deficiency AL Number and Title: 93.767 CHIP Federal Award Number: 2005AK5021, 2105AK5021 Applicable Compliance Requirement: Special Tests and Provisions Prior Year Finding: 2020-049 Federal Awarding Agency: USDHHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Special Tests and Provisions Condition: Certain behavioral health providers were not screened and enrolled in accordance with federal eligibility requirements. Context: Screening is a required element of the provider enrollment process and is used to determine whether an individual and/or entity is eligible to participate as a Medicaid/CHIP provider. Examples of screening activities include, but are not limited to, license verification, site visits, identity confirmation, and exclusion status assessment. Sixty newly enrolled Medicaid providers were randomly selected for testing. Of this number, 13 were individual providers rendering behavioral health services for which the following errors were found: ? One provider lacked documentation to support that the provider was screened at the time of enrollment. Specifically, there was no evidence to show Division of Health Care Services (DHCS) staff or the fiscal agent obtained and verified the provider?s National Provider Identifier or checked the provider against the relevant federal databases to verify the provider was not excluded. According to DHSS staff, the provider was rescreened after auditors identified the issue and staff determined the provider was eligible to be enrolled. ? Two providers lacked documentation to support that professional licensing or education requirements were met prior to enrollment. According to DHCS staff, the providers were rescreened after auditors identified the issue. DHCS staff determined one provider met requirements and one did not. Cause: Deficiencies were due to human error and inadequate training in enrolling new provider types. Criteria: Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Per Title 42 CFR 455.410, the State must require all enrolled providers to be screened under 42 CFR 455 Subpart E. Title 42 CFR 455.450 requires that the State screen all initial applications 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. Title 42 CFR 455.450 requires the State Medicaid agency to verify that a provider meets any applicable federal regulations or State requirements for the provider type prior to making an enrollment determination. Effect: Inadequate controls over provider eligibility increase the risk of unqualified providers delivering services to Medicaid recipients. Questioned Costs: Assistance Listing 93.767: None Assistance Listing 93.778: $33,812 Recommendation: DHCS?s director should strengthen training and implement procedures to ensure providers are screened and enrolled in accordance with federal and State requirements. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: USDHHS Impact: Noncompliance AL Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster Federal Award Number: 2005AKMAP, 2105AKMAP Applicable Compliance Requirement: Special Tests and Provisions Condition: A Medicaid system defect allowed certain laboratory, outpatient, and professional claims to bypass National Correct Coding Initiative (NCCI) system edits during one quarter in FY 21. Context: The Centers for Medicare and Medicaid Services? NCCI promotes national correct coding methodologies and helps reduce improper coding that may result in inappropriate payments of Medicare Part B claims and Medicaid claims. State Medicaid programs were required to incorporate compatible NCCI methodologies in the Medicaid claims processing system by October 1, 2010. NCCI edits are a component of the NCCI methodologies, designed to prevent improper payment when incorrect code combinations are reported or when services are reported with incorrect units of service. As part of the NCCI, states are required to implement new quarterly Medicaid NCCI edit files on the first day of every calendar quarter. DHSS?s fiscal agent subcontracts the management of NCCI edits in the AHE MMIS. The subcontractor is in charge of deploying the quarterly NCCI edit files in the AHE MMIS. Review of a sample of 25 NCCI edits showed six were not consistently applied throughout FY 21. The amount of claims that bypassed NCCI procedure-to-procedure edits is not known and DHCS staff is working with its fiscal agent and subcontractor to identify affected claims to recoup overpayments. Auditors determined affected claims were isolated to a two-month period in FY 21 and the overpayment for FY 21 was likely above $25,000. Cause: The fiscal agent?s subcontractor inadvertently removed some of the content rules while deploying a system change. The subcontractor identified the issue during performance of its quality control procedures and fixed the issue in the same quarter. Criteria: Section 1903(r) of the Social Security Act requires state Medicaid agencies to operate mechanized claims processing and information retrieval systems that incorporate compatible methodologies of the NCCI administered by the secretary and such other methodologies of that initiative. Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant awards. Effect: Claims were paid without being subjected to NCCI edits, resulting in an unknown amount of unallowed payments to providers. Questioned Costs: Assistance Listing 93.778: $7,223 Recommendation: DHCS?s director should continue to work with its fiscal agent and subcontractor to identify affected claims and recoup overpayments made to providers.

Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ? COVID-19 Federal Award Number: 4533DRAKSPLW Applicable Compliance Requirement: Allowable Costs/Cost Principles, Eligibility Condition: Fourteen of 40 claims tested for the Presidential Declared Disaster Assistance to Individuals and Households - Other Needs, known as Lost Wages Assistance (LWA), were paid to recipients that did not meet LWA COVID-19 self-certification eligibility requirements. Specifically, ? Two claimants completed the required self-certification after receiving benefits; ? Eight claimants were ineligible due to answering ?no? to the COVID-19 self-certification question; and ? Four claimants did not complete the required self-certification. Context: To be eligible for LWA, an individual must have received at least $100 of benefits from unemployment insurance (UI) programs specified in the LWA grant award and certify they were impacted by COVID-19. As a part of implementing the new UI benefit programs authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, DLWD implemented COVID-19 self-certification questions in April 2020. Benefit payments for the LWA program were paid out of two systems, DB2 and FastUI. The FastUI system processed UI benefits for a population of claimants not eligible for regular UI. In order to be eligible for programs processed from FastUI, claimants were required to answer ?yes? to a COVID-19 self-certification question. The FastUI system was programmed to pay benefits if a claimant answered ?yes? to the certification question. All 14 recipients who had not completed the required self-certification were paid out of the DB2 system. For benefits processed out of DB2, the self-certification question was only added to the initial application for regular UI benefits. Claimants were required to complete the initial regular application when first applying for UI benefits, if there was a break in benefits, or if there was a change in factors determining eligibility. Claimants were not prompted to complete the self-certification question if the benefit application was completed before the question was added and there was no change in circumstances or break in eligibility through the LWA benefit period. Additionally, the question was not added to applications for other programs providing eligibility for LWA. Although the self-certification question was answered for a portion of the LWA claimants, DB2 did not have the capability to read claimants? responses to the self-certification question, and the response was not considered in determining eligibility. Cause: DLWD added a self-certification question to the initial application for unemployment benefits processed out of DB2, but did not ensure all recipients completed the question and certain benefit application forms were not updated to include the certification question. Additionally, the DB2 system could not read responses to the self-certification question. Staffing shortages, limited resources, and pressure to quickly implement the program contributed to the deficiency. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. The LWA grant award and the Alaska State Administrative Plan for the LWA program define eligible individuals as persons who self-certify that the eligible individual is unemployed, partially unemployed, or unable or unavailable to work due to disruptions caused by COVID-19, and who were eligible to receive at least $100 of UI benefits. Effect: Failure to ensure all claimants completed the required COVID-19 self-certification resulted in benefit payments to ineligible recipients. Questioned Costs: $4,200 Recommendation: DETS?s director should strengthen internal controls, including procedures and system program logic, to ensure benefits are only paid to eligible recipients.

Federal Awarding Agency: USDHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs ? COVID-19 Federal Award Number: 4533DRAKSPLW Applicable Compliance Requirement: Reporting Condition: DLWD accounting staff did not retain supporting documentation for the LWA weekly program status reports. Context: The LWA grant award requires weekly program status reports. The reports are compiled from information in two unemployment benefit systems, DB2 and FastUI. Specifically, the reports must include the following program data: ? The number and dollar amount of applications approved weekly; ? The number of individuals eligible to receive assistance under this award, broken out by the programs identified in Section 4(d)(i) of the August 8, 2020, Presidential Memorandum; ? The amount of assistance disbursed weekly; and ? The number of appeals received. Cause: Due to competing priorities and the need to provide benefits quickly, department staff did not implement procedures to retain supporting documentation for the weekly program reports. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the grant award. Title 2 CFR 200.333 requires the State to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of three years from the date of submission of the final expenditure report. Effect: Failure to retain supporting documentation prevented auditors from verifying the accuracy of submitted LWA weekly program status reports. Questioned Costs: None Recommendation: DETS?s director should strengthen procedures over reporting to ensure supporting documentation is retained.

Prior Year Finding: 2020-066 Federal Awarding Agency: United States Department of the Treasury Impact: Significant Deficiency, Noncompliance AL Number and Title: 21.019 Coronavirus Relief Fund (CRF) - COVID-19 Federal Award Number: SLT0031, SLT0073 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DCCED?s Division of Community and Regional Affairs (DCRA) staff did not identify all federally required information on FY 21 CRF grant subaward documents or conduct timely risk assessments of all CRF subrecipients. Context: DCRA entered into grant agreements with 188 local government communities under the direct municipal relief portion of the CRF program. The audit reviewed a random sample of 19 and a judgmental selection of four community grant agreements. All community grant agreements tested did not include the federal awarding agency, federal award identification number, or federal award date. Sixteen of 23 community grant agreements (70 percent) did not include notification of the federal audit requirement. Additionally, the audit reviewed risk assessments for the 23 CRF subrecipients selected for testing. Risk assessments for eight of 23 CRF subrecipients (35 percent) were untimely. Three of the eight untimely risk assessments were performed after auditors requested the assessments. Cause: A similar finding was identified in the FY 20 audit. Due to an oversight, DCRA grant staff did not correct the prior finding by updating or amending the CRF subaward documentation to include all federally required information. Additionally, although DCCED staff performed risk assessments in FY 21 on more subrecipients when compared to FY 20, not all required assessments were performed timely. According to DCCED staff, CRF risk assessments were untimely due to the large number of assessments needed, the late start in performing them, and staffing constraints. Criteria: Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.332 requires the State to perform annual risk assessments; ensure every subaward includes the required information at the time of the subaward; and ensure that every subrecipient is audited as required by Subpart F?Audit Requirements of this part when it is expected that the subrecipient's federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in Title 2 CFR 200.501. Effect: Absent risk assessments for all subrecipients, higher risk communities may not be sufficiently monitored, increasing the risk of inappropriate use of CRF monies and noncompliance with federal laws. Not providing the required information in the subaward documents increases the risk of subrecipient noncompliance with the terms and conditions of the federal award and could result in the State repaying CRF monies to the federal government. Questioned Costs: None Recommendation: DCRA and DAS?s directors should strengthen procedures to ensure compliance with all subrecipient monitoring requirements applicable to federally funded subawards administered by DCCED. [See Schedule of Findings and Questioned Costs for footnote.]

Federal Awarding Agency: U.S. Department of Defense (USDOD) Impact: Significant Deficiency, Noncompliance AL Number and Title: 12.401 National Guard Military Operations and Maintenance Projects (NGMOMP) Federal Award Number: W91ZRU-16-2-1000 and W91ZRU-21-2-1000 Applicable Compliance Requirement: Allowable Costs/Cost Principles Matching, Level of Effort, Earmarking Condition: DMVA?s management did not ensure the State?s accounting system was updated for changes made to the FFY 21 federally certified Facilities Inventory and Support Plan (FISP), which is used to allocate costs to the NGMOMP program. Context: The NGMOMP program is administered through a Master Cooperative Agreement (MCA) between the federal National Guard Bureau (NGB) and the State. The MCA includes all terms and conditions related to NGB's contribution of funds for the operation and training of the Army and Air National Guard within the state. Appendix 1 of the MCA outlines the requirements for the Army National Guard (ARNG) facilities programs. The facilities programs provide federal support to DMVA for the operation and maintenance of authorized facilities included in the FISP as prescribed by the National Guard Regulations (NGR) 420-10. The FISP is USDOD?s federal registry of real property inventory and includes detailed information on all federal/State owned and State operated ARNG facilities within the state. All ARNG facilities are owned by, leased for, or licensed to the State. As a result, the State operates and maintains all ARNG facilities. The FISP identifies the level of federal reimbursement authorized for each real property facility through support codes. NGR Pamphlet 420-10, Chapter 7, provides the support codes with the corresponding funding level percentage (i.e. 100 percent, 75 percent, 50 percent, or no support). The FISP is annually updated and certified to identify new facilities, changes in funding support, or facilities no longer supported by USDOD. The certified FISP is provided to DMVA management for tracking of ARNG facilities and determining the appropriate funding levels. DMVA management tracks the facilities using location codes in the State's accounting system. The appropriate federal and State funding level is assigned to each location code. In FY 21, there were expenditures for 128 facility location codes. The audit reviewed all 128 facilities and found 10 (eight percent) had expenditures allocated at a higher federal rate than authorized in the FISP. Two of the ten locations were not listed on the FISP. Cause: Procedures were insufficient to ensure the FISP was reviewed annually to identify changes in facility support codes that require coding changes in the State?s accounting system. DMVA management stated the errors were also due to staff turnover. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.403 requires costs to be necessary, reasonable, and allocable to the federal award, and conform to any limitations or exclusions in the federal award as to types or amount of cost items. NGR 5-1 Section 5-4, dated May 28, 2010, states that when there is an identified cost share in an agreement, the grantor shall reimburse the grantee only for the grantor's percentage share of the total allowable costs. NGR 420-10, Policy and Guidance for ARNG Facilities Program to the MCA, dated September 2019, states the rate of reimbursement to the State for all authorized charges shall be based on the FISP support code for the facility generating the expenditure. Effect: Failing to update the State?s accounting system resulted in DMVA management overcharging expenditures to the federal program. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including withholding/terminating funding. Questioned Costs: $212,546 Recommendation: DMVA's Division of Administrative Services (DAS) director and the Army Guard Facilities Maintenance director should strengthen procedures to ensure the State's accounting system is updated annually based on revisions to the certified FISP.

Federal Awarding Agency: USDOD Impact: Significant Deficiency AL Number and Title: 12.401 NGMOMP Federal Award Number: W91ZRU-16-2-1000 and W91ZRU-21-2-1000 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: Timesheet data entered into the State?s accounting system was not consistently reviewed during FY 21 to ensure coding and hours were accurate. Context: DMVA?s staff use positive timekeeping and allocate related costs to federal programs based on program or profile codes that identify federal programs or State funded activities. An employee, typically a supervisor, reviews the coding and hours in the State?s accounting system to verify accuracy. Auditors noted during a walkthrough of the timekeeping process that timesheets lacked evidence of review. DMVA management confirmed not all timesheets were reviewed during FY 21. Cause: DMVA management stated that, due to staff turnover and personnel teleworking during the pandemic, DMVA staff did not always follow procedures to ensure timesheets were entered accurately into the State?s accounting system. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.430(i) requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. The records must be supported by a system of internal control, which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, the records must comply with established accounting policies of the entity. Section 304 of the MCA states that allowability of the costs shall be determined according to the terms and conditions of 2 CFR part 200, as amended, and NGR 5-1, Chapter 5. NGR 5-1, Section 5-6, states it is the grantee?s responsibility to properly account for costs incurred under the agreement and ensure that the cost principles are followed. The grantee shall take particular care to ensure that it does not charge costs incurred in performance of one agreement to another, or to both. Effect: The lack of adequate controls could result in unallowable personal service expenditures. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action including withholding/terminating funding. Questioned Costs: None Recommendation: DMVA?s DAS director and the Army Guard Facilities Maintenance director should ensure staff follow procedures to verify timesheets are accurately entered into the State?s accounting system.

Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) ? COVID-19 Federal Award Number: 4094DRAKP00000001, 4122DRAKP00000001, 4351DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Reporting Condition: The audit identified multiple errors in subaward data elements reported to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). Sample basis testing of 17 out of 165 subawards subject to FFATA reporting during FY 21 identified two (12 percent) were reported with inaccurate subawardee Data Universal Numbering System (DUNS) numbers. Expanded testing identified three subawards that were not reported to FSRS. All 162 subawards reported to the FSRS included inaccurate subaward project descriptions. Additionally, for all 162 subawards, the Division of Homeland Security and Emergency Management (DHS&EM) did not request information from the subawardee to support whether the names and compensation of the subawardee?s highly compensated executives should be reported to FSRS. Context: FFATA requires information on federal awards be made available to the public via a single searchable website (www.usaspending.gov). The FSRS is the reporting tool federal awardees, such as the State of Alaska, use to capture and report subaward and executive compensation data regarding first-tier subawards. DHS&EM staff responsible for Disaster Grant program management obtain information from the subawardee via an obligating award document, which is entered into FSRS by Division of Administrative Services (DAS) staff. During FY 21, DMVA issued 165 Disaster Grant subawards totaling $74,375,743 subject to FFATA reporting, of which 162 were reported to FSRS. The audit tested 17 randomly selected subawards totaling $4,909,190 for compliance with FFATA reporting requirements and to review internal controls. Two (12 percent) of the 17 subawards totaling $1,822,730 reported incorrect subawardee DUNS numbers. Expanded testing identified an additional three subawards totaling $11,397,074 were not reported to FSRS. [See Schedule of Findings and Questioned Costs for chart/table.] Cause: A combination of inadequate procedures, incomplete understanding of program requirements, and a lack of communication between divisions led to the FFATA reporting errors. DHS&EM program staff did not verify the correct subawardee DUNS number was recorded on the initial obligating award document. Subsequently, DHS&EM program staff amended the obligating award document to record the correct DUNS number. Due to inadequate procedures, DAS staff did not review all data elements on the amended obligating award document and did not identify the change in the subawardee DUNS number. As such, DAS staff did not update FSRS accordingly. Additionally, DAS staff misunderstood that the subawardee project description should be based on the ?project award title? identified on the obligating award document provided by DHS&EM program staff and entered the subaward number instead. Furthermore, DHS&EM management was not aware that subawardee highly compensated executive information was required to be reported to FSRS. Thus, procedures were not developed to request the information from the subawardees. Lastly, written procedures were not adequate to ensure the completeness of DMVA?s subaward reporting to FSRS. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 170 states federal award recipients are required to report each subaward that obligates $25,000 ($30,000 effective November 12, 2020) or more in federal funds. This information must be reported no later than the end of the month following the month in which the obligation was made; include information about each obligating action in accordance with submission instructions; and include the names and total compensation of each of the subrecipient?s five most highly compensated executives if revenue thresholds are met and the executive compensation is not available to the public. Effect: Failure to comply with FFATA reporting requirements reduces transparency, impairs decision-making, and may jeopardize future federal funding. Questioned Costs: None Recommendation: DMVA's finance officer should work with the DHS&EM director to develop and implement procedures for reporting subawardee names and compensation of highly compensated executives, and strengthen FFATA reporting procedures to ensure data elements comply with federal reporting requirements and all subawards subject to FFATA reporting are reported to FSRS.

Federal Awarding Agency: USDHS Impact: Significant Deficiency, Noncompliance AL Number and Title: 97.036 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) ? COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: A review of 38 FY 21 Disaster Grants program subrecipients found DMVA's DHS&EM did not document risk assessments for eight subrecipients (21 percent). Furthermore, 15 of the 30 documented risk assessments (50 percent) were incomplete. Context: During FY 21, DHS&EM issued subawards to State agencies, local governments, and private nonprofit entities affected by presidentially declared disasters. According to DHS&EM management, contractors assisted division staff during the initial grant process and performed the subrecipient risk assessments. Contractors were needed due to the increased workload resulting from the 2018 Cook Inlet earthquake and COVID-19 pandemic disasters. During the risk assessment process, DHS&EM management or contractors made a final determination on whether a subrecipient was considered low or high risk and capable of carrying out the program activities, as well as the extent of subrecipient monitoring needed over the subaward. The final determination was documented on a risk assessment form. For subrecipients identified as high risk, DHS&EM applied additional safeguards and procedures. The audit reviewed 38 of 52 FY 21 Disaster Grant subrecipients, including all 23 subrecipients related to the 2018 Cook Inlet earthquake and all 15 subrecipients related to the COVID-19 pandemic. Eight Cook Inlet earthquake subrecipients did not have a risk assessment documented in the subrecipient?s files. Additionally, 15 of 30 documented risk assessments (seven Cook Inlet earthquake and eight COVID-19 pandemic subrecipients) lacked evidence that DHS&EM management or the contractors reviewed the risk assessment to make a final determination on the subrecipient?s risk. Cause: DHS&EM had contractor supervision procedures; however, due to the rapid workload increase caused by the 2018 Cook Inlet earthquake and COVID-19 pandemic disasters, risk assessments were not prioritized. Consequently, DHS&EM management did not monitor contractors? work to ensure risk assessments were performed and properly documented. Criteria: Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Title 2 CFR 200.332(b) requires the State to evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining appropriate subrecipient monitoring. Effect: Absent properly documented risk assessments for subrecipients, higher risk subrecipients may not be sufficiently monitored, increasing the risk of inappropriate use of federal awards. Questioned Costs: None Recommendation: DHS&EM's director should adequately monitor contractors to ensure subrecipient risk assessments are performed and properly documented.

Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants ? Public Assistance (Presidentially Declared Disasters) Federal Award Number: 4162DRAKP00000001, 4257DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for findings relating to three subrecipients? single audits. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the adequacy of the subrecipient?s proposed corrective actions to address the findings. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. Three subrecipient single audits contained findings specific to the Disaster Grants ? Public Assistance program and DMVA management did not issue a management decision to the subrecipients. All three findings related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient?s audit period as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient?s single audit finding. However, management believed it was not necessary to communicate a management decision to a subrecipient regarding findings relating to an untimely issued audit. Criteria: Title 2 CFR 200.332(d)(3) states that pass-through entities? monitoring of subrecipients must include issuing a management decision for audit findings that relate to federal awards provided to subrecipients. Title 2 CFR 200.521(d) states a management decision must be issued within six months of acceptance of the audit report by the federal audit clearinghouse. Effect: The lack of management decisions may result in the subrecipients not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA's DAS director should ensure a management decision is issued for all subrecipient single audit findings within six months of the audit report?s acceptance by the federal audit clearinghouse.

Federal Awarding Agency: Denali Commission Impact: Material Weakness, Material Noncompliance AL Number and Title: 90.100 Denali Commission Program Federal Award Number: Various Applicable Compliance Requirement: Reporting Condition: During the period July 1, 2020 through June 30, 2021 no reports for subawards were filed that were $30,000 or more in federal funds. Context: Not applicable since no reports were submitted. Cause: Management was not aware of the filing requirement. Criteria: The Federal Funding Accountability and Transparency Act (FFATA) requires organizations that receive direct federal funding to file a report for any subawards that obligate $30,000 or more in federal funds. Effect: No FFATA reports were filed during the period July 1, 2020 through June 30, 2021. Questioned Costs: None Recommendation: We recommend the Authority implement the process of identifying and reporting the subawards.

Federal Awarding Agency: U.S. Department of Education (USED) Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425F Higher Education Emergency Relief Fund (HEERF) ? Institutional Aid Portion ? COVID-19 Federal Award Number: P425F202090 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: We observed the lost revenue calculation had included $54,864 disallowed interdepartmental revenue. Context: The University of Alaska Southeast had performed year-over-year variance analysis to calculate lost revenue. The variance had included interdepartmental charges that had a net $-0- impact on the University?s revenue. Cause: The University of Alaska Southeast had not considered the possibility that interdepartmental transactions could be disallowed. Due to a lack of authoritative guidance at the time, the campus relied on the Frequently Asked Questions (FAQ) to determine allowability which made no mention of lost revenue related to interdepartmental transactions. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. The grant allows institutions to claim lost amounts for estimated lost revenue to the school. Effect: Revenues are reimbursed by federal funds for which there is no true revenue loss. Questioned Costs: $54,964 Recommendation: We recommend the University of Alaska Southeast excludes interdepartmental transactions when calculating lost revenue.

Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425F HEERF ? Institutional Aid Portion ? COVID-19 Federal Award Number: P425F202128 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition and Context: During the testing of the University of Alaska Anchorage (UAA) institutional expenditures it was observed there were several interdepartmental transactions that were included in the costs reimbursed with HEERF funding. These costs were internal and did not create an overall expenditure to an outside vendor, and therefore were unallowed. Additionally, one of the transactions was for providing a laptop to an employee from IT stock and the cost to replace this computer did not occur until fiscal year 2022. Cause: UAA had not considered the possibility that interdepartmental transactions could be disallowed. Due to the fact they did not see any authoritative guidance on this issue in the FAQs. Additionally, UAA had claimed the expenditure for the computer in fiscal year 2021 SEFA based on the internal IT work order date, not the date of the purchase order to the external vendor. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations and program compliance requirements. In addition, Per Uniform Guidance 200.34 expenditures on the accrual basis may be: cash disbursements for direct charges for property and services, the value of third-party in-kind contributions applied, and the net increase or decrease in the amounts owed by nonfederal entity. Effect: The University claimed costs that were not allowable as well as claiming costs in the incorrect fiscal year. Questioned Costs: $5,153 Recommendation: We recommend UAA should not claim interdepartmental expenditures as institutional expenditures and should ensure costs are reported in the correct fiscal year.

Prior Year Finding: 2020-094 Federal Awarding Agency: USED Impact: Significant Deficiency, Noncompliance AL Number and Title: 84.425F HEERF ? Institutional Aid Portion ? COVID-19 Federal Award Number: P425F202884 Applicable Compliance Requirement: Reporting Condition and Context: During the testing of the University of Alaska Fairbanks (UAF) Reports, it was observed that the March 31, 2021 Institutional Report was submitted 3 days late, beyond the April 10, 2021 due date. Additionally, UAF was unable to provide documentation of the two institutional reports tested. We also observed there was no documentation to support the amount reported in attribute 7.1.1 on the annual report. Cause: The Office of Grants and Contract Administration (OGCA) analyst position responsible for monitoring the report deadlines was vacant at the time of the March quarterly report. Additionally, the University did not receive a reminder from the Department of Education prompting timely submission. UAF obtained approval from the Vice Chancellor for Administrative Services, however they were not able to provide documentation that this occurred as it was verbally communicated. In regards to the annual report, the reports generated in UAF's system used temporary student codes, which change each semester. The original report was not saved outside the system and is unretrievable, therefore we were not able to trace the amount reported to documentation. Criteria: Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. In addition, a separate form must be posted covering aggregate amounts spent for HEERF I, HEERF II, and HEERF III funds each quarterly reporting period (September 30, December 31, March 31, June 30), no later than 10 days after the end of each calendar quarter under Section 18004(a)(1) of the CARES Act. Effect: The March quarterly institutional report for UAF was not submitted timely as outlined by Federal Guidelines. The lack of documentation of the review process could result in a report not being reviewed and potential errors could go undetected for long periods of time. And finally, when documentation is not available for amounts reported, it is not possible to verify the correct amount is reported. Questioned Costs: None Recommendation: UAF should monitor due dates for the required reports to ensure timely submission, UAF should formally document review of the quarterly institutional reports, UAF should retain copies of the underlying documents used to generate reports.

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