State of Hawaii, Department of Accounting and General Services

Questioned Cost $ – Finding No. 2025-009: Special Tests and Provisions (Material Weakness) State Agency: Department of Labor and Industrial Relations Federal Agency: Department of Labor AL Number and Title: 17.225 – Unemployment Insurance Award Number and Award Year: 25-A55-UI-000105 2025 Repeat Finding? Yes Condition During our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified that minimum case requirements were not met for paid claims for the year ended June 30, 2025. Criteria Pursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases in order to maintain a current database. The minimum number of cases for completing paid claims is 480 cases per year. Effect Failure to meet minimum case requirements results in noncompliance and prevents the granting agency from maintaining a current database. Cause and View of Responsible Officials The department is experiencing a staffing shortage and was unable to process the minimum number of cases. Recommendation We recommend that the State department address staffing shortages and develop policies and procedures to handle unemployment claims and follow existing policies and procedures established to comply with claim handling requirements, as necessary.

Finding No. 2025-009 ALN No. 17.225 Program Title: Unemployment Insurance Grant Award No.: 25-A55-UI-000105 Condition Based on our analysis of the claims processing data, the State is not in compliance with the BAM State Operations Guidance Part 602, as the minimum number of cases for paid claims was not met. Corrective Action Plan Concur. 1. The BAM unit continues to have vacancies and remain understaffed. 2. The unit is in the process of filling a vacancy with an experienced adjudicator. Once the position is filled, the new staff member will be trained in BAM methodology. At this time, the BAM supervisor continues to help the unit toward achieving its BAM requirements. 3. The unit anticipates increasing the number of cases for paid claims beginning June 2026. Person Responsible Sheryl-Lynn Ozaki, UI Quality Control Supervisor Anticipated Date of Completion June 2027 In response to the finding State of Hawaii – Single Audit 2025 finding, the DLIR offers the following: The auditor’s recommendation for the DLIR to develop new policies and procedures to handle the increase in unemployment claims fails to recognize the true source of the deficiency. The shortcoming is a direct result of staffing shortages. A key requirement of the BAM program is for the unit to be staffed with a sufficient number of knowledgeable and skilled investigators to ensure prompt and in-depth investigations. The investigator should be knowledgeable about and trained in the application of federal and state unemployment insurance laws, regulations/rules, and official policies; able to interpret and apply laws and official policies to each claimant's situation; proficient in fact-finding and determination procedures, including the process of interviewing interested parties and providing the opportunity for fair hearings and rebuttals; use independent judgment to develop and analyze evidentiary facts, assess credibility, weigh the evidence obtained, and decide when information is sufficient to issue legally binding decisions; determine appropriate administrative actions required; authorized to change computerized records as needed to pay or stop payment of benefits; prepare timely written decisions to deny or allow benefits which clearly communicate the facts, conclusions and reasoning used to support the decisions; be knowledgeable of the methods to effectively deal with claimants/customers, employers, or others who are under stress, experiencing negative emotions, etc. including handling and controlling conflict; knowledgeable about and skilled in the navigation of the state’s benefit, employment service, and tax systems; and knowledgeable about and compliant with BAM methodology and coding instructions. Regardless of new policies and procedures, the shortcoming is a direct result of the lack of available skilled investigators with the required skills to conduct prompt and in-depth investigations in the BAM program.

2024-007

Questioned Cost $ – Finding No. 2025-010: Equipment (Material Weakness) State Agency: Department of Land and Natural Resources Federal Agency: Department of Defense AL Number and Title: 12.107 – Readiness and Environmental Protection Integration Award Number and Award Year: N62742-22-2-0002 2022 Repeat Finding? No Condition During our audit, we examined all 16 acquisitions of equipment and real property in the current year. Of the 16 acquisitions, 15 were not properly entered into the State’s Fixed Asset Inventory System (FAIS). Criteria Pursuant to 2 CFR 200.313(b), the State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. The State’s procedures require division-designated individuals to be knowledgeable about submitting Form 17A – Detail Inventory of Property along with supporting evidence, such as purchase orders with proper approvals and final billings and invoices to the State Procurement Office to enter into FAIS in the quarter the asset is placed in service. Effect Failure to record equipment properly reflects noncompliance with State procedures and Federal requirements. Cause and View of Responsible Officials The department did not submit Form 17A timely due to delays and errors in preparation of the forms. Recommendation We recommend that the State department develop internal control procedures to ensure that items are entered into the FAIS accurately and in the proper period.

Finding No. 2025-010 ALN No. 12.017 Program Title: Readiness and Environmental Protection Integration Grant Award No.: N62742-22-2-0002 Condition No controls in place to ensure that 17A reports are prepared and reviewed in a timely manner to ensure that all fixed assets are included in the FAIS. Corrective Action Plan Management concurs with the finding. The delay in recording equipment acquisitions in FAIS resulted in noncompliance with established equipment control policies. Management acknowledges the importance of timely and accurate asset recording to ensure compliance and maintain effective internal controls. The Department will implement strengthened internal control procedures to ensure equipment is recorded in FAIS accurately and in the proper reporting period. Actions include: • Updating departmental written procedures, outlining the required timeline and documentation for recording equipment acquisitions in FAIS. Procedures will clearly define roles and responsibilities for program staff and fiscal personnel. • Issuing written procedures establishing clear roles, responsibilities, and required timelines for FAIS entries and reporting requirements within the division. • Requiring equipment to be recorded within a defined timeframe following receipt, acceptance and placed in service. • Implementing a tracking mechanism to monitor and conduct monthly reconciliations between procurement records, payment records, and FAIS entries. • Conducting supervisory review and periodic monitoring to ensure compliance. These corrective measures will be incorporated into ongoing internal control monitoring processes to prevent recurrence. Person Responsible Cynthia C. Gomez, Fiscal Management Officer Michelle B. Del Rosario, DOFAW Program Specialist V Anticipated Date of Completion June 30, 2026

Questioned Cost $- Finding No. 2024‐007: Special Tests and Provisions (Material Weakness) State Agency: DLIR Federal Agency: Department of Labor AL Number and Title: 17.225 – Unemployment Insurance Award Number and Award Year: 24‐55‐A‐55-UI-000068 2024 Repeat Finding? Yes Condition During our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified that minimum cases requirements were not met for paid claims. Criteria Pursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases timely in order to maintain a current database. The minimum number of cases for completing paid claims is 480 cases. Effect Failure to meet minimum case requirements prevents the granting agency from maintaining a current database. Cause and View of Responsible Officials Due to the COVID‐19 pandemic, the department experienced a staffing shortage and was unable to process the minimum number of cases and/or investigate cases within a timely manner. Recommendation We recommend that the State department address staffing shortages and develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with claim handling requirements, as necessary.

Finding No: 2024-007 ALN No.: 17.225 Program Title: Unemployment Insurance Grant Award No.: 24-A-55-UI-000068 2024 Condition The minimum number of cases for paid were not met. Corrective Action Plan Concur. 1. The BAM unit was short staffed an investigator from July 2023 and a second investigator from February 2024. The 2 vacancies remain unstaffed. 2. The unit is in the process of filling a vacancy with an experienced adjudicator. Once the position is filled, the new staff member will be trained in BAM methodology. At this time, the BAM supervisor continues to help the unit toward achieving its BAM requirements. 3. The unit anticipates increasing the number of cases for paid beginning July 2025. Person Responsible Sheryl-Lynn Ozaki, UI Quality Control Supervisor Anticipated Date of Completion June 2026 NOTE: In response to the finding State of Hawaii – Single Audit 2024 finding, the DLIR offers the following: The auditor’s recommendation the DLIR develop new policies and procedures to handle the increase in unemployment claims fails to recognize the true source of the deficiency. The shortcoming is a direct result of staffing shortages. A key requirement of the BAM program is the unit must be staffed with a sufficient number of knowledgeable and skilled investigators to ensure prompt and in-depth investigations. The investigator should be knowledgeable about and trained in the application of federal and state unemployment insurance law, regulation/rules, and official policy, able to interpret and apply law and official policy to each individual claimant's situation. Proficient in factfinding and determination procedures including the process of interviewing interested parties and providing the opportunity for fair hearing, rebuttal. Use independent judgment to develop and analyze evidentiary facts, assess credibility, weigh the evidence obtained, and decide when information is sufficient to issue legally binding decisions, determine appropriate administrative action required, authorized to change computerized records as needed to pay or stop payment of benefits, prepare a timely written decision to deny or allow benefits which clearly communicate the facts, conclusions and reasoning used to support the decision. Be knowledgeable of the methods to effectively deal with claimants/customers, employers, or others, who are under stress, experiencing negative emotions, etc. including handling and controlling conflict. Knowledgeable about and skilled in the navigation of the state’s benefit, employment service, and tax systems; and knowledgeable about and compliant with BAM methodology and coding instructions. Regardless of new policies and procedures, the shortcoming is a direct result of the lack of available skilled investigators with the required skills to conduct prompt and in-depth investigations in the BAM program.

2023-010

Questioned Cost $- Finding No. 2024‐008: Earmarking (Significant Deficiency) State Agency: DLIR Federal Agency: Department of Labor AL Number and Title: 17.258 – WIOA Adult Program 17.259 – WIOA Youth Activities 17.278 – WIOA Dislocated Worker Formula Grant (WIOA Cluster) Award Number and Award Year: AA347643L0 2022 AA347645P0 2022 Repeat Finding? Yes Condition During our audit, we noted a total of 15.63% of funds were allocated for employment and training activities for adults and dislocated workers. Criteria According to Section 129(b) of the Workforce Innovation and Opportunity Act, not more than 15% of funds allocated shall be used to provide employment and training activities for adults and dislocated workers. Effect Failure to comply with the award’s earmarking requirements results in noncompliance with the terms of the award and could result in sanctions by the awarding agency. Cause and View of Responsible Officials When the initial award is provided to the various subrecipients, program personnel allocate amounts in accordance with earmarking requirements. However, as actual results differ from the budget, program personnel became aware of noncompliance at the close of the award. Recommendation We recommend that program management establish policies and procedures with subrecipients to ensure earmarking requirements are met.

Finding No: 2024-008 ALN No.: 17.258 Program Title: WIOA Adult Program 17.259 Program Title: WIOA Youth Activities 17.278 Program Title: WIOA Dislocated Worker Formula Grant (WIOA Cluster) Grant Award No.: AA347643L0 2022 AA347645P0 2022 Condition During the audit, it was noted that an excess 0.63% of funds were allocated for employment and training activities for adults and dislocated workers. The lead WIOA accountant who completed the close-out report at issue is no longer employed by DLIR. Corrective Action Plan Following the departure of the lead WIOA accountant who completed the subject closeout report, the Administrative Services Office (ASO) has heightened fiscal training and internal controls among its two new WIOA accountants to ensure that the federal award is managed in compliance with all terms and conditions of the award, including requirements pertaining to subrecipient earmarking, so no more than 15% of funds are expended towards the administrative costs category for the WIOA Title I Adult, Dislocated Worker, and Youth Programs. The Workforce Development Council (WDC) is also in the process of contracting with a selected vendor to develop in-depth, in-person fiscal training to be held in June 2025 that will support fiscal staff, including local areas’ fiscal staff, to better understand and navigate the financial management and budgeting for Workforce Innovation and Opportunity Act (WIOA) services. Person Responsible Lynn Araki-Regan Anticipated Date of Completion June 30, 2025

2023-011

Questioned Cost $1,643 Finding No. 2023‐009: Eligibility (Significant Deficiency) State Agency: Department of Labor and Industrial Relations ("DLIR") Federal Agency: Department of Labor AL Number and Title: 17.225 – Unemployment Insurance COVID‐19 – 17.225 – COVID‐19 – Unemployment Insurance Award Number and Award Year: UI‐39318‐23‐55‐A‐15 2023 Repeat Finding? Yes Condition During our audit, we selected a non‐statistical sample of sixty benefit payments made during the year and identified two payments where the recipients did not make the minimum number of work search contacts. Criteria Pursuant to State Handbook of Unemployment Benefits, the following requirements must be met to become eligible for benefit payments: 1) Be totally or partially unemployed; 2) File an application to establish an unemployment insurance claim; 3) File a claim certification on a weekly or bi‐weekly basis to request payment of benefits; 4) Register for work with the State Workforce Development Division; 5) Participate in re‐employment services; 6) Be physically and mentally able to work; 7) Be ready and willing to seek and accept work by making three or more work search contacts every week; 8) Serve a one‐week waiting period; and 9) Report for interviews. Effect Failure to comply with the eligibility requirements results in noncompliance with the terms of the award and may result in recapture of funds by the awarding agency. Cause and View of Responsible Officials The department experienced a staffing shortage and was unable to investigate cases within a timely manner. Recommendation We recommend that the State department follow the policies and procedures established to comply with eligibility requirements. Furthermore, we recommend that the department formalize any modifications to the work search requirements used in practice as allowed under HRS Section 12‐5‐34.

Finding No. 2023‐009 – Eligibility (Significant Deficiency) State Department of Labor and Industrial Relations AL Number: 17.225 Program Title: Unemployment Insurance Condition The audit identified two payments where the recipients did not make the minimum number of work search contacts. Current Status of Corrective Action Plan Concur. Hawaii UI issued a memo, dated September 22, 2023, reminding the local offices of the minimum work search requirements under Administrative Rule 12‐5‐35(c) and for the adjudication unit to conduct a fact‐finding as to the reasons for the claimant’s non‐compliance. Hawaii UI is currently working on a project to enhance the work search process and requirements using a grant awarded to UI by US Department of Labor. The project will allow expansion to the work search reporting requirement on the front‐end of the online weekly claim certification process to include employer job search details. The process entails the use of Behavioral Insight techniques to encourage accurate reporting of the work search requirement and provide a log of their work search efforts. These enhancements will help claimants better understand UI program requirements including: -What claimants should report and why, -The reporting expectations at various decision points throughout the certification process while they still have time to meet the requirements, -Convey the consequences of intentionally providing false information or making mistakes during reporting, and -Imposing a denial of benefits for weeks in which the claimant does not meet the work search eligibility requirement. Person Responsible Sheryl Maligro, UI Program Supervisor Anticipated Date of Completion The enhancements to the Work Search Process are anticipated to be completed in June 2024.

2022-005

Questioned Cost $- Finding No. 2023‐010: Special Tests and Provisions (Material Weakness) State Agency: DLIR Federal Agency: Department of Labor AL Number and Title: 17.225 – Unemployment Insurance COVID‐19 – 17.225 – COVID‐19 – Unemployment Insurance Award Number and Award Year: UI‐39318‐23‐55‐A‐15 2023 Repeat Finding? Yes Condition During our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified that minimum cases and timeliness requirements were not met for paid and denied claims. Criteria Pursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases timely in order to maintain a current database. The required number of cases and the timeliness percentages for completing paid and denied claims are as follows: Paid Claims -Minimum cases: 480 paid cases -Timeliness percentages: Complete 70% within 60 days, 95% within 90 days, and 98% within 120 days Denied Claims -Minimum cases: 450 denied cases (150 cases for each category: monetary, separation and non‐separation) -Timeliness percentages: Complete 60% within 60 days, 85% within 90 days, and 98% within 120 days Effect Failure to meet timeliness requirements prevents the granting agency from maintaining a current database. Cause and View of Responsible Officials Due to the COVID‐19 pandemic, the department experienced a staffing shortage and was unable to process the minimum number of cases and/or investigate cases within a timely manner. Recommendation We recommend that the State department address staffing shortages and develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with claim handling requirements, as necessary.

Finding No. 2023‐010 – Special Tests and Provisions (Material Weakness) State Department of Labor and Industrial Relations AL Number: 17.225 Program Title: Unemployment Insurance Condition Both and/or either the minimum number of cases and timeliness percentages for paid and denied claims including monetary, separation, and nonseparation, were not met. Current Status of Corrective Action Plan Concur. -The BAM unit was short staffed an investigator from March 2022. The vacancy was filled on January 17, 2023. -The number of paid and denied claims were increased and the BAM supervisor was assigned denied cases. -The unit anticipates to meet the minimum number of 480 paid and 450 denied cases effective FY 23‐24 which began in July 2023. -The unit has made great strides and is currently meeting the denied timeliness requirements. -The unit has brought on an experienced adjudicator to fill a vacancy and learn BAM methodology. He is in the probationary period and is expected to continue to progress to the level where he will be able to function independently on simple to difficult and complex cases. The unit has worked cohesively to assist colleagues with investigative tasks. The TPS individual contributes to this effort by assisting with the assembly of new case files for the BAM investigators. This collective effort allows the unit to make progress to our goals. The BAM supervisor continues to help and monitor case completion and timeliness to ensure the unit works toward achieving the BAM requirements. Person Responsible Sheryl Maligro, UI Program Supervisor Anticipated Date of Completion June 2025

2022-006

Questioned Cost $- Finding No. 2023‐011: Earmarking (Significant Deficiency) State Agency: DLIR Federal Agency: Department of Labor AL Number and Title: 17.258 – WIOA Adult Program 17.259 – WIOA Youth Activities 17.278 – WIOA Dislocated Worker Formula Grant (WIOA Cluster) Award Number and Award Year: AA‐33225‐15‐55A‐15 2019 Repeat Finding? No Condition During our audit, we noted the following instances of noncompliance: -A total of 15.61% of funds were allocated for employment and training activities for adults and dislocated workers. -A total of 74.60% of funds were allocated for services to out of school youth. Criteria According to Section 129(b) of the Workforce Innovation and Opportunity Act, not more than 15% of funds allocated shall be used to provide employment and training activities for adults and dislocated workers. According to Section 129(c) of the Workforce Innovation and Opportunity Act, not less than 75% of funds allocated to the local area, except for local area administrative costs, shall be used to provide out of school youth. Effect Failure to comply with the award’s earmarking requirements results in noncompliance with the terms of the award and could result in sanctions by the awarding agency. Cause and View of Responsible Officials When the initial award is provided to the various subrecipients, program personnel allocate amounts in accordance with earmarking requirements. However, as actual results differ from the budget, program personnel became aware of noncompliance at the close of the award. Recommendation We recommend that program management establish policies and procedures with subrecipients to ensure earmarking requirements are met.

Finding No. 2023‐011 – Earmarking (Significant Deficiency) State Department of Labor and Industrial Relations AL Numbers and Program Title: 17.258 – WIOA Adult Program 17.259 – WIOA Youth Activities 17.278 – WIOA Dislocated Worker Formula Grant (WIOA Cluster) Condition The auditing firm noted the following instances of noncompliance: -A total of 15.61% of funds were allocated for employment and training activities for adults and dislocated workers. -A total of 74.60% of funds were allocated for services to out of school youth. Current Status of Corrective Action Plan Concur. -Administrative Services Office (ASO) has communicated with Workforce Development Division (WDD) that no more than 15% of funds shall be allocated to provide employment training activities for Adults and Dislocated Workers. If there are recaptured funds to spend from the local areas for the program year, ASO and WDD will make sure that recaptured funds will not exceed the maximum requirements of 15%. -WDD shall monitor the progress of subrecipients to meet the minimum 75% expenditure for out of school youth. If necessary, a monthly or bi‐monthly meeting with subrecipients shall be scheduled to monitor the progress and take pro‐active recommendations and action to meet the requirements. Person Responsible Maricar Pilotin‐Freitas, Workforce Development Division Administrator Anticipated Date of Completion March 2024

See Schedule of Findings and Questioned Costs for chart/table. Condition During our audit, we selected a non statistical sample of fifty benefit payments made during the year and identified three payments where the recipients did not make the minimum number of work search contacts. Criteria Pursuant to State Handbook of Unemployment Benefits, the following requirements must be met to become eligible for benefit payments: 1) Be totally or partially unemployed; 2) File an application to establish an unemployment insurance claim; 3) File a claim certification on a weekly or bi-weekly basis to request payment of benefits; 4) Register for work with the State Workforce Development Division; 5) Participate in re employment services; 6) Be physically and mentally able to work; 7) Be ready and willing to seek and accept work by making three or more work search contacts every week; 8) Serve a one week waiting period; and 9) Report for interviews. Effect Failure to comply with the eligibility requirements results in noncompliance with the terms of the award and may result in recapture of funds by the awarding agency. Cause and View of Responsible Officials The department experienced a staffing shortage and was unable to investigate cases within a timely manner. Recommendation We recommend that the State department follow the policies and procedures established to comply with eligibility requirements. Furthermore, we recommend that the department formalize any modifications to the work search requirements used in practice as allowed under HRS Section 12 5 34.

Finding No. 2022-005 ? Eligibility (Significant Deficiency) State Department of Labor and Industrial Relations AL Number: 17.225 Program Title: Unemployment Insurance Direct Award from: UI 3644 21 55 A 15, UI 3590 20 60 A 15, UI 35700 21 55 A 15, UI 37219 22 55 A 15 Condition Per Administrative Rule 12-5-35(c), an individual may be considered available for work for any week if they make a minimum of three work search contacts each week, unless the individual is exempt from the work search requirements or be subject to a modified work search requirement consistent with and reflective of local area policies and local labor market opportunities. Findings identified three claimants who did not comply with the above requirements and were improperly paid. Current Status of Corrective Action Plan Concur. Hawaii will resend our revised written procedures regarding Administrative Rule 12 5 35(c) dated January 16, 2020, to ensure staff is aware and compliant with our Work Search requirements to ensure proper payment of benefits in the future. To address the modified work search requirements for specific islands or locality, Hawaii will provide staff with a written policy regarding this matter. Person Responsible Sheryl Maligro, UI Program Specialist Supervisor Anticipated Date of Completion June 30, 2023

See Schedule of Findings and Questioned Costs for chart/table. Condition During our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified minimum cases and timeliness requirements were not met regarding paid and denied claims. Criteria Pursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases timely in order to maintain a current database. The required number of cases and the timeliness percentages for completing paid and denied claims are as follows: Paid Claims Minimum cases: 480 paid cases Timeliness percentages: Complete 70% within 60 days, 95% within 90 days, and 98% within 120 days Denied Claims Minimum cases: 450 denied cases (150 cases for each category: monetary, separation and non separation) Timeliness percentages: Complete 60% within 60 days, 85% within 90 days, and 98% within 120 days Effect Failure to meet timeliness requirements prevents the granting agency from maintaining a current database. Cause and View of Responsible Officials Due to the COVID 19 pandemic, the department was significantly impacted with an increase in unemployment claims. Furthermore, the department experienced a staffing shortage and was unable to process the minimum number of cases and/or investigate cases within a timely manner. Recommendation We recommend that the State department develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with claim handling requirements.

Finding No. 2022-006 ?Special Tests and Provisions (Material Weakness) State Department of Labor and Industrial Relations AL Number: 17.225 Program Title: Unemployment Insurance Direct Award from: UI-37219-22-55-A-15 Condition Both and/or either the minimum number of cases and timeliness percentages for paid and denied claims including monetary, separation, and non-separation, were not met. Current Status of Corrective Action Plan Concur. 1. The BAM unit was short staffed an investigator from March 2022. The vacancy was filled on January 17, 2023. 2. The number of paid and denied claims was increased and the BAM supervisor was assigned denied cases. 3. The unit anticipates to meet the minimum number of 480 paid and 450 denied cases effective FY 23-24 which begins in July 2023. 4. The unit has made great strides and is currently meeting the denied timeliness requirements and 60 day paid timeliness requirement. 5. The unit has brought on an experienced adjudicator to fill a vacancy and learn BAM methodology. The unit has worked cohesively to assist colleagues with investigative tasks. Other areas contribute to this effort by assisting with the assembly of new case files for the BAM investigators. This collective effort allows the unit to make progress to our goals. The BAM supervisor continues to help and monitors case completion and timeliness to ensure the unit works toward achieving the BAM requirements. Person Responsible Sheryl Ozaki, UI Quality Control Supervisor Anticipated Date of Completion June 2024

2021-005

See Schedule of Findings and Questioned Costs for chart/table. Condition During our audit, we examined a non statistical sample of two subawards and found no evidence of consultation with private school officials. Criteria Section 1117(a)(4)(A) of the Elementary and Secondary Education Act requires that a recipient must provide equitable services to students and teachers in private schools as determined in consultation with private school officials. Effect Without evidence of program personnel?s consultation with private school officials, the State is unable to support its assertion of compliance with federal requirements. Cause and View of Responsible Officials Program personnel indicated a consultation meeting took place; however, no formal documentation was retained. Recommendation We recommend that program management ensure that program personnel are familiar with all grant requirements and retain necessary documentation to comply with federal program requirements.

2022-015 ? Special Tests and Provisions (Significant Deficiency) Governor?s Office care of State Department of Budget and Finance AL Number: 84.425C Program Title: COVID 19 ? Education Stabilization Fund Direct Award from: U.S. Department of Education Condition A local education agency that receives funds under the Governor?s Emergency Education Relief (GEER I) Fund program must provide equitable services to students and teachers in private schools. During the audit, B&F was unable to locate documentation to verify that timely consultation with private school officials occurred. Current Status of Corrective Action Plan Concur. B&F will ensure that program personnel maintain evidence of compliance with all grant requirements. Person Responsible Mark K. Anderson, Office of Federal Awards Management, Administrator Anticipated Date of Completion July 1, 2023

See Schedule of Findings and Questioned Costs for chart/table. ConditionDuring our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified minimum cases and timeliness requirements were not met regarding paid and denied claims.CriteriaPursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases timely in order to maintain a current database. The required number of cases and the timeliness percentages for completing paid and denied claims are as follows:Paid Claims? Minimum cases: 480 paid cases? Timeliness percentages: Complete 70% within 60 days, 95% within 90 days, and 98% within 120 daysDenied Claims? Minimum cases: 450 denied cases (150 cases for each category: monetary, separation and non separation)? Timeliness percentages: Complete 60% within 60 days, 85% within 90 days, and 98% within 120 daysEffectFailure to meet timeliness requirements prevents the granting agency from maintaining a current database.Cause and View of Responsible OfficialsDue to the COVID 19 pandemic, the department was significantly impacted with an increase in unemployment claims. Employees were also hindered from working for a substantial amount of time due to government-mandated shutdowns and other restrictions.RecommendationWe recommend that the State department develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with claim handling requirements.

2021-005 ? Special Tests and Provisions (Material Weakness)State Department of Labor and Industrial RelationsAL No. 12.225 ? Unemployment InsuranceCOVID-19 ? 17.225 ? COVID-19 ? Unemployment InsuranceDirect award from the U.S. Department of Labor: UI-35644-21-55-A-15, UI-35940-20-60-A-15, UI-35700-21-55-A-15Condition1) Did not meet minimum cases for PAID (PCA) of 480 and Denied (DCA) of 4502) Did not meet timeliness for PCA 95% within 90 days and 98% within 120 dayCorrective Action PlanConcur1) The required minimum cases for PCA-480 and DCA-450 were reinstated July 2021.2) BAM staff who were previously assigned to other duties to address the huge workload increase due to the Pandemic were rededicated to performing only BAM related work beginning September 2020. The unit has brought on two experienced adjudicators to fill vacancies and learn BAM methodology. They continue to progress to the level where they will be able to function independently on simple to difficult and complex cases. The unit has worked cohesively to assist colleagues with investigative tasks. The TPS individual contributes to this effort by assisting with the assembly of new case files for the BAM investigators. This collective effort allows the unit to make progress to our goals. The BAM supervisor continues to help and monitors case completion and timeliness to ensure the unit works toward achieving the BAM requirements.Person ResponsibleSheryl Ozaki, UI Quality Control SupervisorAnticipated Date of Completion1) Completed2) July 2023

2020-005

See Schedule of Findings and Questioned Costs for chart/table. ConditionDuring our audit, we selected a non-statistical sample of two quarterly performance reports to examine and identified two instances where there was no available evidence to verify the reports were prepared.CriteriaThe Unemployment Insurance Program Letter No. 8 20 requires performance reports to be submitted by the twentieth day of the second month after the end of each quarter.EffectThe failure to file required reports reduces transparency on the use of program funds hindering monitoring by the awarding agency.Cause and View of Responsible OfficialsDue to vacancies within the department, program personnel were reassigned which resulted in the reports not being prepared.RecommendationWe recommend that the State department implement adequate review of reports and ensure that individuals responsible for preparing and reviewing reports have adequate knowledge of applicable reporting requirements.

2021-006 ? Special Tests and Provisions (Significant Deficiency)State Department of Labor and Industrial RelationsAL No. 12.225 ? Unemployment InsuranceCOVID-19 ? 17.225 ? COVID-19 ? Unemployment InsuranceDirect award from the U.S. Department of Labor: UI-35644-21-55-A-15, UI-35940-20-60-A-15, UI-35700-21-55-A-15ConditionNon-compliance of RESEA ETA-9129 quarterly report submittal.Corrective Action PlanConcur. DLIR will assign 2 people (lead/alternate) to be responsible for the timely filings of the ETA quarterly reports and will mandate that the reports be reviewed by a supervisor prior to submission.DLIR is also working with ETS to provide PDF versions of the HI RESEA quarterly production reports in a secured document folder on our share drive to guarantee data securement.Person Responsible: Arthur Barba, DLIR-UI Acting AdministratorAnticipated Date of Completion: June 30, 2022

Finding No. 2020-005: Special Tests and Provisions (Material Weakness) Questioned Cost: $0 State Agency: Department of Labor and Industrial Relations (DLIR) Federal Agency: Department of Labor CFDA Number and Title: 17.225 ? Unemployment Insurance COVID-19 ? 17.225 ? COVID-19 ? Unemployment Insurance Award Number and Award Year: UI-34054-20-55-A-15 2020 UI-34160-20-55-A-15 2020 UI-34492-20-60-A-15 2020 UI-34711-20-55-A-15 2020 UIPL No. 13-20 2020 Repeat Finding? No Condition During our audit, we examined the Benefit Accuracy Measurement (BAM) summary report and identified minimum cases and timeliness requirements were not met regarding paid and denied claims. Criteria Pursuant to 20 CFR Part 602, the BAM system requires the State department to complete a minimum number of unemployment cases timely in order to maintain a current database. The required number of cases and the timeliness percentages for completing paid and denied claims are as follows: Paid Claims ? Minimum cases: 480 paid cases ? Timeliness percentages: Complete 70% within 60 days, 95% within 90 days, and 98% within 120 days Denied Claims ? Minimum cases: 450 denied cases (150 cases for each category: monetary, separation and non separation) ? Timeliness percentages: Complete 60% within 60 days, 85% within 90 days, and 98% within 120 days Effect Failure to meet timeliness requirements prevents the granting agency from maintaining a current database. Cause and View of Responsible Officials Due to the COVID 19 pandemic, the department was significantly impacted with an increase in unemployment claims. Employees were also hindered from working for a substantial amount of time due to government-mandated shutdowns and other restrictions. Recommendation We recommend that the State department develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with claim handling requirements.

2020-005 ? Special Tests and Provisions (Material Weakness) (Page 29) State Department of Labor and Industrial Relations CFDA No. 12.225 ? Unemployment Insurance COVID-19 ? 17.225 ? COVID-19 ? Unemployment Insurance Direct award from the U.S. Department of Labor (Award nos. UI-34054-2055-A-15, UI-34160-20-55-A-15, UI-34492-20-60-A-15, UI-34711-20-55-A-15 and UIPL No. 13-20; all grants ? 2020) Corrective Action Plan Concur. Benefit Accuracy Measurement (BAM) minimum cases and timeliness requirements were not met for paid claims and denied claims for the fiscal year 2020. Effective July 1, 2019, Hawaii became a large state with a minimum case load increase from 360 to 480. The Quality Control unit is tasked with performing BAM. The unit was not staffed to perform 480 cases, additionally, a seasoned investigator retired. The COVID-19 Pandemic caused an overwhelming demand for claims filing services, all QC staff were re-assigned to provide support for claims taking functions beginning March 18, 2020. USDOL approved exemptions of paid cases from April to June 2020) and denied cases from 202011 to 202113 (March 16, 2020 to March 2021). QC staff have been reassigned back to their job. Hired 1 investigator. Recruiting at least 1 more staff. QC supervisor is monitoring each investigator?s caseload and meeting with individual investigators weekly to discuss cases. Discussed with QC staff the importance of meeting the minimum cases and timeliness requirements Person Responsible: Sheryl Ozaki, Quality Control Supervisor Anticipated Date of Completion: June 30, 2021

Finding No. 2020-006: Eligibility (Significant Deficiency) Questioned Cost: "See Effect" State Agency: DLIR Federal Agency: Department of Labor CFDA Number and Title: COVID 19 ? 17.225 ? COVID 19 ? Unemployment Insurance Award Number and Award Year: UI-34711-20-55-A-15 2020 Repeat Finding? No Condition During our audit, we were informed by DLIR management that there were inappropriate benefit payments made to ineligible claimants under the Pandemic Unemployment Assistance (PUA) program. Criteria The Coronavirus Aid, Relief, and Economic Security (CARES) Act, Section 2102 contains eligibility requirements for the PUA program. Effect Failure to comply with the eligibility requirements results in noncompliance with the terms of the award and may result in recapture of funds by the awarding agency. Pursuant to 2 CFR 200.516(a)(6), the questioned cost is not required to be disclosed as releasing such information could compromise current investigative proceedings. Cause and View of Responsible Officials Due to the COVID 19 pandemic, the department was significantly impacted with an increase in unemployment claims, resulting in management initially prioritizing the processing and payment of claims over ensuring claimants were fully eligible to receive PUA benefits. However, we noted existing detective controls subsequently identified the ineligible payments. Management subsequently implemented additional preventive controls to ensure eligibility of claims and is pursuing recovery of ineligible payments. Employees were also hindered from working for a substantial amount of time due to government-mandated shutdowns and other restrictions. Recommendation We recommend that the State department develop new policies and procedures to handle the increase in unemployment claims and follow existing policies and procedures established to comply with eligibility requirements.

2020-006 ? Eligibility (Significant Deficiency) (Page 31) State Department of Labor and Industrial Relations CFDA No. COVID-19 ? 17.225 ? COVIC-19 Unemployment Insurance Direct award from the U.S. Department of Labor (Award no. UI-34711-20-55-A-15 2020) Corrective Action Plan Concur. DLIR management identified four areas of improper payment during the audit as described below: 1) Improper payment due to incorrect deductible earnings calculation on the PUA benefit system. Due to the urgency of the State to provide PUA, the Department had minimal opportunity for testing prior to implementation. The error in the deductible earnings calculation was identified approximately 1 month after the first PUA payments were processed. The correction to the calculation was put into production on June 3, 2020, however it resulted in overpayments to some weeks claims. 2) Improper payments due to fraud/identity theft. The Department took what was believed, at the time, to be reasonable security measures to identify potential fraud claims. The fraud detection system used credit score data matching and a fraud scoring system to identify fraud. As attacks began to increase and more analytic data became available, the fraud detection system was enhanced to identify suspicious banks, email addresses, IP addresses and other suspicious behavior to identify suspected ID theft. The Department implemented new ID verification processes to look back on already paid claims resulting in retroactive denials. To adequately address the widespread fraud, as of January 21, 2021, all claimants are required to provide ID verification documentation which includes a government issued ID, Social Security Card and a photo of themselves holding their government issued ID. 3) Improper payment because the claimant did not meet one of the acceptable COVID-19 eligibility reasons. Per guidance from the USDOL in UIPL 16-20 Change 1, ?An individual must self-certify that he or she is unemployed, partially unemployed, or unable or unavailable to work because of a COVID-19 related reason listed in section 2102(a)(3)(A)(ii)(I) of the CARES Act. Unlike DUA, an individual filing for PUA does not need to provide proof of employment or self-employment to qualify, nor does PUA take into account the individual?s principal source of income as part of the self-certification process.? Based on this guidance, claims were initially paid based on self-certifications alone. As it became more apparent that the program was susceptible to fraud, the following guidance was subsequently provided to States in UIPL 16-20 change 2. ?While Section 2102 of the CARES Act relies on self-certification to verify that an individual is covered under the PUA program, the state has authority to request supporting documentation when investigating the potential for fraud and improper payments.? In response to this guidance, the agency began reviewing claims that were suspicious in nature, resulting in retroactive denials when it was determined that claimants did not meet the COVID-19 eligibility requirements. The Department continues to review claims to ensure they meet the eligibility requirements in section 2102(a)(3)(A)(ii)(I) of the CARES Act. 4) Improper payment because the claimant was eligible or potentially eligible for regular UI or extended benefits. PUA is not payable to individuals who are eligible for regular UI or EB under State or Federal law. Due to the urgency of the State to provide PUA, the Department did not have sufficient time to implement a crossmatch between the PUA benefit system and the Hawaii Unemployment Insurance (HUI) benefit system prior to payment. Initial payments were made out of the PUA benefits system on May 15, 2020 while the Department was in the process of programming a crossmatch with the regular UI system and UI wage records to identify eligible or potentially eligible UI claim. The crossmatch went into production on June 22, 2020, which identified a significant number of claims potentially eligible for regular UI. Implementation of this crossmatch has substantially decreased the number of improperly paid claims due to UI eligibility. Person Responsible: Michelle Hamilton, UI Program Specialist/Federal Program Coordinator Anticipated Date of Completion: Completed

Finding No. 2019-006: Period of Performance (Material Weakness) Questioned Cost: $0 State Agency: DOD Federal Agency: Department of Defense CFDA Number and Title: 12.404 ? National Guard ChalleNGe Program Award Number and Award Year: W912-12J6-16-2-4001 2017 W912-12J6-16-2-400K 2017 W912-12J6-17-2-4001 2018 W912-12J6-17-2-400K 2018 Repeat Finding? No Condition During our audit, we noted four instances where there was no available evidence to verify the award closeout reports were prepared. While there were no expenditures under the awards during fiscal year 2019, it does not appear the State closed the awards in a timely matter. Criteria National Guard Regulation (NGR) 5-1, Section 11-10 requires final accounting and settlement within 90 days after the end of the Federal fiscal year, or upon termination or closeout of an award, whichever is earlier. Effect Failure to submit reports on a timely basis prevents the granting agency from timely assessing the status and activities of the program. Cause and View of Responsible Officials Due to an unexpected change in program personnel and lack of training, program management was unaware of the period of performance requirements. Recommendation We recommend that the State department follow the policies and procedures established to comply with period of performance requirements.

2019-006 ? Period of Performance (Material Weakness) (Page 29) State Department of Defense CFDA No. 12.404 ? National Guard ChalleNGe Program Direct award from the U.S. Department of Defense (Award nos. W912-12J6-16-2-4001 2017, W912-12J6-16-2400K 2017, W912-12J6-17-2-4001 2018 and W912-12J6-17-2-400K 2018) Corrective Action Plan Concur. The Youth Challenge Program, going forward, will be including the required instructions and processes of the required National Guard Bureau, closeout procedures and deadlines, in the Program?s amended Financial Standard Operating Procedures (SOP). Grant years 2017 and 2018 are being currently addressed for closing between the program?s Budget Officer and the federal Grants Officer Representative (GOR). Apart from the lack of instructions and guidelines originally provided for closing said years and the sudden, unforeseen change of the program?s Budget Officer, the program has been unable to close out said grants due to Federal cashflow related discrepancies and suspense issues. The YCA federal funds (cashflow) are awarded to the program as monthly pre-approved advances. The National Guard Bureau has thus far and continues to be inconsistent on providing the programs advances in an adequate and timely manner. Due to this, the program has on-going issues sustaining sufficient cash funds to pay its current obligated expenditures. Insufficiency has left the program unable to process a timely and proper close out. Program is actively collaborating with its federal contacts at the United States Property and Fiscal Office of Hawaii to correct cashflow discrepancies and closeout said grant years. Person Responsible: Ariel Matsumoto, Hawaii Youth Challenge Academy Budget Officer Anticipated Date of Completion: March 30, 2020

Finding No. 2019-010: Earmarking (Material Weakness) Questioned Cost: $0 State Agency: DLNR Federal Agency: Department of the Interior CFDA Number and Title: 15.904 ? Historic Preservation Fund Grants-In-Aid Award Number and Award Year: P17AF00042 2017 P18AF00101 2018 Repeat Finding? Yes, Finding No. 2018-012 Condition During our audit, we noted 10% of federal funds awarded were not obligated to certified local governments (CLGs) within the first year of the award P18AF00101, and 10% of the federal funds were not expended for transfers to local governments by the end of the second year for award P17AF00042. Criteria Recipients are required to pass through at least 10% of each year?s award as subgrants to CLGs or they will be recaptured by the National Park Service (NPS). According to paragraph (4) of Section 3029-02(c) of the National Historic Preservation Act, not less than 10% of the annual apportionment shall be transferred by the State to CLGs for historic preservation projects or programs of the CLGs. Effect Failure to comply with the awards earmarking requirements results in noncompliance with the terms of the award and may result in the recapture of funds by the awarding agency. Cause and View of Responsible Officials NPS funding of the Historic Preservation Fund Grants-in-Aid program to the State Historic Preservation Division (SHPD) was not awarded until late in the grant years. Award P18AF00101, with a grant period of October 1, 2017 through September 30, 2020, was issued on August 26, 2019, after the end of the first year of the award. In addition, the second and final modification to Award P17AF00042 extended the grant through September 30, 2018 and included the final increment of federal funds but was not received until August 15, 2018, which left only one month left in the grant period. Recommendation The State department should continue to work with the federal awarding agency and seek guidance on how it can meet earmarking requirements when there are delays in the awarding of the federal grants.

2019-010 ? Earmarking (Material Weakness) (Page 33) State Department of Land and Natural Resources CFDA No.15.904 ? Historic Preservation Fund Grants-In-Aid Direct award from the U.S. Department of the Interior (Award nos. P17AF00042 2017 and P18AF00101 2018) Corrective Action Plan Concur. The Division concurs with the finding and the statement of cause. However, with regard to it being a repeat finding of PY No. 2018-012, it must be noted that the funding for both grant awards were delayed for a considerable period of time by NPS which resulted in the Division?s inability to issue the required 10% pass through to the CLG participants during the term of the grants. The Division will continue to work with NPS to improve the communication for funding. Resolution of this finding is dependent on NPS releasing funds in a timely manner. Person Responsible: Alan S. Downer, Ph.D., SHPD Administrator Anticipated Date of Completion: June 30, 2021

2018-012

Finding No. 2019-011: Special Tests and Provisions (Significant Deficiency) Questioned Cost: $0 State Agency: DLNR Federal Agency: Department of the Interior CFDA Number and Title: 15.904 ? Historic Preservation Fund Grants-In-Aid Award Number and Award Year: P17AF00042 2017 P17AF00003 2016 Repeat Finding? Yes, Finding No. 2018-013 Condition During our audit, we examined six National Register property nominations and noted there was no available evidence to verify that SHPD entered into a memorandum of understanding or agreement with Native Hawaiian organizations in assessing the cultural significance of the nominated properties. Criteria Pursuant to Section 101(d), subsection (6)(c) of the National Historic Preservation Act, the State must enter into a memorandum of understanding or agreement with Native Hawaiian organizations for the assessment of the cultural significance of any property in determining whether to nominate such property to the National Register, and to carry out the cultural component of such preservation program or plan. Effect Failure to enter into memorandums of agreement or understanding with Native Hawaiian organizations in determining the cultural significance of nominated properties could lead to a preservation plan that does not adequately address the property?s cultural significance. A lack of an agreement with Native Hawaiian organizations may result in SHPD losing its Federal funding. Cause and View of Responsible Officials Program management believes the objectives of the memorandums of understanding or agreement with Native Hawaiian organizations were met through alternative means. Recommendation The State department should either clarify with the federal awarding agency whether the memorandums of understanding or agreement with Native Hawaiian organizations are required, or develop procedures and controls to ensure that the memorandums are executed. For award year 2018, memorandums of understanding or agreement with Native Hawaiian organizations in assessing the cultural significance of the nominated properties is no longer a grant requirement.

2019-011 ? Special Tests and Provisions (Significant Deficiency) (Page 34) State Department of Land and Natural Resources CFDA No.15.904 ? Historic Preservation Fund Grants-In-Aid Direct award from the U.S. Department of the Interior (Award nos. P17AF00042 2017 and P17AF00003 2016) Corrective Action Plan Concur. The SHPD will continue to work to ensure that the proper procedures and controls are in place to meet all requirements for consulting Native Hawaiian organizations in accordance with grant award and Section 101(d) of the National Historic Preservation Act. The SHPD will continue to negotiate a memorandum of agreement with a Native Hawaiian organization and will also work with the National Park Service to obtain clarification on questions to specific requirements. Person Responsible: Alan S. Downer, Ph.D., SHPD Administrator Anticipated Date of Completion: June 30, 2021

2018-013

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2017-012

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2017-013

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2016-002

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