Program Audits, Social Services Fns-209 Report Validation for the quarter ended June 30, 2021

COUNTY OF SAN LUIS OBISPO BOARD OF SUPERVISORS AGENDA ITEM TRANSMITTAL (1) DEPARTMENT (2) MEETING DATE (3) CONTACT/PHONE Auditor - Controller - 10/19/2021 Mark Maier (805) 781-4267 Treasurer -Tax Collector Kari Lekvold (805) 781-4846 (4) SUBJECT Submittal of the validation review report of the Department of Social Services’ Status of Claims Against Households Food and Nutrition Services 209 Report for the quarter ended June 30, 2021. All Districts. (5) RECOMMENDED ACTION It is recommended that the Board receive, review, and file the validation review report for the Department of Social Services’ Status of Claims Against Households Food and Nutrition Services 209 Report for the quarter ending June 30, 2021. (6) FUNDING SOURCE(S) (7) CURRENT YEAR FINANCIAL (8) ANNUAL FINANCIAL (9) BUDGETED? N/A IMPACT IMPACT Yes $0.00 0.00 (10) AGENDA PLACEMENT { X } Consent { } Presentation { } Hearing (Time Est. _______) { } Board Business (Time Est.______) (11) EXECUTED DOCUMENTS { } Resolutions { } Contracts { } Ordinances { X } N/A (12) OUTLINE AGREEMENT REQUISITION NUMBER (OAR) (13) BUDGET ADJUSTMENT REQUIRED? BAR ID Number: N/A N/A { } 4/5th's Vote Required { X } N/A (14) LOCATION MAP (15) BUSINESS IMPACT STATEMENT? (16) AGENDA ITEM HISTORY N/A No { } N/A Date 12/10/2019 - (17) ADMINISTRATIVE OFFICE REVIEW Zachary A. Lute (18) SUPERVISOR DISTRICT(S) All Districts Page 1 of 2 COUNTY OF SAN LUIS OBISPO TO: Board of Supervisors FROM: James W. Hamilton, CPA, Auditor – Controller – Treasurer – Tax Collector DATE: 10/19/2021 SUBJECT: Submittal of the validation review report of the Department of Social Services’ Status of Claims Against Households Food and Nutrition Services 209 Report for the quarter ended June 30, 2021. All Districts. RECOMMENDATION It is recommended that the Board receive, review, and file the validation review report for the Department of Social Services’ Status of Claims Against Households Food and Nutrition Services 209 Report for the quarter ending June 30, 2021. DISCUSSION On a quarterly basis, the Department of Social Services is required to report on over-issuance claims establishment and collection activities in the CalFresh program to the California Department of Social Services (CDSS). The CDSS then submits a statewide report to the United States Department of Agriculture (USDA), Food and Nutrition Services (FNS). Every other year, the California Department of Social Services requires an external validation review of the most recent June report and prescribes the external validation requirements. The objective of our review was to validate the accuracy of the claim amounts reported by the Department of Social Services for the quarter ending June 30, 2021. Our review determined the claim amounts reported to CDSS were accurate. OTHER AGENCY INVOLVEMENT/IMPACT Department of Social Services. FINANCIAL CONSIDERATIONS The Department of Social Services reported a Claims Against Households balance of $2,594,425 as of June 30, 2021. RESULTS The validation report helps reduce County risk, maintain and improve internal controls and procedures for reporting requirements, and contributes to the County’s vision of a well-governed community. ATTACHMENTS 1 FY 2020-21 Department of Social Services FNS-209 Validation Report Page 2 of 2 Attachment 1 COUNTY OF SAN LUIS OBISPO AUDITOR - CONTROLLER TREASURER - TAX COLLECTOR Status of Claims Against Households Food and Nutrition Services 209 Report Validation Quarter Ended June 30, 2021 September 2021 James W. Hamilton, CPA Auditor-Controller Treasurer-Tax Collector Page 1 of 8 COUNTY OF SAN LUIS OBISPO AUDITOR - CONTROLLER TREASURER - TAX COLLECTOR James W. Hamilton, CPA Auditor-Controller Treasurer-Tax Collector TO: DEVIN DRAKE, SOCIAL SERVICES DIRECTOR FROM: JAMES W. HAMILTON, CPA, AUDITOR-CONTROLLER-TREASURER-TAX COLLECTOR DATE: SEPTEMBER 21, 2021 SUBJECT: STATUS OF CLAIMS AGAINST HOUSEHOLDS FOOD AND NUTRITION SERVICES 209 REPORT VALIDATION FOR QUARTER ENDED JUNE 2021 Our office recently completed a validation review of the figures reported by the Department of Social Services (DSS) on the Food and Nutrition Service’s Status of Claims Against Households 209 Report (FNS-209) for the quarter ended, June 30, 2021. The validation review did not result in any exceptions. PURPOSE The purpose of this review was to validate the accuracy of the figures reported on the FNS-209 report for the quarter ended June 30, 2021. METHODOLOGY We conducted our review in conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). The Standards require that the internal audit activity be independent and internal auditors be objective in performing their work. The Standards also require that internal auditors perform their engagements with proficiency and due professional care; that the internal audit function be subject to a program of quality assurance; and that the results of engagements are communicated. We collected the information through interviews with DSS staff, review of DSS overpayment of claims recording and reporting processes, and through the review of DSS claims management systems’ reports. RESULTS ACCOUNTABILITY TEST 1: QUARTERLY CLAIMS FIGURES Federal and state regulations require that all amounts in FNS-209 form be reported accurately and be supported with internal accounting records. DSS provided quarterly reports and reconciliations for the Intentional Program Violation (IPV), Inadvertent Household Error (IHE) and Agency Administrative Error (AE) claims. Per the California Department of Social Services (CDSS) compliance requirements, we traced lines 3b through 20b of the June 30, 2021, report to Social Services’ internal records. Page 2 of 8 COUNTY OF SAN LUIS OBISPO AUDITOR - CONTROLLER TREASURER - TAX COLLECTOR James W. Hamilton, CPA Auditor-Controller Treasurer-Tax Collector We found no exceptions during the completion of the procedure performed. See Attachment A for the comparison of the amounts reported on the FNS-209 report to the supporting internal accounting records. ACCOUNTABILITY TEST 2: ENDING BALANCE CLAIMS FIGURES Federal regulations require that the beginning and ending balances on the FNS-209 report be supported by automated claims management systems and/or paper records. Per CDSS’ compliance requirements, we traced the June 30, 2021, ending balance on the FNS-209 report to the automated claims management systems and paper records used by Social Services. We found no exceptions during the completion of the procedure performed. See Attachment B for the summary comparison of the claims management system and the FNS-209 Report’s Ending Balances. PRIOR YEAR FINDING AND STATUS Requirement: 7 CFR 273.18 (m) requires agencies maintain a system for monitoring receipt claims against households that maintains claim records and the corresponding receipt information. The system must also be able to produce summary reports and reconcile to supporting records. Observation: Social Services’ June 30, 2019, FNS-209 report’s ending balances (Line 13) for Inadvertent Household Error and Administrative Error claims did not match to the automated claims management system’s historical reports. The FNS- 209 report’s ending balance for the Inadvertent Household Error claims were 56 claims and $26,602 (1%) less than the automated claims management system amounts. The FNS-209 report’s ending balance for Agency Administrative Error claims were 68 claims and $61,292 (9%) less than automated claims management system amounts. Cause(s): The department’s automated claims management system has several reporting constraints which hinder the efficient reconciliation of the system’s ending balances to the FNS-209 reported ending balances. The system reports include claims that have not yet been verified by the department and exclude claims for clients who do not have current benefits to offset a claim. Effect: The department is out of compliance with the CDSS reporting requirements. Page 3 of 8 COUNTY OF SAN LUIS OBISPO AUDITOR - CONTROLLER TREASURER - TAX COLLECTOR James W. Hamilton, CPA Auditor-Controller Treasurer-Tax Collector Recommendation: We recommend the department work with CDSS to address the automated claims management systems’ reporting constraints and gain FNS-209 reporting compliance. Current status: Corrective action has been implemented. Ending balances were supported by automated claims management system and records. We would like to thank your staff for the cooperation and assistance we received during our review. If you have any questions regarding this report or the review that was conducted, please contact Kari Lekvold, Internal Auditor at (805) 781-4846. Sincerely, James W. Hamilton, CPA Auditor-Controller-Treasurer-Tax Collector Attachments Cc: Michelle Enfantino, Department of Social Services Fiscal Department Administrator Dora Rosales, Department of Social Services Accountant David Barcellos, Department of Social Services Collections Officer Page 4 of 8 Attachment A ‐ Accountability Test #1: FNS‐209 Lines 3b through 20b Validation Intentional Program Violations (IPV) Claims Automated Claims FNS‐209 System/Paper Records Variance Line Item Number Amount Number Amount Number Amount Claims Summary 3a. Beginning Balance 36 $ 81,636.56 36 $ 81,636.56 ‐ $ ‐ 3b. Balance Adjustments (+/‐) 0 $ 1,532.80 ‐ $ 1,532.80 ‐ $ ‐ 4. Newly Established 0 $ ‐ ‐ $ ‐ ‐ $ ‐ 5. Transfers (+/‐) 3 $ 29,247.00 3 $ 29,247.00 ‐ $ ‐ 6. Refunds (20a+20b) $ ‐ $ ‐ $ ‐ 7. Total (3a+3b+4+5+6) 39 $ 112,416.36 39 $ 112,416.36 ‐ $ ‐ 8. Closed 1 1 ‐ 9. Terminated 2 $ 1,218.72 2 $ 1,218.72 ‐ $ ‐ 10. Compromised 0 $ ‐ ‐ $ ‐ ‐ $ ‐ 11a. Collection (18a) 0 $ 3,525.00 ‐ $ 3,525.00 ‐ $ ‐ 11b. Collection Adj. (18b+18c) 0 $ ‐ ‐ $ ‐ ‐ $ ‐ 12. Total 3 $ 4,743.72 3 $ 4,743.72 ‐ $ ‐ 13. Ending Balance 36 $ 107,672.64 36 $ 107,672.64 ‐ $ ‐ Collection Summary 14. Cash, Check, M.O. $ 2,533.00 $ 2,533.00 $ ‐ 15. Food Stamps $ ‐ $ ‐ $ ‐ 16. Recoupment $ 992.00 $ 992.00 $ ‐ 17. Offset $ ‐ $ ‐ $ ‐ 18a. Total (14+15+16+17) $ 3,525.00 $ 3,525.00 $ ‐ 18b. Cash Adjustments (+/‐) $ ‐ $ ‐ $ ‐ 18c. Non‐Cash Adjustments $ ‐ $ ‐ $ ‐ 19. Transfers (+/‐) $ 1,085.00 $ 1,085.00 $ ‐ 20a. Cash Refunds $ ‐ $ ‐ $ ‐ 20b. Non‐Cash Refunds $ ‐ $ ‐ $ ‐ 21. Total (18a+18b+18c+19‐20a‐20b) $ 4,610.00 $ 4,610.00 $ ‐ Page 5 of 8 Attachment A ‐ Accountability Test #1: FNS‐209 Lines 3b through 20b Validation Inadvertent Household Error (IHE) Claims Automated Claims FNS‐209 System/Paper Records Variance Line Item Number Amount Number Amount Number Amount Claims Summary 3a. Beginning Balance 2,240 $ 1,822,794.24 2,240 $ 1,822,794.24 ‐ $ ‐ 3b. Balance Adjustments (+/‐) (4) $ ( 22,666.18) (4) $ ( 22,666.18) ‐ $ ‐ 4. Newly Established 66 $ 78,919.41 66 $ 78,919.41 ‐ $ ‐ 5. Transfers (+/‐) (3) $ ( 29,247.00) (3) $ ( 29,247.00) ‐ $ ‐ 6. Refunds (20a+20b) $ 1,341.13 $ 1,341.13 $ ‐ 7. Total (3a+3b+4+5+6) 2,299 $ 1,851,141.60 2,299 $ 1,851,141.60 ‐ $ ‐ 8. Closed 101 101 ‐ 9. Terminated 29 $ 8,687.44 29 $ 8,687.44 ‐ $ ‐ 10. Compromised ‐ $ ‐ ‐ $ ‐ ‐ $ ‐ 11a. Collection (18a) ‐ $ 70,570.23 ‐ $ 70,570.23 ‐ $ ‐ 11b. Collection Adj. (18b+18c) ‐ $ (398.00) ‐ $ (398.00) ‐ $ ‐ 12. Total 130 $ 78,859.67 130 $ 78,859.67 ‐ $ ‐ 13. Ending Balance 2,169 $ 1,772,281.93 2,169 $ 1,772,281.93 ‐ $ ‐ Collection Summary 14. Cash, Check, M.O. $ 43,220.19 $ 43,220.19 $ ‐ 15. Food Stamps $ 5,398.00 $ 5,398.00 $ ‐ 16. Recoupment $ 21,952.04 $ 21,952.04 $ ‐ 17. Offset $ ‐ $ ‐ $ ‐ 18a. Total (14+15+16+17) $ 70,570.23 $ 70,570.23 $ ‐ 18b. Cash Adjustments (+/‐) $ (398.00) $ (398.00) $ ‐ 18c. Non‐Cash Adjustments $ ‐ $ ‐ $ ‐ 19. Transfers (+/‐) $ (1,085.00) $ (1,085.00) $ ‐ 20a. Cash Refunds $ 1,341.13 $ 1,341.13 $ ‐ 20b. Non‐Cash Refunds $ ‐ $ ‐ $ ‐ 21. Total (18a+18b+18c+19‐20a‐20b) $ 67,746.10 $ 67,746.10 $ ‐ Page 6 of 8 Attachment A ‐ Accountability Test #1: FNS‐209 Lines 3b through 20b Validation Agency Administrative Error (AE) Claims Automated Claims FNS‐209 System/Paper Records Variance Line Item Number Amount Number Amount Number Amount Claims Summary 3a. Beginning Balance 1,030 $ 725,770.46 1 ,030 $ 7 25,770.46 ‐ $ ‐ 3b. Balance Adjustments (+/‐) (1) $ ( 12,067.32) (1) $ ( 12,067.32) ‐ $ ‐ 4. Newly Established 34 $ 57,304.00 34 $ 5 7,304.00 ‐ $ ‐ 5. Transfers (+/‐) ‐ $ ‐ ‐ $ ‐ ‐ $ ‐ 6. Refunds (20a+20b) $ 898.18 $ 898.18 $ ‐ 7. Total (3a+3b+4+5+6) 1,063 $ 771,905.32 1,063 $ 771,905.32 ‐ $ ‐ 8. Closed 59 59 ‐ 9. Terminated 12 $ 14,148.80 12 $ 14,148.80 ‐ $ ‐ 10. Compromised 14 $ 13,234.36 14 $ 13,234.36 ‐ $ ‐ 11a. Collection (18a) ‐ $ 30,052.19 ‐ $ 30,052.19 ‐ $ ‐ 11b. Collection Adj. (18b+18c) ‐ $ ‐ ‐ $ ‐ ‐ $ ‐ 12. Total 71 $ 57,435.35 71 $ 57,435.35 ‐ $ ‐ 13. Ending Balance 992 $ 714,469.97 992 $ 714,469.97 ‐ $ ‐ Collection Summary 14. Cash, Check, M.O. $ 17,052.85 $ 17,052.85 $ ‐ 15. Food Stamps $ 5,352.34 $ 5,352.34 $ ‐ 16. Recoupment $ 7,647.00 $ 7,647.00 $ ‐ 17. Offset $ ‐ $ ‐ $ ‐ 18a. Total (14+15+16+17) $ 30,052.19 $ 30,052.19 $ ‐ 18b. Cash Adjustments (+/‐) $ ‐ $ ‐ $ ‐ 18c. Non‐Cash Adjustments $ ‐ $ ‐ $ ‐ 19. Transfers (+/‐) $ ‐ $ ‐ $ ‐ 20a. Cash Refunds $ 866.18 $ 866.18 $ ‐ 20b. Non‐Cash Refunds $ 3 2.00 $ 3 2.00 $ ‐ 21. Total (18a+18b+18c+19‐20a‐20b) $ 29,154.01 $ 29,154.01 $ ‐ Page 7 of 8 Attachment B ‐ Accountability Test #2: Beginning/Ending Balances Historical Claims Management Report and FNS‐209 Report Comparison Claims # IPV (#) IHE (#) AE(#) Total (#) CalWIN Ending Balance report: 36 2,234 1,126 3,396 Less Unverified Claims: ‐ (65) (134) (199) Adjusted CalWIN Total*: 36 2,169 992 3,197 June 2021 FNS‐209: 36 2,169 992 3,197 Difference: ‐ ‐ ‐ ‐ Claims Amounts IPV ($) IHE ($) AE ($) Total ($) CalWIN Ending Balance report: 107,672.64 1,781,974.96 750,731.71 2,640,379.31 Less Unverified Claims: ‐ (9,693.03) (36,261.74) (45,954.77) Adjusted CalWIN Total*: $ 107,672.64 $ 1,772,281.93 $ 714,469.97 $ 2 ,594,424.54 June 2021 FNS‐209: $ 107,672.64 $ 1,772,281.93 $ 714,469.97 $ 2 ,594,424.54 Difference: ‐ ‐ ‐ ‐ *CalWin Ending Balance Report adjusted for claims not yet verified from internal accounting records. Page 8 of 8