State of California

State of California Federal Compliance Audit Report for the Fiscal Year Ended June 30, 2022 June 2024 REPORT 2022‑002 CALIFORNIA STATE AUDITOR 621 Capitol Mall, Suite 1200 | Sacramento | CA | 95814 916.445.0255 | TTY 916.445.0033 For complaints of state employee misconduct, contact us through the Whistleblower Hotline: 1.800.952.5665 Don’t want to miss any of our reports? Subscribe to our email list at auditor.ca.gov For questions regarding the contents of this report, please contact our Communications Office at 916.445.0255 This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports Grant Parks State Auditor Mike Tilden Chief Deputy June 26, 2024 2022-002 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: As required by Government Code section 8543 et seq., the California State Auditor (State Auditor) presents this audit report concerning the review of the State of California’s internal controls and compliance with federal laws and regulations for the year ended June 30, 2022. The State Auditor contracted with Macias Gini & O’Connell LLP (MGO) to perform this audit for fiscal year 2021–22. This report concludes that the State did not materially comply with certain requirements for seven of the 17 federal programs or clusters of programs (federal programs) MGO audited, including one program for which the noncompliance was pervasive. Additionally, although MGO concluded that the State materially complied with requirements for the remaining federal programs it audited, the State continues to experience certain deficiencies in its accounting and administrative practices that affect its internal controls over compliance with federal requirements. Deficiencies in the State’s internal control system could adversely affect its ability to administer federal programs in compliance with applicable requirements. Respectfully submitted, LINUS LI, CPA Deputy State Auditor 621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov This Page Intentionally Left Blank Contents AUDITOR’S SECTION 1 Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 3 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Schedule of Expenditures of Federal Awards Performed in Accordance With Government Auditing Standards 6 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance 8 Schedule of Findings and Questioned Costs 13 Schedule of Expenditures of Federal Awards Findings 19 Schedule of Federal Award Findings and Questioned Costs 27 U.S. Department of Agriculture 29 U.S. Department of Labor 32 U.S. Department of the Treasury 41 U.S. Department of Health and Human Services 43 AUDITEE’S SECTION 57 Schedule of Expenditures of Federal Awards 59 Notes to the Schedule of Expenditures of Federal Awards 75 Summary Schedule of Prior Audit Findings 81 Department of Finance Response Letter 101 Management’s Response and Corrective Action Plan 105 This Page Intentionally Left Blank California State Auditor Report 2022-002 1 June 2024 Auditor’s Section California State Auditor Report 2022-002 2 June 2024 This Page Intentionally Left Blank Independent Auditor’s Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance The Governor and the Legislature of the State of California: Report on the Audit of the Schedule of Expenditures of Federal Awards Qualified Opinion We have audited the schedule of expenditures of federal awards (the Schedule) of the State of California (State) for the fiscal year ended June 30, 2022, and the related notes to the Schedule (the financial statement). In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statement presents fairly, in all material respects, the expenditures of federal awards of the State for the fiscal year ended June 30, 2022, in accordance with the cash basis of accounting described in Note 2. Basis for Qualified Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of the Financial Statement section of our report. We are required to be independent of the State, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Matter Giving Rise to Qualified Opinion on the Financial Statement We were unable to obtain sufficient appropriate audit evidence supporting the eligible amount of the State’s federal award expenditures for the Unemployment Insurance program (Assistance Listing Number 17.225) for the fiscal year ended June 30, 2022, due to the extent and pervasiveness of benefit payments made to ineligible claimants included in the reported expenditures. Emphasis of Matters Basis of Accounting We draw attention to Note 2 to the financial statement, which describes the basis of accounting. The financial statement is prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Macias Gini & O’Connell LLP 500 Capitol Mall, Suite 2200 www.mgocpa.com Sacramento, CA 95814 California State Auditor Report 2022-002 4 June 2024 Federal Awards Not Included in the Financial Statement As described in Note 1 to the financial statement, the State of California’s basic financial statements include the operations of the University of California system, a component unit of the State of California, the California State University system, the California State Water Resources Control Board Water Pollution Control Revolving Fund, the California State Water Resources Control Board Safe Drinking Water State Revolving Fund, and the California Housing Finance Fund of the California Housing Finance Agency, a component unit of the State of California, which reported $7.5 billion, $3.9 billion, $164.0 million, $80.0 million, and $1.1 billion, respectively, in federal awards, which are not included in the Schedule for the fiscal year ended June 30, 2022. Our audit, described above, did not include the federal awards of the University of California system, the California State University system, the California State Water Resources Control Board Water Pollution Control Revolving Fund, the California State Water Resources Control Board Safe Drinking Water State Revolving Fund, and the California Housing Finance Fund of the California Housing Finance Agency because these entities engaged other auditors to perform an audit in accordance with the Uniform Guidance. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statement Management is responsible for the preparation and fair presentation of the financial statement in accordance with the cash basis of accounting described in Note 2, and for determining that the cash basis of accounting is an acceptable basis for the presentation of the financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibilities for the Audit of the Financial Statement Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statement. In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the State’s internal control. Accordingly, no such opinion is expressed. California State Auditor Report 2022-002 5 June 2024 • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statement. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 21, 2024, on our consideration of the State’s internal control over financial reporting of the financial statement and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance of the financial statement, and the results of that testing, and not to provide an opinion on the effectiveness of the State’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the State’s internal control over financial reporting and compliance of the financial statement. Sacramento, California June 21, 2024 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Schedule of Expenditures of Federal Awards Performed in Accordance With Government Auditing Standards The Governor and the Legislature of the State of California: We have audited, in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), the Schedule of Expenditures of Federal Awards (the Schedule) of the State of California (State) for the fiscal year ended June 30, 2022, and the related notes to the Schedule (the financial statement), and have issued our report thereon dated June 21, 2024. Our report is qualified because we were unable to obtain sufficient appropriate audit evidence supporting the eligible amount of the State’s federal award expenditures for the Unemployment Insurance program (Assistance Listing Number 17.225), and includes emphasis of matter paragraphs to describe the basis of accounting and those entities which are audited by other auditors and whose federal award expenditures are not included in the Schedule. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statement, we considered the State’s internal control over financial reporting of the financial statement (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of the State’s internal control. Accordingly, we do not express an opinion on the effectiveness of the State’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2022-001 and 2022-002 that we consider to be material weaknesses. Macias Gini & O’Connell LLP 500 Capitol Mall, Suite 2200 www.mgocpa.com Sacramento, CA 95814 California State Auditor Report 2022-002 7 June 2024 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the State’s financial statement is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statement. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items 2022-001 and 2022-002. State of California’s Response to Findings Government Auditing Standards requires auditors to perform limited procedures on the State’s response to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs. The State’s response was not subjected to the other auditing procedures applied in the audit of the financial statement and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Sacramento, California June 21, 2024 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance The Governor and the Legislature of the State of California: Report on Compliance for Each Major Federal Program Adverse, Qualified and Unmodified Opinions We have audited the State of California’s (State) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the State’s major federal programs for the fiscal year ended June 30, 2022. The State’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Adverse Opinion on the Unemployment Insurance Program In our opinion, because of the significance of the matter discussed in the Basis for Adverse, Qualified and Unmodified Opinions section of our report, the State did not comply in all material respects, with the compliance requirements referred to above that could have a direct and material effect on the Unemployment Insurance program for the fiscal year ended June 30, 2022. Qualified Opinion on Certain Major Federal Programs In our opinion, except for the noncompliance described in the Basis for Adverse, Qualified and Unmodified Opinions section of our report, the State complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on the major federal programs listed in the Basis for Adverse, Qualified and Unmodified Opinions section of our report for the fiscal year ended June 30, 2022. Unmodified Opinion on Each of the Other Major Federal Programs In our opinion, the State complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its other major federal programs identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs for the fiscal year ended June 30, 2022. Basis for Adverse, Qualified and Unmodified Opinions We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. Macias Gini & O’Connell LLP 500 Capitol Mall, Suite 2200 www.mgocpa.com Sacramento, CA 95814 California State Auditor Report 2022-002 9 June 2024 We are required to be independent of State and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse, modified, and unmodified opinions on compliance for each major federal program. Our audit does not provide a legal determination of the State’s compliance with the compliance requirements referred to above. Matters Giving Rise to Adverse Opinion on the Unemployment Insurance Program As described in the table below and in the accompanying schedule of findings and questioned costs, the State did not comply with requirements regarding the following: Finding Assistance Compliance State Administering Number Listing Number Federal Program Name or Cluster Requirement(s) Department 2022-004 17.225 Unemployment Insurance Activities Allowed Employment 2022-005 or Unallowed Development 2022-006 Eligibility Department Compliance with such requirements is necessary, in our opinion, for the State to comply with the requirements applicable to that program. Matters Giving Rise to Qualified Opinion on Certain Major Federal Programs As described in the table below and in the accompanying schedule of findings and questioned costs, the State did not comply with requirements regarding the following: Finding Assistance Federal Program Name or Cluster Compliance State Administering Number Listing Number Requirement(s) Department 2022-003 10.557 Special Supplemental Nutrition Program for Women Eligibility Department of Infants, and Children Public Health 2022-007 21.027 Coronavirus State and Local Fiscal Recovery Funds Activities Allowed Department of or Unallowed Finance 2022-008 93.767 Children's Health Insurance Program Activities Allowed Department of or Unallowed Health Care Services 2022-008 93.778 Medical Assistance Program (Medicaid Cluster) Activities Allowed Department of or Unallowed Health Care Services 2022-010 93.917 HIV Care Formula Grants Eligibility Department of Public Health 2022-011 93.323 Epidemiology and Laboratory Capacity for Infectious Subrecipient Department of Diseases (ELC) Monitoring Public Health Compliance with such requirements is necessary, in our opinion, for the State to comply with the requirements applicable to these programs. California State Auditor Report 2022-002 10 June 2024 Other Matter – Federal Expenditures Not Included in the Compliance Audit As described in Note 1 to the Schedule of Expenditures of Federal Awards (Schedule), the State’s basic financial statements include the operations of the University of California system, a component unit of the State, the California State University system, the State Water Resources Control Board Water Pollution Control Revolving Fund, the State Water Resources Control Board Safe Drinking Water State Revolving Fund, and the California Housing Finance Fund of the California Housing Finance Agency, a component unit of the State, which reported $7.5 billion, $3.9 billion, $164.0 million, $80.0 million, and $1.1 billion, respectively, in federal awards, which are not included in the State's Schedule during the fiscal year ended June 30, 2022. Our compliance audit, described in the Adverse, Qualified and Unmodified Opinions section of our report, did not include the federal awards of the University of California system, the California State University system, the State Water Resources Control Board Water Pollution Control Revolving Fund, the State Water Resources Control Board Safe Drinking Water State Revolving Fund, and the California Housing Finance Fund of the California Housing Finance Agency because these entities engaged other auditors to perform an audit in accordance with the Uniform Guidance. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the State’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the State’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the State’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the State’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the State’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the State’s internal control over compliance. Accordingly, no such opinion is expressed. California State Auditor Report 2022-002 11 June 2024 We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Other Matter Government Auditing Standards requires the auditor to perform limited procedures on the State’s response to the noncompliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The State’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be material weaknesses. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items 2022-003, 2022-004, 2022-005, 2022-006, 2022-007, 2022-008, 2022-009, 2022-010, 2022-011, and 2022-012 to be material weaknesses. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. Government Auditing Standards requires the auditor to perform limited procedures on the State’s response to the internal control over compliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The State’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Sacramento, California June 21, 2024 California State Auditor Report 2022-002 12 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 13 June 2024 Schedule of Findings and Questioned Costs California State Auditor Report 2022-002 14 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 15 June 2024 STATE OF CALIFORNIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2022 Section I – Summary of Auditor’s Results Financial Statements Issued under a separate cover. Refer to California State Auditor’s 2022-001.1 report entitled State of California: Internal Control and Compliance Audit Report for the Fiscal Year Ended June 30, 2022. Schedule of Expenditures of Federal Awards (Schedule) Type of report the auditor issued on whether the Schedule audited was prepared in accordance with the cash basis of accounting: Qualified Internal control over financial reporting: • Material weakness(es) identified? Yes • Significant deficiency(ies) identified? No Noncompliance material to the Schedule noted? Yes Federal Awards Internal control over major federal programs: • Material weakness(es) identified? Yes • Significant deficiency(ies) identified? No Type of auditor’s report issued on compliance for Refer to the the major federal programs: tables that follow Adverse Opinion Assistance Listing Number Federal Program or Cluster 17.225 Unemployment Insurance California State Auditor Report 2022-002 16 June 2024 Qualified Opinion Assistance Listing Number Federal Program or Cluster 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children 21.027 Coronavirus State and Local Fiscal Recovery Funds 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) 93.767 Children’s Health Insurance Program Medicaid Cluster: 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers (Title XVIII) Medicare 93.778 Medical Assistance Program 93.917 HIV Care Formula Grants Unmodified Opinion Assistance Listing Number Federal Program or Cluster Child Nutrition Cluster: 10.553 School Breakfast Program 10.555 National School Lunch Program 10.556 Special Milk Program for Children 10.559 Summer Food Service Program for Children 10.582 Fresh Fruit and Vegetable Program 14.231 Emergency Solutions Grant Program 21.023 Emergency Rental Assistance Program 84.010 Title I Grants to Local Educational Agencies 84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) Education Stabilization Fund: 84.425C Governor’s Emergency Education Relief Fund 84.425D Elementary and Secondary School Emergency Relief Fund 84.425G Discretionary Grants: Reimagining Workforce Preparation Grants 84.425R Discretionary Grants 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief 84.425W American Rescue Plan – Elementary and Secondary School Emergency Relief – Homeless Children and Youth 93.658 Foster Care Title IV-E 93.659 Adoption Assistance 93.667 Social Services Block Grant 93.959 Block Grants for Prevention and Treatment of Substance Abuse Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes California State Auditor Report 2022-002 17 June 2024 Identification of major federal programs: Assistance Listing Number Federal Program or Cluster 10.557 Special Supplemental Nutrition Program for Women, Infants, and Children Child Nutrition Cluster: 10.553 School Breakfast Program 10.555 National School Lunch Program 10.556 Special Milk Program for Children 10.559 Summer Food Service Program for Children 10.582 Fresh Fruit and Vegetable Program 14.231 Emergency Solutions Grant Program 17.225 Unemployment Insurance 21.023 Emergency Rental Assistance Program 21.027 Coronavirus State and Local Fiscal Recovery Funds 84.010 Title I Grants to Local Educational Agencies 84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) Education Stabilization Fund: 84.425C Governor’s Emergency Education Relief Fund 84.425D Elementary and Secondary School Emergency Relief Fund 84.425G Discretionary Grants: Reimagining Workforce Preparation Grants 84.425R Discretionary Grants 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief 84.425W American Rescue Plan – Elementary and Secondary School Emergency Relief – Homeless Children and Youth 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) 93.658 Foster Care Title IV-E 93.659 Adoption Assistance 93.667 Social Services Block Grant 93.767 Children’s Health Insurance Program Medicaid Cluster: 93.775 State Medicaid Fraud Control Units 93.777 State Survey and Certification of Health Care Providers and Suppliers (Title XVIII) Medicare 93.778 Medical Assistance Program 93.917 HIV Care Formula Grants 93.959 Block Grants for Prevention and Treatment of Substance Abuse Dollar threshold used to distinguish between type A and type B programs: $272,017,698 Auditee qualified as low-risk auditee? No California State Auditor Report 2022-002 18 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 19 June 2024 Schedule of Expenditures of Federal Awards Findings California State Auditor Report 2022-002 20 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 21 June 2024 EMPLOYMENT DEVELOPMENT DEPARTMENT Reference Number: 2022-001 Type of Finding: Material Weakness and Material Instance of Noncompliance Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart F - Audit Requirements. §200.510 Financial statements (2 CFR 200.510): (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available. For a cluster of programs also provide the total for the cluster. Condition The State of California (State) has a decentralized financial reporting process, which requires State agencies and departments to provide specific financial information to the Department of Finance (Finance) in order to annually compile the Schedule of Expenditures of Federal Awards (Schedule). In its effort to more efficiently and accurately prepare the Schedule in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Finance developed the Single Audit Expenditures Reporting Database (Database). Finance developed the Database to include all of the relevant data fields necessary to compile and produce the Schedule. Finance also created a Single Audit Database User Manual, which provides specific guidance to users for accessing and navigating through the database. California State Auditor Report 2022-002 22 June 2024 Due to the unprecedented impacts from the COVID-19 pandemic, the Employment Development Department (EDD) was unable to timely report to Finance through the Database with accurate and reliable federal cash basis expenditures for its largest federal award program that it administers, the Unemployment Insurance (ALN 17.225) program. The delay resulted in Finance being unable to compile and produce a complete and final approved Schedule until December 2023. Although an initial estimated expenditure amount was reported by EDD of $27.0 billion, the final amount reported in the Schedule was $23.3 billion. Cause Given the substantial increase in claimants seeking assistance under the Unemployment Insurance program resulting from the COVID-19 pandemic, EDD was overwhelmed with the administration of the Unemployment Insurance program. Effect The difficulties that EDD encountered from the COVID-19 pandemic, resulted in the late reporting and submission of final federal cash basis expenditures to Finance. The untimely submission continued to limit and constrain Finance from compiling and producing a final complete and accurate Schedule. Questioned Costs Questioned costs were not determinable. Recommendation EDD should continue to evaluate existing processes and controls related to its ability to properly report, and timely submit complete and accurate federal award cash basis expenditures to the Database, which affords Finance the ability to timely compile and produce a final Schedule pursuant to the Uniform Guidance. Views of Responsible Officials and Corrective Action Plan EDD agrees with this finding. The deferred transition to FI$Cal and the difficulties experienced thereafter have continued to cause EDD to be late with submitting year-end financials and its ability to submit timely the cash basis expenditures into the Single Audit Expenditures Reporting Database (Database). In addition, the onset of the COVID-19 pandemic created additional issues which ultimately impacted the EDD’s ability to submit timely year-end financials. However, the EDD continues to make progress to gain ground in the department’s efforts to follow the State’s deadlines for submitting year-end financials and entering the cash basis expenditures into the Database. During fiscal year 2022-23, the EDD completed a restructuring within the accounting area which realigned workload amongst the units and provided additional resources in critical areas. These changes will have a lasting effect and help the department to be better positioned going forward in processing the accounting workload and ultimately be able to catch up and submit year-end financials and enter the cash basis expenditures into the Database by the State’s deadlines. In addition, the EDD took lessons learned from the financial audits from the prior two fiscal years to update processes and procedures and applied that knowledge going forward. Also, staff continue to participate in various trainings offered by the Department of Finance and the Department of FI$Cal. In addition, staff work with the control agencies when issues arise that would impact our accounting functions. California State Auditor Report 2022-002 23 June 2024 While the EDD has been behind in submitting year-end financials for prior years, the department is making great progress on catching up. The EDD submitted the last of its fiscal year 2021-22 financials in May 2023 and submitted the last of its fiscal year 2022-23 financials in January 2024. The department is now working on identifying the ineligible payment data needed in order to accurately reflect the cash basis expenditures to enter into the Database. The EDD’s goal is to submit fiscal year 2023-24 financials in November 2024. Similar to the 2020-21 financial audit, the EDD will take the knowledge learned during prior audit seasons and continue to engage with the control agencies, and continue to train and develop staff in order to keep progressing towards the department’s goal of becoming timely with the submission of the year-end financials and the entering of the cash basis expenditures into the Database. California State Auditor Report 2022-002 24 June 2024 DEPARTMENT OF PUBLIC HEALTH Reference Number: 2022-002 Type of Finding: Material Weakness and Instance of Noncompliance Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart F - Audit Requirements. §200.510 Financial statements (2 CFR 200.510): (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended. While not required, the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available. For a cluster of programs also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal program. Condition The State of California (State) has a decentralized financial reporting process, which requires State agencies and departments to provide specific financial information to the Department of Finance (Finance) in order to annually compile the Schedule of Expenditures of Federal Awards (Schedule). In its effort to more efficiently and accurately prepare the Schedule in accordance with the requirements of 2 CFR 200.510, Finance developed the Single Audit Expenditures Reporting Database (Database) to include all relevant data fields necessary to compile and produce the Schedule. Finance also created a Single Audit Database User Manual, which provides specific guidance to users for accessing and navigating through the database. Departments are given access to the centralized Database by Finance in order to upload and report federal award information for all federal award programs which they administer. California State Auditor Report 2022-002 25 June 2024 The California Department of Public Health (Public Health) understated federal expenditures and overstated amounts passed through to subrecipients for the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program (ALN No. 93.323). The error, which was subsequently corrected, is indicative of a lack of sufficient controls for ensuring the Schedule’s completeness and accuracy prior to submission to Finance. Cause Public Health was a subrecipient of federal funds provided by their bona fide agent, Heluna Health, during the fiscal year ended June 30, 2022. Initially, the ELC program funds were not identified and recognized as federal expenditures until January 2023. During its compilation of federal award expenditures for reporting in Finance’s Database, Public Health did not properly analyze and capture all relevant financial transactions related to the ELC program. Effect Federal expenditures originally reported in the Schedule by Public Health for the ELC program were understated by $154,155,192 and the amounts passed through to subrecipients were overstated by $516,650,718. Questioned Costs No questioned costs were identified. Recommendation Public Health should establish a more thorough internal review and communication process between ELC program administration and accounting personnel to ensure information submitted to Finance for compilation of the Schedule is complete and accurate. Views of Responsible Officials and Corrective Action Plan Public Health’s Accounting Office will generate the FI$Cal Year End Close report (KK_12 expenditure) and collaborate with the ELC program to ensure that all expenditures captured are complete and accurate, ensuring timely reporting of the SEFA data for FY 2023-24 and beyond. Please note that the ELC program has been reported in the FY 2022-23 SEFA. Additionally, we will update the procedures to document the SEFA reporting for the ELC program. Estimated Implementation Date: September 2024 Contact: Jennifer Chan, Accounting Administrator II Federal Reporting Unit, Financial Management Division California Department of Public Health California State Auditor Report 2022-002 26 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 27 June 2024 Schedule of Federal Award Findings and Questioned Costs California State Auditor Report 2022-002 28 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 29 June 2024 U.S. DEPARTMENT OF AGRICULTURE Reference Number: 2022-003 Category of Finding: Eligibility Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Public Health (Public Health) Assistance Listing Number: 10.557 Federal Program Title: Special Supplemental Nutrition Program for Women, Infants, and Children COVID-19 Special Supplemental Nutrition Program for Women, Infants, and Children Federal Award Numbers and Years: 202019W100647; 2020 202020W100347, 2020 202020W100647, 2020 202120W600347, 2021 202120W600647, 2021 202121W100347, 2021 202121W100647, 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 7 – Agriculture. Subtitle B - Regulations of the Department of Agriculture. Chapter II – Food and Nutrition Service, Department of Agriculture. Subchapter A – Child Nutrition Programs. Part 246 - Special Supplemental Nutrition Program for Women, Infants and Children, §246.7 - Certification of participants: (c) Eligibility criteria and basic certification procedures. (1) To qualify for the Program, infants, children, and pregnant, postpartum, and breastfeeding women must: (i) Reside within the jurisdiction of the State (except for Indian State agencies). Indian State agencies may establish a similar requirement. All State agencies may determine a service area for any local agency, and may require that an applicant reside within the service area. However, the State agency may not use length of residency as an eligibility requirement. (ii) Meet the income criteria specified in paragraph (d) of this section. California State Auditor Report 2022-002 30 June 2024 (iii) Meet the nutritional risk criteria specified in paragraph (e) of this section. (2) (i) At certification, the State or local agency must require each applicant to present proof of residency (i.e., location or address where the applicant routinely lives or spends the night) and proof of identity. The State or local agency must also check the identity of participants, or in the case of infants or children, the identity of the parent or guardian, or proxies when issuing food, cash-value vouchers or food instruments. The State agency may authorize the certification of applicants when no proof of residency or identity exists (such as when an applicant or an applicant's parent is a victim of theft, loss, or disaster; a homeless individual; or a migrant farmworker). In these cases, the State or local agency must require the applicant to confirm in writing his/her residency or identity. Further, an individual residing in a remote Indian or Native village or an individual served by an Indian tribal organization and residing on a reservation or pueblo may establish proof of residency by providing the State agency their mailing address and the name of the remote Indian or Native village. (e) Nutritional risk. To be certified as eligible for the Program, applicants who meet the Program's eligibility standards specified in paragraph (c) of this section must be determined to be at nutritional risk. … Nutritional risk data shall be documented in the participant's file and shall be used to assess an applicant's nutritional status and risk; tailor the food package to address nutritional needs; design appropriate nutrition education, including breastfeeding promotion and support; and make referrals to health and social services for follow-up, as necessary and appropriate. (1) Determination of nutritional risk. (ii) Timing of nutritional risk data. (A) Weight and height or length. Weight and height or length shall be measured not more than 60 days prior to certification for program participation. (B) Hematological test for anemia. (1) For pregnant, breastfeeding, and postpartum women, and child applicants, the hematological test for anemia shall be performed or obtained from referral sources at the time of certification or within 90 days of the date of certification. The hematological test for anemia may be deferred for up to 90 days from the time of certification for applicants who have at least one qualifying nutritional risk factor present at the time of certification. If no qualifying risk factor is identified, a hematological test for anemia must be performed or obtained from referral sources (with the exception of presumptively eligible pregnant women). (2) Infants nine months of age and older (who have not already had a hematological test performed, between six and nine months of age, by a competent professional authority or obtained from referral sources), shall between nine and twelve months of age have a hematological test performed or obtained from referral sources. Such a test may be performed more than 90 days after the date of certification. (3) For pregnant women, the hematological test for anemia shall be performed during their pregnancy. For persons certified as postpartum or breastfeeding women, the hematological test for anemia shall be performed after the termination of their pregnancy. For breastfeeding women who are 6-12 months postpartum, no additional blood test is necessary if a test was performed after the termination of their pregnancy. The participant or parent/guardian shall be informed of the test results when there is a finding of anemia, and notations reflecting the outcome of the tests shall be made in the participant's file. Nutrition education, food package tailoring, and referral services shall be provided to the participant or parent/guardian, as necessary and appropriate. California State Auditor Report 2022-002 31 June 2024 Condition During the fiscal year ended June 30, 2020, the Special Supplemental Food Program for Women, Infants and Children (WIC) nutrition program implemented phase 1 of a new management information system known as the Women, Infants, and Children Web Information System Exchange (WIC-WISE) in a two- phased approach to replace the WIC Management Information Systems (WIC-MIS). WIC-WISE is programmed such that updates to eligibility information overwrites existing data. As a result, key data and documentation to support the initial participant eligibility is removed during the recertification process. The California Department of Public Health, WIC Division requested a correction to WIC-WISE to retain eligibility history in the “Cert History Report” when subsequent eligibility information is inputted. The correction had not been implemented and the system defect still existed during the fiscal year ended June 30, 2022. Identification as a Repeat Finding Finding 2021-003 was reported in the immediate prior year. Cause The phase 1 implementation of WIC-WISE did not include system functionality to retain historical eligibility documentation when subsequent information was entered during the participant recertification process. Effect The system limitation of WIC-WISE does not allow for the retention of proper documentation of eligibility information. Accordingly, there is an increased risk for the occurrence of benefits being provided to ineligible individuals, which may not be prevented or detected in a timely manner. Questioned Costs Questioned costs were not determinable. Context Total food vouchers disbursed to program participants during the fiscal year ended June 30, 2022, totaled $566,045,030. Recommendation WIC-WISE system updates should be promptly implemented and tested to ensure that participant data and eligibility documentation is appropriately retained within the system. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 32 June 2024 U.S. DEPARTMENT OF LABOR Reference Number: 2022-004 Category of Finding: Activities Allowed or Unallowed Eligibility Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Employment Development Department (EDD) Assistance Listing Number: 17.225 Federal Program Title: COVID-19 Unemployment Insurance Federal Award Number and Year: UI-37212-22-55-A-6; 2022 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 20 - Employees’ Benefits, Chapter V, Employment and Training Administration, Department of Labor, Part 625 - Disaster Unemployment Assistance, §625.14 Overpayments; disqualification for fraud: (h) Provisions in the procedures of each State with respect to detection and prevention of fraudulent overpayments of DUA shall be, as a minimum, commensurate with the procedures adopted by the State with respect to regular compensation and consistent with the Secretary's “Standard for Fraud and Overpayment Detection,” Employment Security Manual, part V, sections 7510 et seq. (Appendix C of this part). (i) Any individual who, with respect to a major disaster, makes or causes another to make a false statement or misrepresentation of a material fact, knowing it to be false, or knowingly fails or causes another to fail to disclose a material fact, in order to obtain for the individual or any other person a payment of DUA to which the individual or any other person is not entitled, shall be disqualified as follows: (1) If the false statement, misrepresentation, or nondisclosure pertains to an initial application for DUA – i. The individual making the false statement, misrepresentation, or nondisclosure shall be disqualified from the receipt of any DUA with respect to that major disaster; and California State Auditor Report 2022-002 33 June 2024 ii. If the false statement, misrepresentation, or nondisclosure was made on behalf of another individual, and was known to such other individual to be a false statement, misrepresentation, or nondisclosure, such other individual shall be disqualified from the receipt of any DUA with respect to that major disaster; and (2) If the false statement, misrepresentation, or nondisclosure pertains to a week for which application for a payment of DUA is made – i. The individual making the false statement, misrepresentation, or nondisclosure shall be disqualified from the receipt of DUA for that week and the first two compensable weeks in the Disaster Assistance Period that immediately follow that week, with respect to which the individual is otherwise entitled to a payment of DUA; and ii. If the false statement, misrepresentation, or nondisclosure was made on behalf of another individual, and was known to such other individual to be a false statement, misrepresentation, or nondisclosure, such other individual shall be disqualified from the receipt of DUA for that week and the first two compensable weeks in the Disaster Assistance Period that immediately follow that week, with respect to which the individual is otherwise entitled to a payment of DUA. Title 15 - Commerce and Trade, Chapter 116, Coronavirus Economic (CARES Act) Subchapter II - Unemployment Insurance Provisions, §9023 Emergency Increase in Unemployment Compensation Benefits (f) Fraud and Overpayments: (1) In General – If an individual knowingly has made, or caused to be made by another, a false statement or representation of a material fact, or knowingly has failed, or caused another to fail, to disclose a material fact, and as a result of such false statement or representation or of such nondisclosure such individual has received an amount of Federal Pandemic Unemployment Compensation or Mixed Earner Unemployment Compensation to which such individual was not entitled, such individual— 1. shall be ineligible for further Federal Pandemic Unemployment Compensation Mixed Earner Unemployment Compensation in accordance with the provisions of the applicable State unemployment compensation law relating to fraud in connection with a claim for unemployment compensation Condition During the fiscal year ended June 30, 2022, EDD continued its administration of the Pandemic Unemployment Assistance (PUA) program, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19 relief in unemployment compensation. Under the CARES Act, the PUA program was to be administered in accordance with the Disaster Unemployment Assistance (DUA) program under section 625 of Title 20, Code of Federal Regulations. Claimants eligible for PUA benefits were paid additional benefits under the Federal Pandemic Unemployment Compensation program (FPUC). In EDD’s administration of the PUA and FPUC programs, $3,559,865,590 in benefit payments were estimated to be ineligible payments and have not been reported in the schedule of expenditures of federal awards. The estimate was made by the Unemployment Insurance Branch and was based on data parameters to identify claimants that received benefits that matched ineligible criteria for identity fraud or eligibility fraud for misrepresented information. California State Auditor Report 2022-002 34 June 2024 Out of 138 PUA benefit payments tested, there were 27 benefit payments to claimants determined to be ineligible whose identity or employment was not sufficiently verified. Identification as a Repeat Finding Finding 2021-004 was reported in the immediate prior year. Cause Existing internal controls did not prevent, or detect and correct, instances of potential fraud for benefit payments for the following reasons. • There was a significant increase in unemployment claims that overwhelmed EDD’s existing fraud detection process. • There were insufficient controls in place to prevent or detect fraud associated with benefit payments related to incarceration, identity, and multiple claims from the same address. Effect EDD did not have adequate oversight controls to ensure that benefit payments were not being made to fraudulent claimants. Accordingly, benefit payments were made to fraudulent claimants who were not eligible. Questioned Costs Likely questioned costs were estimated to be $3,559,865,590 for fiscal year 2021-22. Known questioned costs were $417,860. Context Benefits paid to claimants under the COVID-19 Unemployment Insurance program for the fiscal year ended June 30, 2022, totaled $15,246,314,741. The sample was not a statistically valid sample. Recommendation EDD should continue to strengthen controls, such as database identification cross-matches, ID.me verification, partnerships with law enforcement and Thompson Reuters, as well as system enhancements to mitigate the potential of further employment benefit fraud. Such improvements in internal controls should improve EDD’s ability to timely prevent and detect unemployment benefit fraud. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 35 June 2024 Reference Number: 2022-005 Category of Finding: Activities Allowed or Unallowed Eligibility Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Employment Development Department (EDD) Assistance Listing Number: 17.225 Federal Program Title: COVID-19 Unemployment Insurance Federal Award Number and Year: UI-37212-22-55-A-6; 2022 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 20 - Employees’ Benefits, Chapter V, Employment and Training Administration, Department of Labor, Part 625 - Disaster Unemployment Assistance, §625.6 Weekly amount; jurisdictions; reductions Eligibility and Disqualifications, (b) If the weekly amount computed under paragraph (a) of this section is less than 50 percent of the average weekly payment of regular compensation in the State, as provided quarterly by the Department, or, if the individual has insufficient wages from employment or insufficient or no net income from self- employment (which includes individuals falling within paragraphs (a)(3) and (b)(3) of § 625.5) in the applicable base period to compute a weekly amount under paragraph (a) of this section, the individual shall be determined entitled to a weekly amount equal to 50 percent of the average weekly payment of regular compensation in the State. (e) The State agency shall immediately determine, upon the filing of an initial application for DUA, a weekly amount under the provisions of paragraphs (a) through (d) of this section, as the case may be, based on the individual's statement of employment or self-employment preceding the individual's unemployment that was a direct result of the major disaster, and wages earned or paid for such employment or self-employment. An immediate determination of a weekly amount shall also be made where, in conjunction with the filing of an initial application for DUA, the individual submits documentation substantiating employment or self-employment and wages earned or paid for such employment or self-employment, or, in the absence of documentation, where any State agency records of employment or self-employment and wages earned or paid for such employment or self-employment, justify the determination of a weekly amount. An immediate determination shall also be made based California State Auditor Report 2022-002 36 June 2024 on the individual's statement or in conjunction with the submittal of documentation in those cases where the individual was to commence employment or self-employment on or after the date the major disaster began but was prevented from doing so as a direct result of the disaster. (1) In the case of a weekly amount determined in accordance with paragraph (e) of this section, based only on the individual's statement of earnings, the individual shall furnish documentation to substantiate the employment or self-employment or wages earned from or paid for such employment or self-employment or documentation to support that the individual was to commence employment or self-employment on or after the date the major disaster began. In either case, documentation shall be submitted within 21 calendar days of the filing of the initial application for DUA. (3) For purposes of a computation of a weekly amount under paragraph (a) of this section, if an individual submits documentation to substantiate employment or self-employment in accordance with paragraph (e)(1), but not documentation of wages earned or paid during the base period set forth in paragraph (a)(2) of this section, including those cases where the individual has not filed a tax return for the most recent tax year that has ended, the State agency shall immediately redetermine the weekly amount of DUA payable to the individual in accordance with paragraph (b) of this section. Condition During the fiscal year ended June 30, 2020, EDD implemented the Pandemic Unemployment Assistance (PUA) program, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19 relief in unemployment compensation. Under the CARES Act, the PUA program was to be administered in accordance with the Disaster Unemployment Assistance (DUA) program under section 625 of Title 20, Code of Federal Regulations. The amount of PUA payable to an unemployed or unemployed self-employed individual for a week of total unemployment shall be the weekly amount of compensation the individual would have been paid as regular compensation, as computed under the provisions of the applicable State law for a week of total unemployment. The weekly amount determination is calculated using the wages reported by the claimant. Upon receipt of a PUA claim, EDD would verify wages reported to ensure accurate weekly benefit amounts under PUA. Out of 138 PUA benefit payments tested, there were 67 claimants with verification issues (either wages, self-employment, or both). Identification as a Repeat Finding Finding 2021-005 was reported in the immediate prior year. Cause EDD did not perform timely wage and employment verifications of the claimants due to the significant increase in claims resulting from the COVID-19 pandemic. Effect EDD did not have adequate oversight controls to ensure that the claimant’s wages were timely and properly reviewed and approved. Accordingly, there was an increased risk for the occurrence of overpayment in benefits being provided to individuals, which was not timely prevented or detected. Questioned Costs Known questioned costs for the 67 claimants were $702,538. California State Auditor Report 2022-002 37 June 2024 Context Benefits paid to claimants under the COVID-19 Unemployment Insurance program for the fiscal year ended June 30, 2022, totaled $15,246,314,741. The sample was not a statisitcally valid sample. Recommendation EDD should ensure that proper verification procedures are in place to minimize the number of claimants with wage and/or employment verification issues. Effective and robust verification procedures should assist EDD in processing unemployment benefits only to eligible claimants. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 38 June 2024 Reference Number: 2022-006 Category of Finding: Activities Allowed or Unallowed Eligibility Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Employment Development Department (EDD) Assistance Listing Number: 17.225 Federal Program Title: Unemployment Insurance COVID-19 Unemployment Insurance Federal Award Number and Year: UI-37212-22-55-A-6; 2022 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 22 - Social Security, Division 1 - Employment Development Department, Subdivision 1 - Director of Employment Development, Division - 1 Unemployment and Disability Compensation, Part 1 - Unemployment Compensation, Chapter 5 Unemployment Compensation Benefits, Article 1 - Eligibility and Disqualifications §1256, §1257 and §1326 Eligibility and Disqualifications, §1256 California Code of Regulations: (a) An individual is disqualified for unemployment compensation benefits if the director finds that he or she left his or her most recent work voluntarily without good cause or that he or she has been discharged for misconduct connected with his or her most recent work. Eligibility and Disqualifications, §1257 California Code of Regulations: (a) An individual is also disqualified for unemployment compensation benefits if: He or she willfully, for the purpose of obtaining unemployment compensation benefits, either made a false statement or representation, including, but not limited to, using a false name, false social security number, or other false identification, with actual knowledge of the falsity thereof, or withheld a material fact in order to obtain any unemployment compensation benefits under this division. California State Auditor Report 2022-002 39 June 2024 Continued Claim for Unemployment Benefits - Filing and Contents, §1326-6 California Code of Regulations: (c) The claimant shall, to maintain his or her eligibility to file continued claims during a continuous period of unemployment, file continued claims at intervals of not more than two weeks, or such other interval as the department shall require, unless he or she shows good cause for his or her delay in filing his or her continued claim. Condition In EDD’s administration of the Unemployment Insurance program, $525,494,406 in benefit payments were estimated by EDD to be potentially ineligible payments and have not been reported in the schedule of expenditures of federal awards. The estimate was based on data parameters to identify claimants whom received benefits that matched ineligible criteria for identity or eligibility fraud due to misrepresented information. The Unemployment Insurance Branch of EDD reviews unemployment insurance claims of claimants for involuntary separation to ensure separations were for valid reasons under the Unemployment Insurance Code. Out of 88 unemployment insurance benefit payments tested, there were 6 claimants receiving benefits, whose reasons for involuntary separation indicated separation reasons due to voluntary quitting without good cause and 6 claimants receiving benefits that made false statements regarding wages. In addition to the Unemployment Insurance program, EDD continued its administration of the Pandemic Emergency Unemployment Compensation (PEUC) program for the fiscal year ended June 30, 2022. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19, the PEUC program eligibility was determined from individuals who have exhausted all rights to regular unemployment compensation (UC) under state or Federal law and have no rights to regular UC under any other state or Federal law. A claimant must have an eligible existing Unemployment Insurance program claim that has been exhausted prior to being eligible for PEUC. Out of 50 PEUC benefit payments tested, 1 claimant received benefits, whose reason for involuntary separation indicated separation reasons due to voluntary quitting without good cause, 1 claimant received benefits without completing weekly certifications, and 1 claimant was receiving full benefits while earning wages. Identification as a Repeat Finding Finding 2021-006 was reported in the immediate prior year. Cause EDD has acknowledged that the adjudication process for potential eligibility issues, which includes work separation, was inadequately or not timely performed due to the significant increase in claims resulting from the COVID-19 pandemic. Effect By EDD not performing timely and adequate review for potential eligibility issues, benefit payments were made to ineligible claimants. California State Auditor Report 2022-002 40 June 2024 Questioned Costs Known questioned costs for the 12 claimants identified for the unemployment compensation were $57,752 for Unemployment Insurance Program and $31,800 for the Federal Pandemic Unemployment Compensation program of the COVID-19 Unemployment Insurance. Known questioned costs for the 3 claimants identified were $9,386 for the PEUC program and $6,000 for the Federal Pandemic Unemployment Compensation (FPUC) program of the COVID-19 Unemployment Insurance. Context Benefits paid to claimants under the Unemployment Insurance program for the fiscal year ended June 30, 2022, totaled $7,720,873,424. Benefits to claimants under the PEUC and FPUC programs were $1,713,827,584 and $11,923,097,900, respectively. The sample was not a statistically valid sample. Recommendation EDD should enhance its adjudication process to support proper eligibility determinations and decrease improper payments to ineligible claimants. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 41 June 2024 U.S. DEPARTMENT OF THE TREASURY Reference Number: 2022-007 Category of Finding: Activities Allowed or Unallowed Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: Department of Finance (Finance) Assistance Listing Number: 21.027 Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Award Number and Years: N/A; 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Sections 602(c)(1)(C) and 603(c)(1)(C) of the Social Security Act provide that State and Local Fiscal Recovery Funds (SLFRF) may be used “for the provision of government services to the extent of the reduction in revenue of such…government due to the COVID-19 public health emergency relative to the revenues collected in the most recent full fiscal year of the …government prior to the emergency”. The interim final rule adopted a definition based largely on the components reported under “General Revenue from Own Sources” in the Census Bureau’s Annual Survey of State and Local Government Finances. Under the interim final rule, general revenue included revenue collected by a recipient and generated from its underlying economy, and it would capture a range of different types of tax revenues, as well as other types of revenue that are available to support government services. Specifically, revenue under the interim final rule included money that is received from tax revenue, current charges, and miscellaneous general revenues and excluded refunds and other correcting transactions, proceeds from issuance of debt or the sale of investments, agency or private trust transactions, revenue from utilities, social insurance trust revenues, and intergovernmental transfers from the federal government, including transfers made pursuant to section 9901 of the ARPA. Condition Finance included contributions by State employees to 457(b) and 401(k) deferred compensation plans in the calculation of base year revenues. The contributions from State employees are deposited directly with the third-party deferred compensation plan administrator and do not result in revenue reported by the State in its basic financial statements. Furthermore, the employee contributions do not represent revenues available to the State for the provision of government services and should have been excluded from the calculation of general revenue for the base year and preceding fiscal years establishing the average annual growth rate of general revenues. California State Auditor Report 2022-002 42 June 2024 Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause The process established by Finance to review and determine the proper inclusion or exclusion of the State’s general ledger revenue accounts in its calculation of base year revenue and preceding fiscal year revenues did not consider whether certain general ledger revenue accounts were reported within the State’s basic financial statements. Additionally, the review controls over the revenue loss calculation did not detect the inclusion of specific general ledger revenue accounts which are included in revenues for budgetary purposes, but which are excluded for financial reporting purposes in the State’s basic financial statements. Effect By including the employee contributions as general revenues in the base revenue calculation, the amount of total revenue loss calculated as available to potentially fund general government services was overstated by $977,898,160. Questioned Costs No questioned costs were identified. Context The amount of revenue loss available to the State to fund general government services was initially calculated as $17,823,151,622. Subsequently, the State revised its calculation by removing contribution amounts by State employees to 457(b) and 401(k) deferred compensation plans, resulting in a revenue loss calculation of $16,845,253,462, a reduction of 5.5%. As of June 30, 2022, the State has reported $11,158,313,000 of total revenue loss utilized for the provision of government services. The amount of revenue loss funded expenditures reported for fiscal year 2022 was not impacted by the reduction. Recommendation Finance should include a reconciliation between general revenues identified for inclusion in the revenue loss calculation and the State’s basic financial statements, to ensure that all revenue recorded in the identified general ledger revenue accounts are in compliance with the definition of general revenues as established by the U.S. Treasury in the Final Rule. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 43 June 2024 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Reference Number: 2022-008 Category of Finding: Activities Allowed or Unallowed Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Health Care Services (Health Care Services) Assistance Listing Number: 93.767 Federal Program Title: Children’s Health Insurance Program Federal Award Numbers and Years: 2205CA5021; 2022 2105CA5021; 2021 Assistance Listing Number: 93.778 Federal Program Title: Medical Assistance Program Federal Award Numbers and Years: 2205CA5ADM; 2022 2205CA5MAP; 2022 2105CA5ADM; 2021 2105CA5MAP; 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). California Welfare and Institutions Code - WIC, Division 9. Public Social Services, Part 3. Aid and Medical Assistance, Chapter 8.9. Transition of Community-Based Medi-Cal Mental Health: §14705: (c) With regard to county operated facilities, clinics, or programs for which claims are submitted to the department for Medi-Cal reimbursement for specialty mental health services to Medi-Cal eligible individuals, the county shall ensure that all requirements necessary for Medi-Cal reimbursement for these services are complied with, including, but not limited to, utilization review and the submission of yearend cost reports by December 31 following the close of the fiscal year. California State Auditor Report 2022-002 44 June 2024 §14713: (b) If the department determines that a mental health plan has failed to comply with the requirements of Chapter 7 (commencing with Section 14000), Chapter 8 (commencing with Section 14200), Chapter 8.8 (commencing with Section 14600), or this chapter, the department may impose sanctions and plans of correction pursuant to Section 14197.7. Condition Fifteen of 56 contractor counties of Short-Doyle funding were tested and 10 had not submitted their cost reports by the December 31 due date. Three of the 10 contractor counties had not submitted their cost reports for fiscal year 2020-21 (more than 12 months late) and 7 of the 10 contractor counties have subsequently submitted their cost reports for fiscal year 2020-21. Although the Mental Health Division of Health Care Services did take the required action of notifying the ten contractor counties in writing within 30 days of the noncompliance, it has not taken any additional action necessary to ensure contract and performance compliance. The cost reports are the basis for the allocation of payments made to contractor counties providing mental health services to eligible beneficiaries and serve to provide the Mental Health Division with fiscal oversight for contract and performance compliance. Identification as a Repeat Finding Finding 2021-008 was reported in the immediate prior year. Cause The Mental Health Division did not take additional action for significantly late annual cost reports because its monitoring and follow-up process does not go beyond emailing the delinquent subrecipients every 30 days. Effect Delays in reviewing cost reports do not comply with the objective of timely and effective contract monitoring. Inaccurate or untimely cost reports could result in under/over funding each contractor county and increases the risk of statewide noncompliance with contract requirements. Questioned Costs Questioned costs were not determinable. Context For the fiscal year ended June 30, 2022, disbursements of Short-Doyle funding from the Medical Assistance Program to the 10 noncompliant contractor counties totaled $1,521,017,226, the 15 tested contractor counties totaled $1,827,939,268, and all 56 contractor counties totaled $2,511,609,039. For the fiscal year ended June 30, 2022, disbursements of Short-Doyle funding from the Children’s Health Insurance Program to the 10 noncompliant contractor counties totaled $143,710,692, the 15 tested contractor counties totaled $165,488,866, and all 56 contractor counties totaled $218,883,485. The sample was not a statistically valid sample. California State Auditor Report 2022-002 45 June 2024 Recommendation Health Care Services should develop and follow policies and procedures to take additional action for significantly late annual cost reports. These policies and procedures should include imposing sanctions, including, but not limited to, fines, penalties, the withholding of payments, probationary or corrective actions, or any other actions deemed necessary to promptly ensure contract and performance compliance. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 46 June 2024 Reference Number: 2022-009 Category of Finding: Activities Allowed or Unallowed Type of Finding: Material Weakness State Administering Department: California Department of Health Care Services (Health Care Services) Assistance Listing Number: 93.959 Federal Program Title: Block Grants for Prevention and Treatment of Substance Abuse (SAPT) Federal Award Numbers and Years: 1B08TI083437-01; 2021 6B08TI083437-01M002; 2021 6B08TI083437-01M003; 2021 6B08TI083437-01M004; 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition During our testing of 40 employee timesheets, 19 of the 40 employees did not prepare and submit timesheets as required by the Department of Health Care Services (Health Care Services) internal control procedures. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause Health Care Services did not adhere to its documented controls due to the effects of COVID-19. The effects resulted in high staff turnover and increased demand on staff resources. Effect Nonadherence to the internal controls over the documentation of employee timesheets can result in the risk of noncompliance with established policies and procedures. Questioned Costs None. California State Auditor Report 2022-002 47 June 2024 Context Expenditures related to payroll costs charged to the SAPT program for fiscal year 2021-22 totaled $11,606,958. Recommendation Health Care Services should adhere to its processes and controls in place to ensure all required employees submit a timesheet. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 48 June 2024 Reference Number: 2022-010 Category of Finding: Eligibility Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Public Health (Public Health) Assistance Listing Number: 93.917 Federal Program Title: HIV Care Formula Grants COVID-19 HIV Care Formula Grants Federal Award Numbers and Years: 5 X07HA12778-13-00; 2021 6 X07HA12778-13-01; 2021 6 X07HA12778-13-02; 2022 6 X07HA12778-13-03; 2022 6 X07HA12778-13-04; 2022 2 X07HA12778-14-00; 2022 6 X07HA12778-14-01; 2022 6 X07HA12778-14-02; 2022 6 X07HA12778-14-03; 2022 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 42 - The Public Health and Welfare. Chapter 6A - Public Health Service. Subchapter XXIV - HIV Health Care Services Program. Part B - Care Grant Program. Subpart I - General Grant Provisions. Section 300ff-26 - Provision of Treatments: (a) In general A State shall use a portion of the amounts provided under a grant awarded under section 300ff–21 of this title to establish a program under section 300ff–22(b)(3)(B) of this title to provide therapeutics to treat HIV/AIDS or prevent the serious deterioration of health arising from HIV/AIDS in eligible individuals, including measures for the prevention and treatment of opportunistic infections. (b) Eligible individual To be eligible to receive assistance from a State under this section an individual shall: (1) Have a medical diagnosis of HIV/AIDS; and (2) Be a low-income individual, as defined by the State. California State Auditor Report 2022-002 49 June 2024 California State AIDS Drug Assistance Program Guidelines January 2022: (1.1) AIDS Drug Assistance Program (ADAP) Eligibility Criteria: To be eligible for the ADAP program, a client must: • Have a positive HIV/AIDS diagnosis. • Be at least 18 years old. • Be a resident of California. • Have an annual Modified Adjusted Gross Income (MAGI) that does not exceed 500 percent Federal Poverty Level (FPL) based on household size and income. • Not be fully covered by Medi-Cal or any other third-party payers (an entity that reimburses and manages health care expenses such as private insurance or governmental agencies, employers, etc.). HRSA PCN 15-04 (Revised 1/11/2019): The RWHAP legislation requires that rebates collected on ADAP medication purchases be applied to the RWHAP Part B Program with a priority, but not a requirement, that the rebates be placed back into ADAP. Although ADAP rebates are neither program income nor refunds, they are subject to the same regulatory provision regarding expenditure. These rebates must be used for the statutorily permitted purposes under the RWHAP Part B Program, which are limited to core medical services including ADAP, support services, clinical quality management, and administrative expenses (including planning and evaluation) as part of a comprehensive system of care for low-income individuals living with HIV. Condition Our sample of 60 participants from a population of 25,749 participants who received benefits during the fiscal year identified 10 participants who did not submit all required documentation, including proof of HIV/AIDS diagnosis, proof of residency, and income documentation to verify their annual MAGI did not exceed 500 percent Federal Poverty Level based on household size and income. Identification as a Repeat Finding Finding 2021-011 was reported in the immediate prior year pertaining to not submitting all required documentation. Cause Procedures that required the collection of valid supporting documents were not followed. Existing internal controls did not prevent, or detect and correct, the occurrence of benefits being provided to potentially ineligible individuals. Effect Public Health did not have adequate oversight controls to ensure that the applicant’s eligibility was properly reviewed and approved. Accordingly, there is an increased risk for the occurrence of benefits being provided to ineligible individuals that may not be prevented or detected in a timely manner. Questioned Costs Questioned costs were not determinable because benefit costs were not tracked by individual participants. California State Auditor Report 2022-002 50 June 2024 Context Pharmacy benefits management services are provided by a contractor who received administrative fees and reimbursements for prescription drug costs to program participants. Payments to the contractor totaled $108,210,356 for approximately 26,000 program participants for the fiscal year ended June 30, 2022. The sample was not a statistically valid sample. Recommendation The ADAP Branch should continue to monitor compliance with its policies to ensure enrollment workers and secondary reviews of ADAP applications follow the established guidelines and retain acceptable documentation to support eligibility determinations. Applications that have been granted an eligibility exception (i.e., Temporary Access Period, Medi-Cal Eligibility Exception Request, or Eligibility Exception Request) should be reviewed in a timely manner to ensure clients who do not provide the required documentation within the approved extension period are disenrolled in a timely manner. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 51 June 2024 Reference Number: 2022-011 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Public Health (Public Health) Assistance Listing Number: 93.323 Federal Program Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award Number and Year: NU50CK000539; 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (b) Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards: (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) 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: California State Auditor Report 2022-002 52 June 2024 (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving cross-cutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass- through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section §200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award- specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F 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 §200.501. (g) Consider whether the results of the subrecipient’s audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity’s own records. Condition Public Health did not establish a formal risk assessment process over its subrecipients of federal awards to determine the frequency and extent of subrecipient monitoring to be performed. While Public Health received reimbursement invoices from subrecipients, there did not appear to be other financial or programmatic monitoring to verify subrecipents compliance with applicable requirements. In addition, Public Health did not obtain Single Audit reports from those subrecipients as required. Identification as a Repeat Finding Finding 2021-014 was reported in the immediate prior year. Cause Procedures to perform the required subrecipient monitoring were not established nor performed by Public Health. Effect By not properly evaluating the risk of noncompliance, Public Health may inadvertently award grant funds to subrecipients who lack the necessary mechanisms or understanding to adhere to federal statutes. This increases the likelihood of noncompliance arising during the performance of the grant-funded activities. Furthermore, failure to perform monitoring procedures or obtain Single Audit reports increases the risk for not properly identifying subrecipient program control weaknesses, noncompliance, and performing sufficient follow-up on any subrecipient corrective action. Questioned Costs No questioned costs were identified. California State Auditor Report 2022-002 53 June 2024 Context Disbursements to subrecipients for the ELC program totaled $301,107,041, or 31.0% of total reported program expenditures. Recommendation Public Health should establish and document formal procedures for conducting risk assessments of its subrecipients, including criteria for evaluating organizational capacity, financial stability, compliance history, and programmatic capabilities. Public Health should also develop and implement specific subrecipient monitoring procedures and establish a process for obtaining Single Audit reports from its subrecipients. Furthermore, a monitoring mechanism should be implemented to track compliance with the single audit mandate among subrecipients, including regular follow-ups and documentation of communication efforts. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 54 June 2024 Reference Number: 2022-012 Category of Finding: Special Tests and Provisions – Provider Health and Safety Standards Type of Finding: Material Weakness State Administering Department: California Department of Public Health (Public Health) Assistance Listing Number: 93.778 Federal Program Title: Medical Assistance Program Federal Award Numbers and Years: 2205CA5ADM; 2022 2205CA5MAP; 2022 2105CA5ADM; 2021 2105CA5MAP; 2021 Criteria Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition There was no evidence of surveyor signature or supervisor review and approval on Form CMS-1539 for all 40 surveys of providers tested. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause California Department of Public Health (Public Health) did not adhere to its documented controls due to staff members either no longer working with Public Health or being on extended leave. Effect Nonadherence to internal controls over the review and approval process of the Form CMS-1539 can result in the risk of statewide noncompliance as providers may not meet the prescribed health and safety standards. Further, the integrity of the surveys can be compromised because they are being conducted with no apparent oversight. Questioned Costs No questioned costs were identified. California State Auditor Report 2022-002 55 June 2024 Context A total of 987 surveys were included in the population, which consisted of all surveys completed by Public Health for Hospitals, Intermediate Care Facility and Individuals with Intellectual Disabilities and Nursing Facilities during fiscal year 2021-22. Recommendation Public Health should update its processes and controls in place to ensure compliance with established procedures and performance of timely review and approval of the Form CMS-1539, including for situations when staff is on leave and/or has left the department. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report. California State Auditor Report 2022-002 56 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 57 June 2024 Auditee’s Section California State Auditor Report 2022-002 58 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 59 June 2024 Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2022 California State Auditor Report 2022-002 60 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 61 STATE OF CALIFORNIA June 2024 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2022 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS U.S. Department of Agriculture Agricultural Research Basic and Applied Research 10.001 $ 57,496 $ - Plant and Animal Disease, Pest Control, and Animal Care 10.025 48,791,396 28,445,348 Inspection Grading and Standardization 10.162 33,504 - Market Protection and Promotion 10.163 3,635,133 - Specialty Crop Block Grant Program - Farm Bill 10.170 12,578,231 9,852,843 COVID-19 - Specialty Crop Block Grant Program - Farm Bill 10.170 1,226,226 1,019,593 Total Specialty Crop Block Grant Program - Farm Bill 13,804,457 10,872,436 Organic Certification Cost Share Programs 10.171 1,340,755 - Trade Mitigation Program Eligible Recipient Agency Operational Funds 10.178 559 559 Trade Mitigation Program Eligible Recipient Agency Operational Funds (Noncash) 10.178 48,077,168 - Total Trade Mitigation Program Eligible Recipient Agency Operational Funds 48,077,727 559 Food Insecurity Nutrition Incentive Grants Program 10.331 6,016,355 5,524,036 Cooperative Agreements with States for Intrastate Meat and Poultry Inspection 10.475 148,347 - Meat, Poultry, and Egg Products Inspection 10.477 29,863 - Food Safety Cooperative Agreements 10.479 463,563 Supplemental Nutrition Assistance Program (SNAP) Employment and Training (E&T) Data and 17,372 - 10.537 Technical Assistance Grants Farmers’ Market Supplemental Nutrition Assistance Program Support Grants 10.545 13,650 - Special Supplemental Nutrition Program for Women, Infants, and Children 10.557 900,050,970 276,191,433 COVID-19 Special Supplemental Nutrition Program for Women, Infants, and Children 10.557 52,232,571 - Total Special Supplemental Nutrition Program for Women, Infants, and Children 952,283,541 276,191,433 Child and Adult Care Food Program 10.558 619,535,727 606,380,118 COVID-19 - Child and Adult Care Food Program 10.558 41,088,439 41,088,439 Total Child and Adult Care Food Program 660,624,166 647,468,557 State Administrative Expenses for Child Nutrition 10.560 40,900,002 - WIC Farmers' Market Nutrition Program (FMNP) 10.572 1,487,636 45,975 Team Nutrition Grants 10.574 75,150 75,150 Senior Farmers Market Nutrition Program 10.576 882,976 850,248 WIC Grants To States (WGS) 10.578 751,690 - Child Nutrition Discretionary Grants Limited Availability 10.579 5,999,821 5,988,806 Pandemic EBT Administrative Costs 10.649 101,462,255 2,605,871 COVID-19 - Pandemic EBT Administrative Costs 10.649 863,271 863,271 Total Pandemic EBT Administrative Costs 102,325,526 3,469,142 Cooperative Forestry Assistance 10.664 4,571,247 1,383,557 Urban and Community Forestry Program 10.675 1,245,529 608,430 Forest Legacy Program 10.676 1,048,293 1,020,000 Forest Stewardship Program 10.678 77,647 20,467 Forest Health Protection 10.680 197,847 43,017 Good Neighbor Authority 10.691 2,456,281 2,252,217 Watershed Restoration and Enhancement Agreement Authority 10.693 717,897 2,717 State & Private Forestry Cooperative Fire Assistance 10.698 325,028 - Partnership Agreements 10.699 601,816 - Total Excluding Clusters 1,899,001,711 984,262,095 SNAP Cluster Supplemental Nutrition Assistance Program (Noncash) 10.551 13,128,155,870 - COVID-19 Supplemental Nutrition Assistance Program (Noncash) 10.551 5,604,552,136 - Total Supplemental Nutrition Assistance Program 18,732,708,006 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 10.561 1,211,793,086 1,087,350,800 COVID-19 - State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 10.561 24,681,017 24,681,017 Total State Administrative Matching Grants for the Supplemental Nutrition Assistance Program 1,236,474,103 1,112,031,817 Total SNAP Cluster 19,969,182,109 1,112,031,817 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 62 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Child Nutrition Cluster School Breakfast Program 10.553 683,834,638 683,834,638 National School Lunch Program 10.555 2,215,174,935 2,215,174,935 COVID-19 - National School Lunch Program 10.555 112,128,236 112,128,236 National School Lunch Program (Noncash) 10.555 218,814,114 - Total National School Lunch Program 2,546,117,285 2,327,303,171 Special Milk Program for Children 10.556 92,019 92,019 Summer Food Service Program for Children 10.559 67,000,704 66,111,045 Fresh Fruit and Vegetable Program 10.582 9,985,375 9,820,694 Total Child Nutrition Cluster 3,307,030,021 3,087,161,567 Food Distribution Cluster Commodity Supplemental Food Program 10.565 8,742,160 8,570,750 COVID-19 - Commodity Supplemental Food Program 10.565 359,312 359,312 Commodity Supplemental Food Program (Noncash) 10.565 33,297,453 - Total Commodity Supplemental Food Program 42,398,925 8,930,062 Emergency Food Assistance Program (Administrative Costs) 10.568 19,243,713 18,626,333 COVID-19 Emergency Food Assistance Program (Administrative Costs) 10.568 14,800,816 14,800,816 Total Emergency Food Assistance Program (Administrative Costs) 34,044,529 33,427,149 Emergency Food Assistance Program (Food Commodities) (Noncash) 10.569 102,184,982 - COVID-19 - Emergency Food Assistance Program (Food Commodities) (Noncash) 10.569 64,958,446 - Total Emergency Food Assistance Program (Food Commodities) 167,143,428 - Total Food Distribution Cluster 243,586,882 42,357,211 Forest Service Schools and Roads Cluster Schools and Roads - Grants to States 10.665 29,942,287 29,942,287 Total Forest Service Schools and Roads Cluster 29,942,287 29,942,287 Research and Development Cluster Specialty Crop Block Grant Program - Farm Bill 10.170 11,615,124 11,502,182 COVID-19 - Specialty Crop Block Grant Program - Farm Bill 10.170 108,617 93,904 Total Specialty Crop Block Grant Program - Farm Bill 11,723,741 11,596,086 Total Research and Development Cluster 11,723,741 11,596,086 Total U.S. Department of Agriculture 25,460,466,751 5,267,351,063 U.S. Department of Commerce Coastal Zone Management Administration Awards 11.419 2,523,490 - Coastal Zone Management Estuarine Research Reserves 11.420 958,480 855,802 Regional Fishery Management Councils 11.441 233,072 - Unallied Management Projects 11.454 665,428 - Meteorologic and Hydrologic Modernization Development 11.467 741,675 - Center for Sponsored Coastal Ocean Research Coastal Ocean Program 11.478 135,237 135,237 Total Excluding Clusters 5,257,382 991,039 Research and Development Cluster Interjurisdictional Fisheries Act of 1986 11.407 186,147 - Coastal Zone Management Estuarine Research Reserves 11.420 305,421 305,421 Pacific Coast Salmon Recovery Pacific Salmon Treaty Program 11.438 14,017,344 10,413,411 Unallied Science Program 11.472 1,103,569 - Total Research and Development Cluster 15,612,481 10,718,832 Total U.S. Department of Commerce 20,869,863 11,709,871 U.S. Department of Defense Community Economic Adjustment Assistance for Responding to Threats to the Resilience of a Military 12.003 60,507 - Installation Payments to States in Lieu of Real Estate Taxes 12.112 146,971 146,971 State Memorandum of Agreement Program for the Reimbursement of Technical Services 12.113 13,557,493 - Basic and Applied Scientific Research 12.300 60,144 - National Guard Military Operations and Maintenance (O&M) Projects 12.401 96,119,162 - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 63 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS COVID-19 National Guard Military Operations and Maintenance (O&M) Projects 12.401 63,481 - Total National Guard Military Operations and Maintenance (O&M) Projects 96,182,643 - National Guard ChalleNGe Program 12.404 23,548,312 - Community Investment 12.600 1,728,905 1,491,346 Community Economic Adjustment Assistance for Compatible Use and Joint Land Use Studies 12.610 198,229 132,149 Economic Adjustment Assistance for State Governments 12.617 1,314,442 897,303 Air Force Defense Research Sciences Program 12.800 22,474 - Other - U.S. Department of Defense 12.U01 1,316,670 - Total Excluding Clusters 138,136,790 2,667,769 Total U.S. Department of Defense 138,136,790 2,667,769 U.S. Department of Housing and Urban Development Manufactured Home Dispute Resolution 14.171 86,564 - Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii 14.228 74,144,177 63,994,506 COVID-19 Community Development Block Grants/State's Program and Non-Entitlement Grants in 14.228 8,303,912 3,840,021 Hawaii Total Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii 82,448,089 67,834,527 Emergency Solutions Grant Program 14.231 13,205,415 11,871,377 COVID-19 Emergency Solutions Grant Program 14.231 167,607,753 163,371,688 Total Emergency Solutions Grant Program 180,813,168 175,243,065 Home Investment Partnerships Program 14.239 20,042,120 14,827,347 Housing Opportunities for Persons with AIDS 14.241 3,829,406 3,829,406 COVID-19 Housing Opportunities for Persons with AIDS 14.241 397,316 263,861 Total Housing Opportunities for Persons with AIDS 4,226,722 4,093,267 Housing Trust Fund 14.275 12,838,474 10,682,825 Equal Opportunity in Housing 14.400 2,945,541 - Lead Hazard reduction Demonstration Grant Program 14.905 27,451 - Total Excluding Clusters 303,428,129 272,681,031 CDBG - Disaster Recovery Grants - Pub. L. No. 113-2 Cluster National Disaster Resilience Competition 14.272 15,581,105 15,367,221 Total U.S. Department of Housing and Urban Development 319,009,234 288,048,252 U.S. Department of the Interior Southern Nevada Public Land Management 15.235 428,955 - Environmental Quality and Protection 15.236 124,392 - Federal Oil and Gas Royalty Management State and Tribal Coordination 15.427 1,854,134 - Geothermal Resources 15.434 4,324,697 4,324,697 Minerals Leasing Act 15.437 37,501,991 37,501,991 National Forest Acquired Lands 15.438 30 30 Providing Water to At-Risk Natural Desert Terminal Lakes 15.508 1,595 - Central Valley Improvement Act, Title XXXIV 15.512 1,241,727 - Fish and Wildlife Coordination Act 15.517 2,276,589 8,646 Recreation Resources Management 15.524 2,977,402 - Central Valley, Trinity River Division, Trinity River Fish and Wildlife Management 15.532 4,792 - Lake Tahoe Regional Wetlands Development 15.543 61,587 - San Joaquin River Restoration 15.555 1,486,321 49,523 SECURE Water Act - Research Agreements 15.560 (35,736) - Coastal Wetlands Planning, Protection and Restoration 15.614 2,259,841 1,765,485 Cooperative Endangered Species Conservation Fund 15.615 14,123,858 - Clean Vessel Act 15.616 999,824 461,772 Sportfishing and Boating Safety Act 15.622 1,373,070 1,373,070 North American Wetlands Conservation Fund 15.623 188,543 188,543 Coastal 15.630 6,252 - State Wildlife Grants 15.634 10,631 - Central Valley Project Improvement Act (CVPIA) 15.648 1,076,697 - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 64 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Endangered Species Recovery Implementation 15.657 24,328 - Earthquake Hazards Program Assistance 15.807 27,697 - U.S. Geological Survey Research and Data Collection 15.808 100,090 - National Cooperative Geologic Mapping 15.810 512,023 - National Geological and Geophysical Data Preservation 15.814 20,206 - Historic Preservation Fund Grants-In-Aid 15.904 2,055,392 323,638 Outdoor Recreation Acquisition, Development and Planning 15.916 1,757,047 1,665,484 National Maritime Heritage Grants 15.925 256,144 256,144 Redwood National Park Cooperative Management with the State of California 15.937 131,490 - Heritage Partnership 15.939 147,433 - Natural Resource Stewardship 15.944 1,171 - Other - U.S. Department of the Interior 15.U02 3,024,871 - Total Excluding Clusters 80,345,084 47,919,023 Fish and Wildlife Cluster Sport Fish Restoration 15.605 3,270,699 - Wildlife Restoration and Basic Hunter Education 15.611 2,302,335 - Enhanced Hunter Education and Safety 15.626 77,230 - Total Fish and Wildlife Cluster 5,650,264 - Research and Development Cluster Wildlife Resource Management 15.247 25,543 1,663 Central Valley Improvement Act, Title XXXIV 15.512 3,724,642 - Fish and Wildlife Coordination Act 15.517 11,699 - Central Valley, Trinity River Division, Trinity River Fish and Wildlife Management 15.532 1,028,092 - Sport Fish Restoration 15.605 17,709,578 415,145 Fish and Wildlife Management Assistance 15.608 85,306 - Wildlife Restoration and Basic Hunter Education 15.611 19,868,546 120,502 Cooperative Endangered Species Conservation Fund 15.615 3,699,366 2,927,062 State Wildlife Grants 15.634 1,908,547 110,328 Endangered Species Conservation - Recovery Implementation Funds 15.657 42,058 - Endangered Species Conservation-Wolf Livestock Loss Compensation and Prevention 15.666 7,587 - Adaptive Science 15.670 182,160 - Prescott Marine Mammal Rescue Assistance 15.683 4,724 White-nose Syndrome National Response Implementation 15.684 36,226 - Other - U.S. Department of the Interior 15.U03 6,292 - Total Research and Development Cluster 48,340,366 3,574,700 Total U.S. Department of the Interior 134,335,714 51,493,723 U.S. Department of Justice Law Enforcement Assistance Narcotics and Dangerous Drugs Laboratory Analysis 16.001 534,083 - Sexual Assault Services Formula Program 16.017 1,035,624 1,035,624 COVID-19 Coronavirus Emergency Supplemental Funding Program 16.034 41,648,812 41,383,066 Services for Trafficking Victims 16.320 641,278 425,348 Antiterrorism Emergency Reserve 16.321 748,495 440,870 Juvenile Justice and Delinquency Prevention 16.540 3,527,949 2,933,638 National Criminal History Improvement Program (NCHIP) 16.554 2,036,042 - Crime Victim Assistance 16.575 226,071,123 216,452,531 Crime Victim Compensation 16.576 15,651,001 - Drug Court Discretionary Grant Program 16.585 492,038 57,923 Violence Against Women Formula Grants 16.588 13,456,013 12,481,965 Residential Substance Abuse Treatment for State Prisoners 16.593 826,782 696,530 Bulletproof Vest Partnership Program 16.607 229,385 229,385 Regional Information Sharing Systems Pass-Through from The Western States Information Network (BI) 16.610 15PBJA-21-GG-00349-R 1,466,850 - Pass-Through from The Western States Information Network (BI) 16.610 2018-RS-CX-0004 308,263 - Total Regional information Sharing Systems 1,775,113 - Public Safety Partnership and Community Policing Grants 16.710 4,351 - Special Data Collections and Statistical Studies 16.734 1,988,371 - PREA Program: Strategic Support for PREA Implementation 16.735 71,491 71,491 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 65 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Edward Byrne Memorial Justice Assistance Grant Program 16.738 12,855,855 11,945,009 DNA Backlog Reduction Program 16.741 1,212,550 - Paul Coverdell Forensic Sciences Improvement Grant Program 16.742 2,847,117 2,644,264 Support for Adam Walsh Act Implementation Grant Program 16.750 274,631 - Edward Byrne Memorial Competitive Grant Program 16.751 147,172 147,172 Postconviction Testing of DNA Evidence 16.820 521,275 505,623 STOP School Violence 16.839 646,383 307,120 Equitable Sharing Program 16.922 27,204 - Other - U.S. Department of Justice 16.U04 449,785 - Total Excluding Clusters 329,719,923 291,757,559 Research and Development Cluster National Criminal History Improvement Program (NCHIP) 16.554 7,951 - Total Research and Development Cluster 7,951 - Total U.S. Department of Justice 329,727,874 291,757,559 U.S. Department of Labor Labor Force Statistics 17.002 7,313,954 - Compensation and Working Conditions 17.005 901,368 - Unemployment Insurance 17.225 7,795,871,269 - COVID-19 Unemployment Insurance 17.225 15,498,272,223 - Total Unemployment Insurance 23,294,143,492 - Senior Community Service Employment Program 17.235 6,267,130 5,999,521 Trade Adjustment Assistance 17.245 5,416,293 - WIOA Pilots, Demonstrations, and Research Projects 17.261 119,767 - Reentry Employment Opportunities 17.270 25,600 Work Opportunity Tax Credit Program (WOTC) 17.271 2,771,974 - Temporary Labor Certification for Foreign Workers 17.273 2,013,247 - WIOA National Dislocated Worker Grants / WIA National Emergency Grants 17.277 20,873,956 19,648,562 WIOA Dislocated Worker National Reserve Demonstration Grants 17.280 538,704 538,397 Apprenticeship USA Grants 17.285 149,998 - Hurricanes and Wildfires of 2017 Supplemental - National Dislocated Worker Grants 17.286 6,381,643 6,373,387 Occupational Safety and Health State Program 17.503 33,198,597 - COVID-19 - Occupational Safety and Health State Program 17.503 3,719,493 - Total Occupational Safety and Health State Program 36,918,090 - Consultation Agreements 17.504 6,538,325 - Mine Health and Safety Grants 17.600 379,933 - Disability Employment Policy Development 17.720 185,125 87,982 Total Excluding Clusters 23,390,938,599 32,647,849 Employment Service Cluster Employment Service/Wagner-Peyser Funded Activities 17.207 69,648,250 2,389,078 Jobs for Veterans State Grants 17.801 16,234,353 - Total Employment Service Cluster 85,882,603 2,389,078 WIOA Cluster WIOA Adult Program 17.258 119,972,309 115,788,968 WIOA Youth Activities 17.259 118,027,199 106,257,662 WIOA Dislocated Worker Formula Grants 17.278 132,150,218 114,097,547 Total WIOA Cluster 370,149,726 336,144,177 Total U.S. Department of Labor 23,846,970,928 371,181,104 U.S. Department of Transportation Airport Improvement Program 20.106 25,890 - Highway Training and Education 20.215 41,461 - Fuel Tax Evasion-Intergovernmental Enforcement Effort 20.240 54,288 - Capital Assistance to States - Intercity Passenger Rail Service 20.317 2,212,091 2,212,091 ARRA - High-Speed Rail Corridors and Intercity Passenger Rail Service - Capital Assistance Grants 20.319 (238,812) - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 66 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS High-Speed Rail Corridors and Intercity Passenger Rail Service - Capital Assistance Grants 20.319 9,353,257 9,353,257 Total High-Speed Rail Corridors and Intercity Passenger Rail Service - Capital Assistance Grants 9,114,445 9,353,257 Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research 20.505 33,326,585 33,242,202 Formula Grants for Rural Areas and Tribal Transit Program 20.509 26,859,076 24,887,279 COVID-19 Formula Grants for Rural Areas and Tribal Transit Program 20.509 26,358,055 25,850,660 Total Formula Grants for Rural Areas and Tribal Transit Program 53,217,131 50,737,939 Paul S. Sarbanes Transit in the Parks 20.520 109,645 - Rail Fixed Guideway Public Transportation System State Safety Oversight Formula Grant Program 20.528 2,639,173 - Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 35,884,849 23,349,871 National Highway Traffic Safety Administration (NHTSA) Discretionary Safety Grants and 20.614 752,140 - Cooperative Agreements E-911 Grant Program 20.615 4,222,369 3,711,172 Pipeline Safety Program State Base Grant 20.700 6,474,312 - Interagency Hazardous Materials Public Sector Training and Planning Grants 20.703 1,207,725 120,674 PHMSA Pipeline Safety Underground Natural Gas Storage Grant 20.725 1,121,994 - Total Excluding Clusters 150,404,098 122,727,206 Highway Planning and Construction Cluster Highway Planning and Construction 20.205 3,984,602,848 1,314,580,336 COVID-19 - Highway Planning and Construction 20.205 94,550,817 80,458 Total Highway Planning and Construction 4,079,153,665 1,314,660,794 Recreational Trails Program 20.219 2,656,492 - Total Highway Planning and Construction Cluster 4,081,810,157 1,314,660,794 FMCSA Cluster Motor Carrier Safety Assistance Program 20.218 19,810,070 - Motor Carrier Safety Assistance High Priority Activities Grants and Cooperative Agreements 20.237 662,208 - Total FMCSA Cluster 20,472,278 - Transit Services Programs Cluster Enhanced Mobility of Seniors and Individuals with Disabilities 20.513 16,251,650 15,076,102 COVID-19 - Enhanced Mobility of Seniors and Individuals with Disabilities 20.513 1,483,467 1,483,467 Total Enhanced Mobility of Seniors and Individuals with Disabilities 17,735,117 16,559,569 Total Transit Services Programs Cluster 17,735,117 16,559,569 Federal Transit Cluster Buses and Bus Facilities Formula, Competitive, and Low or No Emissions Programs 20.526 1,454,619 1,454,619 Total Federal Transit Cluster 1,454,619 1,454,619 Highway Safety Cluster State and Community Highway Safety 20.600 21,942,205 12,521,703 National Priority Safety Programs 20.616 25,590,303 15,665,456 Total Highway Safety Cluster 47,532,508 28,187,159 Research and Development Cluster Highway Research and Development Program 20.200 258,142 - Highway Planning and Construction 20.205 4,768,734 - State and Community Highway Safety 20.600 43,015 - National Priority Safety Programs 20.616 70,477 - Total Research and Development Cluster 5,140,368 - Total U.S. Department of Transportation 4,324,549,145 1,483,589,347 U.S. Department of the Treasury Equitable Sharing 21.016 638,383 - COVID-19 Coronavirus Relief Fund 21.019 195,464,449 8,773,932 COVID-19 Emergency Rental Assistance Program 21.023 3,464,114,210 667,533,583 COVID-19 Coronavirus State and Local Fiscal Recovery Funds 21.027 13,460,216,545 2,057,077,047 Total Excluding Clusters 17,120,433,587 2,733,384,562 Total U.S. Department of the Treasury 17,120,433,587 2,733,384,562 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 67 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Equal Employment Opportunity Commission Other - Equal Employment Opportunity Commission 30.U05 2,770,878 - Total Excluding Clusters 2,770,878 - Total Equal Employment Opportunity Commission 2,770,878 - General Services Administration Donation of Federal Surplus Personal Property (Noncash) 39.003 644,149 - Election Reform Payments 39.011 950,409 - Total Excluding Clusters 1,594,558 - Total General Services Administration 1,594,558 - National Endowment for the Arts Promotion of the Arts Partnership Agreements 45.025 2,446,305 1,406,162 Grants to States 45.310 16,026,395 9,575,357 COVID-19 Grants to States 45.310 10,154,643 10,154,643 Total Grants to States 26,181,038 19,730,000 Total Excluding Clusters 28,627,343 21,136,162 Total National Endowment for the Arts 28,627,343 21,136,162 Small Business Administration State Trade Expansion 59.061 930,446 894,886 Total Excluding Clusters 930,446 894,886 Total Small Business Administration 930,446 894,886 U.S. Department of Veterans Affairs Grants to States for Construction of State Home Facilities 64.005 5,790,490 - COVID-19 Veterans State Nursing Home Care 64.015 33,144,091 - VHA Primary Care 64.047 60,408 - Burial Expenses Allowance for Veterans 64.101 622,755 - Veterans Housing Guaranteed and Insured Loans 64.114 173,535,208 - All-Volunteer Force Educational Assistance 64.124 1,314,230 - Total Excluding Clusters 214,467,182 - Total U.S. Department of Veterans Affairs 214,467,182 - Environmental Protection Agency Air Pollution Control Program Support 66.001 7,900,441 - State Indoor Radon Grants 66.032 51,199 51,199 Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to 66.034 192,458 - the Clean Air Act Diesel Emissions Reduction Act (DERA) State Grants 66.040 2,875 - Congressionally Mandated Projects 66.202 284,773 278,794 Multipurpose Grants to States and Tribes 66.204 172,868 - State Environmental Justice Cooperative Agreement Program 66.312 200,000 200,000 Water Pollution Control State, Interstate, and Tribal Program Support 66.419 6,516,065 - State Public Water System Supervision 66.432 7,126,000 - State Underground Water Source Protection 66.433 378,020 - Voluntary School and child Care Lead Testing and Reduction Grant Program (SDWA 1464(d)) 66.444 14,358 - Water Quality Management Planning 66.454 874,448 379,392 Nonpoint Source Implementation Grants 66.460 8,272,067 4,313,028 Regional Wetland Program Development Grants 66.461 130,823 128,067 Beach Monitoring and Notification Program Implementation Grants 66.472 406,567 363,526 Performance Partnership Grants 66.605 1,933,379 - Environmental Information Exchange Network Grant Program and Related Assistance 66.608 106,948 - TSCA Title IV State Lead Grants Certification of Lead-Based Paint Professionals 66.707 692 - Hazardous Waste Management State Program Support 66.801 8,099,980 - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 68 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Superfund State, Political Subdivision, and Indian Tribe Site-Specific Cooperative Agreements 66.802 681,932 - Underground Storage Tank (UST) Prevention, Detection, and Compliance Program 66.804 180,000 - Leaking Underground Storage Tank Trust Fund Corrective Action Program 66.805 2,386,798 - State and Tribal Response Program Grants 66.817 1,736,330 - Brownfields Assessment and Cleanup Cooperative Agreements 66.818 1,773,832 1,647,599 Targeted Airshed Grant Program 66.956 128,993 127,394 Total Excluding Clusters 49,551,846 7,488,999 Research and Development Cluster Regional Wetland Program Development Grants 66.461 24,380 24,380 Total Research and Development Cluster 24,380 24,380 Total Environmental Protection Agency 49,576,226 7,513,379 U.S. Department of Energy State Energy Program 81.041 3,792,430 - Weatherization Assistance for Low-Income Persons 81.042 6,789,080 6,168,959 Nuclear Legacy Cleanup Program 81.065 971,725 - Environmental Remediation and Waste Processing and Disposal 81.104 688,939 - Long-Term Surveillance and Maintenance 81.136 23,758 - Environmental Monitoring/Cleanup, Cultural and Resource Management, Emergency Response 81.214 37,340 - Research, Outreach, Technical Analysis Sustainable Energy for Homes and Business 81.U06 57,785 - Total Excluding Clusters 12,361,057 6,168,959 Total U.S. Department of Energy 12,361,057 6,168,959 U.S. Department of Education Adult Education - Basic Grants to States 84.002 108,105,787 100,028,433 Title I Grants to Local Educational Agencies 84.010 2,217,221,205 2,197,027,872 Migrant Education State Grant Program 84.011 123,584,382 117,477,330 Title I State Agency Program for Neglected and Delinquent Children and Youth 84.013 15,516 - Career and Technical Education -- Basic Grants to States 84.048 117,711,699 107,645,069 Rehabilitation Services Vocational Rehabilitation Grants to States 84.126 360,077,747 - Rehabilitation Services Independent Living Services for Older Individuals Who are Blind 84.177 3,427,577 3,147,022 Special Education-Grants for Infants and Families 84.181 46,777,985 - Supported Employment Services for Individuals with the Most Significant Disabilities 84.187 2,227,030 - Education for Homeless Children and Youth 84.196 11,318,633 11,131,763 Charter Schools 84.282 5,259,477 4,721,741 Twenty-First Century Community Learning Centers 84.287 136,293,233 132,720,105 Special Education - State Personnel Development 84.323 2,241,938 2,241,938 Rural Education 84.358 5,091,765 4,819,566 English Language Acquisition State Grants 84.365 167,842,820 163,625,246 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 84.367 267,357,387 259,623,175 Grants for State Assessments and Related Activities 84.369 25,258,161 18,522,849 Comprehensive Literacy Development 84.371 9,141,360 8,909,207 School Improvement Grants 84.377 21,246,732 20,882,409 Disability Innovation Fund (DIF) 84.421 2,316,141 - Student Support and Academic Enrichment Program 84.424 150,877,099 150,128,552 COVID-19 Governor's Emergency Education Relief Fund 84.425C 184,905,609 184,905,609 COVID-19 Elementary and Secondary School Emergency Relief Fund 84.425D 3,109,976,994 3,109,439,056 COVID-19 Discretionary Grants: Reimagining Workforce Preparation Grants 84.425G 13,466,138 - COVID-19 Discretionary Grants 84.425R 145,144,039 - COVID-19 American Rescue Plan - Elementary and Secondary School Emergency Relief 84.425U 2,210,021,662 2,206,487,335 COVID-19 American Rescue Plan - Elementary and Secondary School Emergency Relief - Homeless 84.425W 29,310,589 29,095,676 Children and Youth Total COVID-19 Education Stabilization Fund 5,692,825,031 5,529,927,676 Randolph-Sheppard - Financial Relief and Restoration Payments 84.426 906,516 - Disaster Recovery Assistance for Education 84.938 1,300,290 1,231,926 Total Excluding Clusters 9,478,425,511 8,833,811,879 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 69 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Special Education Cluster (IDEA) Special Education Grants to States 84.027 1,595,573,490 1,550,809,199 Special Education Preschool Grants 84.173 50,421,001 49,493,783 COVID-19 - Special Education Preschool Grants 84.173 1,261,589 1,261,589 Total Special Education Preschool Grants 51,682,590 50,755,372 Total Special Education Cluster (IDEA) 1,647,256,080 1,601,564,571 Total U.S. Department of Education 11,125,681,591 10,435,376,450 U.S. Election Assistance Commission Help America Vote Act Requirements Payments 90.401 9,259,645 - COVID-19 - Help America Vote Act Requirements Payments 90.401 3,943,785 - Total Help American Vote Act Requirements Payments 13,203,430 - 2018 HAVA Election Security Grants 90.404 913,851 - COVID-19 2018 HAVA Election Security Grants 90.404 6,522,374 - Total 2018 HAVA Election Security Grants 7,436,225 - Total Excluding Clusters 20,639,655 - Total U.S. Election Assistance Commission 20,639,655 - U.S. Department of Health and Human Services Special Programs for the Aging, Title VII, Chapter 3, Programs for Prevention of Elder Abuse, Neglect, 93.041 and Exploitation 484,153 484,153 Special Programs for the Aging, Title VII, Chapter 2, Long Term Care Ombudsman Services for Older 93.042 1,882,658 1,735,056 Individuals COVID-19 Special Programs for the Aging, Title VII, Chapter 2, Long Term Care Ombudsman 93.042 375,703 375,703 Services for Older Individuals Total Special Programs for the Aging, Title VII, Chapter 2, Long Term Care Ombudsman 2,258,361 2,110,759 Services for Older Individuals Special Programs for the Aging, Title III, Part D, Disease Prevention and Health Promotion Services 93.043 2,660,035 2,660,035 COVID-19 - Special Programs for the Aging, Title III, Part D, Disease Prevention and Health 93.043 724,941 724,941 Promotion Services Total Special Programs for the Aging, Title III, Part D, Disease Prevention and 3,384,976 3,384,976 Health Promotion Services COVID-19 Special Programs for the Aging, Title IV, and Title II, Discretionary Projects 93.048 1,707,200 1,562,836 National Family Caregiver Support, Title III, Part E 93.052 20,215,908 19,679,433 COVID-19 National Family Caregiver Support, Title III, Part E 93.052 3,414,612 2,914,538 Total National Family Caregiver Support, Title III, Part E 23,630,520 22,593,971 Public Health Emergency Preparedness 93.069 34,863,844 24,114,919 Environmental Public Health and Emergency Response 93.070 1,229,690 - Medicare Enrollment Assistance Program 93.071 2,143,717 1,874,932 Cooperative Agreements to Promote Adolescent Health through School-Based HIV/STD Prevention 93.079 103,657 - and School-Based Surveillance Guardianship Assistance 93.090 146,249,454 146,042,789 COVID-19 Guardianship Assistance 93.090 9,642,051 9,642,051 Total Guardianship Assistance 155,891,505 155,684,840 Affordable Care Act (ACA) Personal Responsibility Education Program 93.092 5,287,219 4,144,083 Food and Drug Administration Research 93.103 4,901,184 - Maternal and Child Health Federal Consolidated Programs 93.110 69,266 - Project Grants and Cooperative Agreements for Tuberculosis Control Programs 93.116 8,877,361 4,476,504 Preventive Medicine Residency 93.117 100,297 - Emergency Medical Services for Children 93.127 31,577 - Cooperative Agreements to States/Territories for the Coordination and Development of Primary Care 93.130 561,374 - Offices Injury Prevention and Control Research and State and Community Based Programs 93.136 10,528,423 4,111,967 Projects for Assistance in Transition from Homelessness (PATH) 93.150 9,858,325 - Grants to States for Loan Repayment 93.165 925,500 - Childhood Lead Poisoning Prevention Projects, State and Local Childhood Lead Poisoning Prevention 999,919 - 93.197 and Surveillance of Blood Lead Levels in Children Traumatic Brain Injury State Demonstration Grant Program 93.234 249,177 - State Capacity Building 93.240 292,922 - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 70 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS State Rural Hospital Flexibility Program 93.241 77,673 - Substance Abuse and Mental Health Services Projects of Regional and National Significance 93.243 2,716,551 1,823,025 Early Hearing Detection and Intervention 93.251 (4,781) - Immunization Cooperative Agreements 93.268 36,886,005 12,751,273 COVID-19 Immunization Cooperative Agreements 93.268 210,562,638 94,917,437 Immunization Cooperative Agreements (Noncash) 93.268 522,007,656 - Total Immunization Cooperative Agreements 769,456,299 107,668,710 Viral Hepatitis Prevention and Control 93.270 249,656 55,725 Small Rural Hospital Improvement Grant Program 93.301 94,314 - COVID-19 Small Rural Hospital Improvement Grant Program 93.301 184,038 - Total Small Rural Hospital Improvement Grant Program 278,352 - COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Pass-Through from Heluna Health 93.323 95-2557063 971,912,951 301,107,041 State Health Insurance Assistance Program 93.324 3,983,921 3,021,352 Behavioral Risk Factor Surveillance System 93.336 388,365 - COVID-19 Public Health Emergency Response: Cooperative Agreement for Emergency Response: 93.354 20,556,732 13,046,793 Public Health Crisis Response Flexible Funding Model - Infrastructure Development and Maintenance for State Manufactured Food 93.367 767,436 - Regulatory Programs ACL Independent Living State Grants 93.369 3,588,595 3,588,595 National and State Tobacco Control Program 93.387 3,542,240 708,511 COVID-19 - Activities to Support State, Tribal, Local and Territorial (STLT) Health Department 4,335,365 4,268,059 Response to Public Health or Healthcare Crises 93.391 Improving the Health of Americans through Prevention and Management of Diabetes and Heart 93.426 2,218,313 - Disease and Stroke Every Student Succeeds Act/Preschool Development Grants 93.434 15,584,841 1,736,775 Well-Integrated Screening and Evaluation for Women Across the Nation (WISEWOMAN) 93.436 214,009 - State Physical Activity and Nutrition (SPAN) 93.439 873,451 472,953 ACL Assistive Technology 93.464 1,886,481 - Alzheimer’s Disease Program Initiative (ADPI) 93.470 328,738 328,738 Title IV-E Kinship Navigator Program 93.471 817,820 817,820 Preventing Maternal Deaths: Supporting Maternal Mortality Review Committees 93.478 385,888 - COVID-19 - Family Violence Prevention and Services/ Sexual Assault/Rape Crisis Services and 93.497 502,324 473,374 Supports COVID-19 Provider Relief Fund 93.498 3,690,107 3,690,107 Low Income Household Water Assistance Program 93.499 2,072,342 499,281 COVID-19 - Low Income Household Water Assistance Program 93.499 450,562 444,089 Total Low Income Household Water Assistance Program 2,522,904 943,370 MaryLee Allen Promoting Safe and Stable Families Program 93.556 35,211,468 33,817,690 COVID-19 - MaryLee Allen Promoting Safe and Stable Families Program 93.556 2,602,215 2,602,215 Total MaryLee Allen Promoting Safe and Stable Families Program 37,813,683 36,419,905 Temporary Assistance for Needy Families 93.558 2,858,613,333 2,391,205,198 COVID-19 Temporary Assistance for Needy Families 93.558 187,676,024 187,676,024 Total Temporary Assistance for Needy Families 3,046,289,357 2,578,881,222 Child Support Enforcement 93.563 694,188,805 545,275,945 COVID-19 Child Support Enforcement 93.563 2,293 - Total Child Support Enforcement 694,191,098 545,275,945 Child Support Enforcement Research 93.564 393,418 355,206 Refugee and Entrant Assistance State/Replacement Designee Administered Programs 93.566 53,836,402 48,995,404 Low-Income Home Energy Assistance 93.568 183,610,409 174,961,370 COVID-19 Low-Income Home Energy Assistance 93.568 99,641,980 95,845,667 Total Low-Income Home Energy Assistance 283,252,389 270,807,037 Community Services Block Grant 93.569 63,370,285 60,910,051 COVID-19 Community Services Block Grant 93.569 37,571,436 35,854,740 Total Community Services Block Grant 100,941,721 96,764,791 Refugee and Entrant Assistance Discretionary Grants 93.576 (155) - U.S. Repatriation 93.579 100,235 60,000 Refugee and Entrant Assistance Targeted Assistance Grants 93.584 (20,716) - See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 71 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS State Court Improvement Program 93.586 2,457,576 - Community-Based Child Abuse Prevention Grants 93.590 4,431,235 4,130,414 COVID-19 - Community-Based Child Abuse Prevention Grants 93.590 25,000,000 25,000,000 Total Community-Based Child Abuse Prevention Grants 29,431,235 29,130,414 Grants to States for Access and Visitation Programs 93.597 894,109 - Chafee Education and Training Vouchers Program (ETV) 93.599 7,898,063 - Adoption and Legal Guardianship Incentive Payments 93.603 11,177,820 11,177,820 Developmental Disabilities Basic Support and Advocacy Grants 93.630 7,444,243 - Support for Ombudsman and Beneficiary Counseling Programs for States Participating in Financial 93.634 1,646,864 535,652 Alignment Model Demonstrations for Dually Eligible Individuals Children's Justice Grants to States 93.643 1,702,039 1,536,676 Adult Medicaid Quality: Improving Maternal and Infant Health Outcomes in Medicaid and CHIP 93.644 (242) - Stephanie Tubbs Jones Child Welfare Services Program 93.645 28,230,361 28,230,361 Foster Care Title IV-E 93.658 1,263,494,034 1,121,219,064 COVID-19 Foster Care Title IV-E 93.658 36,735,971 36,735,971 Total Foster Care Title IV-E 1,300,230,005 1,157,955,035 Adoption Assistance 93.659 659,192,957 655,163,131 COVID-19 Adoption Assistance 93.659 70,765,799 70,765,799 Total Adoption Assistance 729,958,756 725,928,930 Social Services Block Grant 93.667 464,205,768 199,480,167 Child Abuse and Neglect State Grants 93.669 7,790,686 7,325,342 COVID-19 - Child Abuse and Neglect State Grants 93.669 136,749 136,749 Total Child Abuse and Neglect State Grants 7,927,435 7,462,091 Family Violence Prevention and Services/Domestic Violence Shelter and Supportive Services 93.671 9,238,476 8,789,823 COVID-19 Family Violence Prevention and Services/Domestic Violence Shelter and Supportive 93.671 4,917,521 4,659,919 Services Total Family Violence Prevention and Services/Domestic Violence Shelter and Supportive 14,155,997 13,449,742 Services John H. Chafee Foster Care Program for Successful Transition to Adulthood 93.674 13,014,284 11,036,693 COVID-19 - John H. Chafee Foster Care Program for Successful Transition to Adulthood 93.674 31,000,000 215,565 Total John H. Chafee Foster Care Program for Successful Transition to Adulthood 44,014,284 11,252,258 PPHF: Racial and Ethnic Approaches to Community Health Program financed solely by Public 93.738 757,229 485,989 Prevention and Health Funds COVID-19 - PPHF: Racial and Ethnic Approaches to Community Health Program financed solely by 93.738 45,033 45,033 Public Prevention and Health Funds Total PPHF: Racial and Ethnic Approaches to Community Health Program financed 802,262 531,022 solely by Public Prevention and Health Funds PPHF: Health Care Surveillance/Health Statistics – Surveillance Program Announcement: Behavioral 93.745 269 - Risk Factor Surveillance System Financed in Part by Prevention and Public Health Funds Elder Abuse Prevention Interventions Program 93.747 247,457 130,453 COVID-19 - Elder Abuse Prevention Interventions Program 93.747 1,991,201 1,991,201 Total Elder Abuse Prevention Interventions Program 2,238,658 2,121,654 Children's Health Insurance Program 93.767 2,692,763,149 - COVID-19 Children's Health Insurance Program 93.767 223,828,688 - Total Children's Health Insurance Program 2,916,591,837 - Opioid STR 93.788 108,479,704 - Money Follows the Person Rebalancing Demonstration 93.791 10,377,191 - State Survey Certification of Health Care Providers and Suppliers (Title XIX) Medicaid 93.796 29,180,549 - Hospital Preparedness Program (HPP) Ebola Preparedness and Response Activities 93.817 2,389,531 2,389,531 Promoting Population Health through Increased capacity in Alcohol Epidemiology 93.845 40,010 - Maternal, Infant and Early Childhood Home Visiting Grant 93.870 20,289,421 16,510,984 COVID-19 - Maternal, Infant and Early Childhood Home Visiting Grant 93.870 102,476 - Total Maternal, Infant and Early Childhood Home Visiting Grant 20,391,897 16,510,984 National Bioterrorism Hospital Preparedness Program 93.889 27,879,624 10,877,386 COVID-19 National Bioterrorism Hospital Preparedness Program 93.889 481,413 481,413 Total National Bioterrorism Hospital Preparedness Program 28,361,037 11,358,799 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 72 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Cancer Prevention and Control Programs for State, Territorial and Tribal Organizations 93.898 9,796,264 190,066 Grants to States for Operation of State Offices of Rural Health 93.913 (5,834) - HIV Care Formula Grants 93.917 144,569,319 27,753,907 COVID-19 HIV Care Formula Grants 93.917 546,850 546,850 Total HIV Care Formula Grants 145,116,169 28,300,757 HIV Prevention Activities Health Department Based 93.940 23,730,888 12,410,130 Human Immunodeficiency Virus (HIV)/Acquired Immunodeficiency Virus Syndrome (AIDS) 93.944 1,546,309 330,167 Surveillance Tuberculosis Demonstration, Research, Public and Professional Education 93.947 93,112 - Block Grants for Community Mental Health Services 93.958 115,546,212 - COVID-19 - Block Grants for Community Mental Health Services 93.958 40,465,326 - Total Block Grants for Community Mental Health Services 156,011,538 - Block Grants for Prevention and Treatment of Substance Abuse 93.959 236,316,385 - COVID-19 - Block Grants for Prevention and Treatment of Substance Abuse 93.959 112,415,091 - Total Block Grants for Prevention and Treatment of Substance Abuse 348,731,476 - Sexually Transmitted Diseases (STD) Prevention and Control Grants 93.977 7,839,362 1,712,715 Mental Health Disaster Assistance and Emergency Mental Health 93.982 92,002,003 - Preventive Health and Health Services Block Grant 93.991 12,227,471 1,144,507 Maternal and Child Health Services Block Grant to the States 93.994 38,422,509 16,728,410 Other - Department of Health and Human Services 93.U07 28,190,121 - Total Excluding Clusters 12,929,980,476 6,525,722,286 Aging Cluster Special Programs for the Aging, Title III, Part B, Grants for Supportive Services and Senior Centers 93.044 43,147,927 41,113,733 COVID-19 Special Programs for the Aging, Title III, Part B, Grants for Supportive Services and Senior 93.044 13,900,236 12,781,347 Centers Total Special Programs for the Aging, Title III, Part B, Grants for Supportive Services and 57,048,163 53,895,080 Senior Centers Special Programs for the Aging, Title III, Part C, Nutrition Services 93.045 82,668,089 80,951,044 COVID-19 Special Programs for the Aging, Title III, Part C, Nutrition Services 93.045 36,305,641 32,794,951 Total Special Programs for the Aging, Title III, Part C, Nutrition Services 118,973,730 113,745,995 Nutrition Services Incentive Program 93.053 13,235,556 13,235,556 Total Aging Cluster 189,257,449 180,876,631 CCDF Cluster Child Care Disaster Relief 93.489 2,582,640 - Child Care and Development Block Grant 93.575 910,682,628 535,707,156 COVID-19 Child Care and Development Block Grant 93.575 480,643,141 480,643,141 Total Child Care and Development Block Grant 1,391,325,769 1,016,350,297 Child Care Mandatory and Matching Funds of the Child Care and Development Fund 93.596 272,636,636 224,598,756 Total CCDF Cluster 1,666,545,045 1,240,949,053 Head Start Cluster Head Start 93.600 5,139,542 3,310,923 COVID-19 Head Start 93.600 259,396 259,396 Total Head Start 5,398,938 3,570,319 Total Head Start Cluster 5,398,938 3,570,319 Medicaid Cluster State Medicaid Fraud Control Units 93.775 39,554,453 - State Survey and Certification of Health Care Providers and Suppliers (Title XVIII) Medicare 93.777 51,529,774 - COVID-19 - State Survey and Certification of Health Care Providers and Suppliers (Title XVIII) 93.777 3,856,190 - Medicare Total State Survey and Certification of Health Care Providers and Suppliers (Title XVIII) Medicare 55,385,964 - Medical Assistance Program 93.778 75,669,114,949 - COVID-19 Medical Assistance Program 93.778 5,868,420,502 - Total Medical Assistance Program 81,537,535,451 - Total Medicaid Cluster 81,632,475,868 - Total U.S. Department of Health and Human Services 96,423,657,776 7,951,118,289 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 73 June 2024 PASS-THROUGH ASSISTANCE ENTITY AMOUNTS PASSED FEDERAL AGENCY/FEDERAL PROGRAM TITLE/ LISTING IDENTIFYING FEDERAL THROUGH TO PASS-THROUGH ENTITY OR PROGRAM NUMBER NUMBER EXPENDITURES SUBRECIPIENTS Corporation for National and Community Service State Commissions 94.003 1,070,699 - AmeriCorps 94.006 33,880,006 33,706,541 Training and Technical Assistance 94.009 58,530 - Volunteer Generation Fund 94.021 14,513 - Total Excluding Clusters 35,023,748 33,706,541 Foster Grandparent/Senior Companion Cluster Foster Grandparent Program 94.011 1,162,208 - Total Foster Grandparent/Senior Companion Cluster 1,162,208 - Total Corporation for National and Community Service 36,185,956 33,706,541 Executive Office of the President Pass-Through from INCH/LA Police Chief's Association/Riverside County 95.001 G19LA0007A 3 - Pass-Through from INCH/LA Police Chief's Association/Riverside County 95.001 G20LA0007A 92,140 - Pass-Through from LA Clear/LA Police Chief's Association/City of Monrovia 95.001 G19LA0006A 54,095 - Pass-Through from LA Clear/LA Police Chief's Association/City of Monrovia 95.001 G20LA0006A 1,303,141 - Pass-Through from The Western States Information Network 95.001 G21OR0003A 107,861 - Total High Intensity Drug Trafficking Areas Program 1,557,240 - Total Excluding Clusters 1,557,240 - Total Executive Office of the President 1,557,240 - Social Security Administration Disability Insurance/SSI Cluster Social Security Disability Insurance 96.001 243,624,829 - Total Disability Insurance/SSI Cluster 243,624,829 - Total Social Security Administration 243,624,829 - U.S. Department of Homeland Security Non-Profit Security Program 97.008 6,425,257 6,425,257 Boating Safety Financial Assistance 97.012 3,753,059 2,151,328 Community Assistance Program State Support Services Element (CAP-SSSE) 97.023 573,768 - Flood Mitigation Assistance 97.029 654,481 614,198 Crisis Counseling 97.032 919,199 919,199 Disaster Grants - Public Assistance (Presidentially Declared Disasters) 97.036 1,169,039,438 1,014,948,239 Hazard Mitigation Grant 97.039 75,925,058 60,475,848 National Dam Safety Program 97.041 108,346 - Emergency Management Performance Grants 97.042 17,340,097 13,405,899 COVID-19 Emergency Management Performance Grants 97.042 14,098,722 5,784,170 Total Emergency Management Performance Grants 31,438,819 19,190,069 Cooperating Technical Partners 97.045 613,101 - Fire Management Assistance Grant 97.046 12,922,693 2,947,890 BRIC: Building Resilient Infrastructure and Communities 97.047 5,274,648 4,758,997 COVID-19 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs 97.050 10,548,393 - Homeland Security Grant Program 97.067 165,518,471 144,161,747 Earthquake Consortium 97.082 617,168 567,849 Disaster Assistance Projects 97.088 4,625,796 4,276,507 Total Excluding Clusters 1,488,957,695 1,261,437,128 Total U.S. Department of Homeland Security 1,488,957,695 1,261,437,128 Total Expenditures of Federal Awards $ 181,345,132,318 $ 30,218,535,044 See accompanying notes to the Schedule of Expenditures of Federal Awards. California State Auditor Report 2022-002 74 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 75 June 2024 Notes to the Schedule of Expenditures of Federal Awards California State Auditor Report 2022-002 76 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 77 June 2024 STATE OF CALIFORNIA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2022 1. GENERAL The accompanying Schedule of Expenditures of Federal Awards (Schedule) presents the expenditures for all federal award programs received by the State of California (State) for the fiscal year ended June 30, 2022, except for federal awards received by the University of California system, a component unit of the State, the California State University system, the California State Water Resources Control Board Water Pollution Control Revolving Fund, the California State Water Resources Control Board Safe Drinking Water State Revolving Fund, and the California Housing Finance Fund of the California Housing Finance Agency, a component unit of the State. While these entities’ operations are included in the State’s basic financial statements, these entities engaged other auditors to perform an audit in accordance with the U.S. Office of Management and Budget, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200) also referred to as the “Uniform Guidance.” As noted above, the Schedule presents only a portion of the State’s operations. The Schedule is not intended to and does not present the financial position, changes in net position/fund balance, or cash flows of the State. 2. BASIS OF ACCOUNTING The federal awards expenditures reported in the Schedule are prepared from records maintained by each State department and reported on the cash basis. Under the cash basis of accounting, expenditures are reported when paid by the State. All expenditures for each federal program are net of applicable program income and refunds. State departments’ records are periodically reconciled to the federal receipts and department expenditure reports maintained by the California State Controller’s Office. Negative amounts shown in the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. 3. ASSISTANCE LISTING NUMBER The Assistance Listing Number (ALN) and federal program titles listed in the Schedule were obtained from the federal funding agency, the pass-through grantor, or the U.S. General Services Administration’s System for Award Management (SAM). The ALN is a five-digit number. The first two digits identify the federal funding agency and the last three digits identify the specific federal program. If a valid three-digit ALN extension is unknown or unavailable, the letter “U” is used to indicate “unidentified”, followed by a two digit number. COVID-19 Emergency Acts expenditures are denoted by the prefix COVID-19 in the federal program title. California State Auditor Report 2022-002 78 June 2024 4. NONCASH FEDERAL AWARDS The State is the recipient of federal awards that do not result in cash receipts or disbursements. These noncash federal awards include a variety of items, such as food and nutritional purchase assistance, commodities, vaccines, or federal excess property. Noncash awards received by the State are included in the Schedule. Noncash awards for the fiscal year ended June 30, 2022, are as follows: Noncash Awards for Assistance Listing the Fiscal Year Ended Number Federal Program Title June 30, 2022 10.178 Trade Mitigation Program Eligible Recipient Agency Operational Funds $ 4 8,077,168 10.551 Supplemental Nutrition Assistance Program 13,128,155,870 10.551 COVID-19 Supplemental Nutrition Assistance Program 5,604,552,136 10.555 National School Lunch Program 2 18,814,114 10.565 Commodity Supplemental Food Program 33,297,453 10.569 Emergency Food Assistance Program (Food Commodities) 1 02,184,982 10.569 COVID-19 - Emergency Food Assistance Program (Food Commodities) 64,958,446 39.003 Donation of Federal Surplus Personal Property 6 44,149 93.268 Immunization Cooperative Agreements 5 22,007,656 Total $ 1 9,722,691,974 5. LOANS, LOAN GUARANTEES OUTSTANDING, AND INSURANCE IN EFFECT Loans and loan guarantees outstanding, and insurance in effect at June 30, 2022, are summarized in the schedule below. Loans/Loan Assistance Listing Guarantees Outstanding Insurance in Effect Number Federal Program Title as of June 30, 2022 as of June 30, 2022 64.114 Veterans Housing Guaranteed and Insured Loans $ - $ 173,535,208 81.041 State Energy Program 3,792,430 - Total $ 3,792,430 $ 173,535,208 6. PASS-THROUGH AWARDS The State receives the majority of its federal assistance directly from the federal awarding agencies. Federal awards received by the State from a pass-through entity are included in the Schedule and are italicized. 7. SUBRECIPIENTS The State awards federal funds to non-federal entities (subrecipients) to assist with the implementation and administration of federal programs. Subrecipients are monitored by the State to ensure federal funds are expended in accordance with authorized laws, regulations, and the provisions of contracts or grant agreements. Amounts provided to subrecipients from each federal program are included in a separate column in the Schedule. California State Auditor Report 2022-002 79 June 2024 8. RELATIONSHIP TO FEDERAL FINANCIAL REPORTS The regulations and guidelines governing the preparation of federal financial reports vary by federal agency and among programs. Accordingly, the amounts reported in the federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the cash expenditure basis as explained in Note 2. 9. INDIRECT COST RATE The majority of State entities claim indirect costs in accordance with a federally approved indirect cost rate plan. State entities that utilize the ten percent de minimis indirect cost rate as allowed under the Uniform Guidance are as follows: • Governor’s Office of Planning and Research • California Tahoe Conservancy • California Sierra Nevada Conservancy • California Emergency Medical Services Authority • California Department of Veterans Affairs • California Delta Protection Commission • Colorado River Board of California The Governor’s Office of Planning and Research, the California Tahoe Conservancy, and the California Department of Veterans Affairs also administer other federal programs that utilize other indirect cost rate methodologies. 10. DONATED PERSONAL PROTECTIVE EQUIPMENT (UNAUDITED) The State is the recipient of federally donated Personal Protective Equipment (PPE). The fair market value of the PPE at the time of receipt was $193,471,760. California State Auditor Report 2022-002 80 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 81 June 2024 Summary Schedule of Prior Audit Findings Prepared by Department of Finance California State Auditor Report 2022-002 82 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 83 June 2024 Reference Number: 2021-001 State Administering Department: California Employment Development Department (EDD) Audit Finding: Material Weakness and Material Instance of Noncompliance. Due to the unprecedented impacts from the COVID-19 pandemic, the Employment Development Department (EDD) was unable to timely report to Finance through the Database with accurate and reliable federal cash basis expenditures for its largest federal award programs that it administers, the Unemployment Insurance (ALN 17.225) and Presidential Declared Disaster Assistance to Individuals and Households – Other Needs (ALN 97.050) programs. The delay resulted in Finance being unable to compile and produce a complete and final approved Schedule until December 2022. Although initial estimated expenditure amounts were reported by EDD for both programs, $90.6 billion and $7.5 billion, respectively, the final amounts reported in the Schedule for both programs were ultimately updated to $92.7 billion and $6.5 billion, respectively. EDD should continue to evaluate its existing process and controls related to its ability to properly account for, report, and timely submit complete and accurate federal award cash basis expenditures to the Database, which affords Finance the ability to timely compile and produce a final Schedule pursuant to the Uniform Guidance. Status of Corrective Action: Partially Corrected. The deferred transition to the Financial Information System for California (FI$Cal) and the COVID-19 pandemic have resulted in delays in obtaining the data needed to submit year-end financial statements to the California State Controller’s Office (SCO) and report in the Database. These delays resulted in EDD reporting estimated expenditures into the Database and updating once actual expenditures were known. Below is EDD’s actual and anticipated submittal timeline for the three most recent fiscal years: Fiscal year ending June 30, 2021 • Financial statements were submitted to SCO, July 2022. • Expenditures were finalized in the Database, November 2022. Fiscal year ending June 30, 2022 • Financial statements were submitted to SCO, March 2023. • Initial expenditures were finalized in the Database, July 2023. Updates are needed once the ineligible payment dataset is known. The goal is to complete all updates by October 2023. California State Auditor Report 2022-002 84 June 2024 Fiscal year ending June 30, 2023 • The goal is to submit financial statements to SCO in December 2023. • The goal is to finalize the expenditures in the Database within a month after submitting the financial statements. The ability to finalize the expenditures is dependent on the availability of the ineligible payment dataset. If there are no delays in submitting the 2022-23 financial statements, this will be the first time since the FI$Cal transition that EDD can submit year-end financial statements in the same calendar year they are due. While this is still past SCO's deadline, it positions EDD to submit timely 2023-24 financial statements. Refer to finding 2022-001. Reference Number: 2021-002 State Administering Department: California Department of Public Health (Public Health) Audit Finding: Material Weakness and Instance of Noncompliance. Public Health failed to include $479,996,082 of federal expenditures and $367,405,431 of subrecipient expenditures for the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program (ALN No. 93.323) in the Database, which Finance uses to prepare the State’s annual Schedule. The error resulted in an additional major program that was required to be audited as a major program in accordance with the Uniform Guidance and the State having to reissue its federal compliance audit report for the fiscal year ended June 30, 2021. Status of Corrective Action: Partially Corrected. Public Health properly included Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program (ALN No. 93.323) program expenditures in the Schedule for the fiscal year end June 30, 2022. Refer to finding 2022-002. Reference Number: 2021-003 Assistance Listing Number: 10.557 State Administering Department: California Department of Public Health (Public Health) Audit Finding: Eligibility. During the fiscal year ended June 30, 2020, the Special Supplemental Food Program for Women, Infants and Children (WIC) nutrition program implemented phase 1 of a new management information system known as the Women, Infants, and Children Web Information System Exchange (WIC-WISE) in a two-phased approach to replace the WIC Management Information Systems (WIC-MIS). California State Auditor Report 2022-002 85 June 2024 WIC-WISE is programmed such that updates to eligibility information overwrites existing data. As a result, key data and documentation to support the initial participant eligibility is removed during the recertification process. The California Department of Public Health, WIC Division requested a correction to WIC-WISE to retain eligibility history in the “Cert History Report” when subsequent eligibility information is entered. This correction will be included in a future release targeted for May 2023. As such, the system defect still existed during the fiscal year ended June 30, 2021. Accordingly, sample testing was not performed. WIC-WISE system updates should be promptly implemented and tested to ensure that participant data and eligibility documentation is appropriately retained within the system. Status of Corrective Action: Remains Uncorrected. Public Health’s WIC Division agrees that the WIC-WISE system does not currently store eligibility history that should be included in the “Cert History Report” and the initial eligibility data is overwritten when subsequent eligibility information is entered into WIC-WISE. However, WIC-WISE includes preventative internal stops or checkpoints that disallow ineligible individuals to be certified and issued benefits (e.g., over income limits, not a California resident, no nutrition risk factor, etc.). User acceptance testing vetted these items prior to system implementation in 2019-20. The WIC Division has entered Defect Correction #6972 in the Team Foundation Services, the tracking mechanism used to track system changes and defects. The Defect Correction #6972 supports a system change to ensure initial eligibility information is retained when subsequent eligibility information is entered into WIC-WISE. This correction is currently in active user acceptance testing and the updated report coding is in progress. Implementation of this correction is expected in Fall 2023 or sooner. Refer to finding 2022-003. Reference Number: 2021-004 Assistance Listing Number: 17.225 State Administering Department: California Employment Development Department (EDD) Audit Finding: Activities Allowed or Unallowed and Eligibility. During the fiscal year ended June 30, 2021, EDD continued its administration of the Pandemic Unemployment Assistance (PUA) program, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19 relief in unemployment compensation. Under the CARES Act, the PUA program was to be administered in accordance with the Disaster California State Auditor Report 2022-002 86 June 2024 Unemployment Assistance (DUA) program under section 625 of Title 20, Code of Federal Regulations. Claimants eligible for PUA benefits were paid additional benefits under the Federal Pandemic Unemployment Compensation program (FPUC). In EDD’s administration of the PUA and FPUC programs, $17,143,006,979 in benefit payments were estimated to be potentially fraudulent payments. The estimate was made by the Unemployment Insurance Branch and was based on data parameters to identify claimants that received benefits that matched imposter fraud for identity or eligibility fraud for misrepresented information. Out of 138 PUA benefit payments tested, there were 26 benefit payments to claimants determined to be potentially fraudulent whose identity was not sufficiently verified. EDD should continue to evaluate and enhance it fraud detection and prevention internal controls, increasing the use of automation features and other analytical tools in an effort to increase efficiency, continue to reduce workload, and enhance detection and timely identification of unemployment benefit fraud. Status of Corrective Action: Remains Uncorrected. Since fiscal year 2020-21, EDD has implemented dozens of strict anti-fraud measures to continue to evaluate and enhance its fraud detection. These measures, as described in the response to the 2019-20 California State Auditor Finding Reference Number 2020-005, included but were not limited to, crossmatching claimant information against law enforcement and government databases, and implementing rigorous new identity verification procedures. As a result, EDD caught and stopped multiple fraud attempts using the enhancements placed into effect in September 2020 EDD implemented the following measures to address the nationwide fraud attempts perpetrated against the new emergency federal benefit programs in 2020-21: • Implemented additional crossmatches in September 2020 to detect multiple claims per address. • Ceased automatically backdating PUA claims under federal rules in September 2020. • Strengthened identity verification procedures in October 2020 by implementing ID.me. • Implemented additional crossmatches in November 2020 against state inmate information. • Vetted applications against law enforcement databases and other tools provided by Thomson Reuters in December 2020 to further curb identity and non-identity fraud. • Established a 1099-G call center to help identity theft victims deal with any tax-related questions. Refer to finding 2022-004. California State Auditor Report 2022-002 87 June 2024 Reference Number: 2021-005 Assistance Listing Number: 17.225 State Administering Department: California Employment Development Department (EDD) Audit Finding: Activities Allowed or Unallowed and Eligibility. During the fiscal year ended June 30, 2020, EDD implemented the Pandemic Unemployment Assistance (PUA) program, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19 relief in unemployment compensation. Under the CARES Act, the PUA program was to be administered in accordance with the Disaster Unemployment Assistance (DUA) program under section 625 of Title 20, Code of Federal Regulations. The amount of PUA payable to an unemployed or unemployed self-employed individual for a week of total unemployment shall be the weekly amount of compensation the individual would have been paid as regular compensation, as computed under the provisions of the applicable State law for a week of total unemployment. The weekly amount determination is calculated using the wages reported by the claimant. Upon receipt of a PUA claim, EDD would verify wages reported to ensure accurate weekly benefit amounts under PUA. Out of 138 PUA benefit payments tested, there were 4 claimants whose wages were not reduced or suspended due to a lack of wage verification and 8 claimants whose self-employment were not verified. EDD should continue to look for ways to enhance its capacity to perform timely wage verifications to ensure accurate eligibility determinations and claimant benefit payments. Status of Corrective Action: Remains Uncorrected. Given the unprecedented volume of unemployment insurance claims during the federal disaster, approximately 20 million claims compared to 3.8 million during the Great Recession, EDD has taken actions to speed payments to eligible claimants whenever possible. For example, EDD launched a Conditional Payment Program in July 2021 to speed payments to claimants who were certified for benefits and have already received at least one week of benefits in the past, but whose payments were later pending for more than two weeks. EDD also boosted its capacity to complete workloads, prioritize timely payments, and employ automation among other measures. As reported in the response to the 2019-20 California State Auditor Finding Reference Number 2020-006, EDD began automatically crossmatching EDD wage records and Franchise Tax Board (FTB) records in November 2020, to assist in verifying the income of PUA claimants. Claimants who could not be automatically verified through the FTB record match were required to submit additional documentation to EDD for manual reviews. California State Auditor Report 2022-002 88 June 2024 Regarding the manual processing of the income documents to substantiate the PUA weekly benefit amounts that have been increased above the minimum California weekly benefit amount (WBA) of $167, in June 2022, EDD submitted a blanket waiver application to the U.S. Department of Labor (DOL), pursuant to the DOL Unemployment Insurance Program Letter 20-21, Change 1. EDD’s application is pending DOL’s determination. If approved, the blanket waiver application would cover any overpayments for claimants who, through no fault of their own, failed to provide proof of income substantiation to support the increase or whose WBA would have been decreased because the proof they provided was insufficient. To address the employment verification or self-employment substantiation (known in California as “Self- employment/Employment Substantiation” or “SEES”), the verification process is being implemented in two phases. Phase One of the SEES effort was implemented on November 10, 2021, and involved notifying claimants registered in California’s UI Online (UIO) system by email and text of their requirements to provide SEES documentation. Phase Two will involve notifying claimants who did not respond to the UIO request for SEES documentation and those who are not registered in UIO, via a paper notice mailed through the United States Postal Service. EDD submitted a blanket waiver application in June 2022 to DOL regarding this issue. The blanket waiver application covers any overpayments for claimants who, through no fault of their own, provided insufficient documentation or did not provide any documentation. EDD recently received approval for the blanket waiver for the SEES population and is in the process of determining the next steps. Regarding questioned costs, EDD will further assess implementation based on the DOL’s decision. If the blanket waiver of $325,948 is approved, EDD will pursue recovery of the associated overpayments from individuals deemed ineligible for benefits, to the extent allowable under federal and state laws. Any overpayments recovered will be returned to the accounts from which they were paid. Refer to finding 2022-005. Reference Number: 2021-006 Assistance Listing Number: 17.225 State Administering Department: California Employment Development Department (EDD) Audit Finding: Activities Allowed or Unallowed and Eligibility. In EDD’s administration of the Unemployment Insurance program, $1,440,071,129 in benefit payments were estimated to be potentially fraudulent payments. The estimate was made by the Unemployment Insurance Branch and was based on data California State Auditor Report 2022-002 89 June 2024 parameters to identify claimants that received benefits that matched imposter fraud for identity or eligibility fraud for misrepresented information. The Unemployment Insurance Branch of EDD reviews unemployment insurance claims of claimants for involuntary separation to ensure separations were for valid reasons under the Unemployment Insurance Code. Out of 138 unemployment insurance benefit payments tested, there were 4 claimants receiving benefits, whose reasons for involuntary separation indicated separation reasons due to voluntary quitting without good cause. EDD should continue its work catching up with the adjudication process to support proper eligibility determinations and decrease improper payments to ineligible claimants. Status of Corrective Action: Remains Uncorrected. EDD experienced an unprecedented workload increase because of the COVID-19 pandemic. DOL provided the flexibility to augment state civil services staff to perform unemployment insurance program related activities and contract staff to process unemployment compensation administrative activities. In September 2021, EDD entered into a contract with the vendor Maximus to assist in processing deferred workloads. EDD developed a workload plan that prioritized its deferred workloads outlined in the risk assessment performed by Accenture (i.e., high-risk cases were processed before low-risk cases) to ensure all deferred workloads were liquidated. As of April 30, 2023, EDD fully liquidated its deferred workloads in alignment with the projected workload forecast. Additionally, EDD’s eligibility determinations are current to support the timely and proper determination of claimants’ eligibility, decreasing the volume of improper payments issued to claimants. Refer to finding 2022-006. Reference Number: 2021-007 Assistance Listing Number: 21.019 State Administering Department: California Business, Consumer Services, and Housing Agency California Department of Education California Department of Social Services Audit Finding: Subrecipient Monitoring. For 2 of 60 subawards tested, the State did not communicate required subaward information to its subrecipients of the Coronavirus Relief Fund (CRF) program at the time of the subaward, or when the State became aware of changes in subaward information, including identification that the subaward funds represented federal funding. Also, for 4 of 60 direct costs tested, the transactions were subsequently determined to be subawards, for which the required subaward information was California State Auditor Report 2022-002 90 June 2024 not properly communicated to the subrecipients. The 4 direct costs transactions were from the Business, Consumer Services and Housing Agency; 1 of the subawards was from the California Department of Education; and 1 of the subawards was from the California Department of Social Services. The state administering departments identified above should review all subawards provided which were funded using CRF program funds, provide the subrecipients with subaward information required by 2 CFR 200.332(a), and determine whether the subrecipients properly reported CRF subawards and related expenditures in their respective schedule of expenditures of federal awards pursuant to 2 CFR 200.502. If federal subawards were not reported, the state administering departments should perform appropriate follow-up monitoring procedures. Status of Corrective Action: BCSH – Partially Corrected. The California Interagency Council on Homelessness (Cal ICH) within BCSH will conduct mandatory desk reviews of the CRF subawards to verify that subrecipients properly reported their CRF awards and related expenditures pursuant to 2 CRF 200.502. This process is currently underway and is planned to be completed in one year. Additionally, Cal ICH has developed an improved communication system between the leadership and program staff to ensure changes are clearly communicated. This will also ensure Cal ICH’s subrecipients are notified in a timely manner upon any changes in subaward information, such as identifying if subaward funds represent federal funding so that expenditures are spent in accordance with federal statutes, regulations, and the terms and conditions of federal awards. This process has been completed. CDE – Fully Corrected. CDE reviewed its CRF reporting and determined CRF subawards and related expenditures may not have been completely reported in the respective Schedule of its subrecipients. CDE has notified all subaward recipients regarding the change in funding and requested that they review their financial statements to determine if any corrections in reporting are needed. All recipients were directed to contact and submit any revised information to Social Services, which is now the control agency responsible for administering the impacted programs. Social Services - Fully Corrected. Counties were formally notified of the program changes at the state level in December 2022 via County Fiscal Letter 22/23-31. As part of Social Services’ regular fiscal on-site monitoring review process of counties selected based on risk-assessment criteria, Social Services will include in the on- site monitoring review a discussion regarding all subawards funded using CRF program funds and whether the subrecipients properly reported their CRF subawards and related expenditures in the respective Schedule. The on-site monitoring reviews began in April 2023 and will continue through June 2024. California State Auditor Report 2022-002 91 June 2024 Reference Number: 2021-008 Assistance Listing Numbers: 93.767 93.778 State Administering Department: California Department of Health Care Services (Health Care Services) Audit Finding: Activities Allowed or Unallowed. Fifteen of 56 contractor counties of Short-Doyle funding were tested and seven had not submitted their cost reports by the December 31 due date. Two of the seven contractor counties had not submitted their cost reports for fiscal year 2019-20 (more than 12 months late) and five of the seven contractor counties have subsequently submitted their cost reports for fiscal year 2020-21. Although the Mental Health Division of Health Care Services did take the required action of notifying the seven contractor counties in writing within 30 days of the noncompliance, it has not taken any additional action necessary to ensure contract and performance compliance. The cost reports are the basis for the allocation of payments made to contractor counties providing mental health services to eligible beneficiaries and serve to provide the Mental Health Division with fiscal oversight for contract and performance compliance. Health Care Services should develop and follow policies and procedures to take additional action for significantly late annual cost reports. These policies and procedures should include imposing sanctions, including, but not limited to, fines, penalties, the withholding of payments, probationary or corrective actions, or any other actions deemed necessary to promptly ensure contract and performance compliance. Status of Corrective Action: Partially Corrected. Health Care Services is currently working to implement the sanctions policy communicated in the Behavioral Health Information Notice 22-045, as included in Health Care Services’ response to the 2019-20 California State Auditor Finding Reference Number 2020-007. Due to the timing of the communication, the policy has not yet impacted the timeliness of the counties’ cost report submissions. Health Care Services will provide the implemented sanction policy, evidence of corrected managed care plans, and documentation supporting how the new monitoring plan will help determine counties’ compliance upon full implementation. Due to the complex nature of developing, reviewing, publishing, and revising a sanction process, Health Care Services anticipates this will be implemented by December 31, 2023. Refer to finding 2022-008. California State Auditor Report 2022-002 92 June 2024 Reference Number: 2021-009 Assistance Listing Number: 93.917 State Administering Department: California Department of Public Health (Public Health) Audit Finding: Cash Management. Out of 25 cash drawdowns reviewed, one sample did not meet the requirements to minimize the timing between Public Health’s Office of AIDS receipt of Federal funds and disbursement of those funds for program purposes. The funds from this drawdown were designated to pay 33 vendor invoices. However, payments for 23 of these invoices were made between 16 to 175 days after the drawdown occurred. One invoice was paid 598 days after the date of the drawdown. The Public Health’s Office of AIDS (OA) should continue to monitor compliance with its policies to ensure staff follow established guidelines to minimize the timing between drawdown and disbursement of Federal funds. Status of Corrective Action: Fully Corrected. OA has implemented the recommendation. OA has taken steps to resolve the issue by realigning staff and responsibilities within its Support Branch for a greater focus on fiscal reporting and invoice processing. The Care Branch, whose invoices were audited, has also put an increased emphasis on tracking and reviewing invoices for payments to prevent similar delays. The two subsequent Ryan White grant closeouts had all invoices processed and paid prior to the federal financial reporting closeout deadlines to ensure that invoice payments were not held for extended timeframes. Reference Number: 2021-010 Assistance Listing Number: 93.767 State Administering Department: California Department of Health Care Services (Health Care Services) Audit Finding: Eligibility. Out of 40 Children’s Health Insurance Program (CHIP) beneficiaries tested, there was one beneficiary where the transaction sent to terminate eligibility failed and eligibility continued in error, and one instance where the beneficiary remained in a transitional aid code for an extended period. Through subawards, Health Care Services has delegated performance of eligibility determinations to California county welfare agencies that collect and record this information in their respective eligibility systems (collectively known as the Statewide Automated Welfare System [SAWS]) and the California Healthcare Eligibility, Enrollment, and Retention System (CalHEERS), which transmit eligibility data to the Health Care Services’ Medi-Cal Eligibility Data System (MEDS). Health Care Services then pays: (1) managed care plans monthly to provide California State Auditor Report 2022-002 93 June 2024 eligible services for beneficiaries (Managed Care); (2) medical providers for services provided directly to beneficiaries (Fee for Service), and (3) the U.S. Centers for Medicare and Medicaid Services (CMS) for Medicare premiums (Premiums). Health Care Services should continue with the quality control process used to monitor all MEDS alerts to ensure that the system has a process of identifying and alerting caseworkers to the review of beneficiaries that may be still receiving benefits when deemed ineligible. Health Care Services should continue its efforts to utilize focus reviews to assess counties’ risk of delays in renewal activities. Health Care Services should then work directly with those county welfare agencies to implement policies and procedures to improve their compliance status. Health Care Services should ensure there are controls in place to ensure all beneficiaries have the proper supporting documentation to be eligible. Status of Corrective Action: Partially Corrected. CMS has confirmed that the continuous enrollment requirement was ended on March 31, 2023 and has been delinked from the public health emergency in the Consolidation Appropriations Act of 2023. Health Care Services began the continuous coverage requirement unwinding activities on April 1, 2023, including the resumption of renewals. Per the current county oversight timeline established within the California Advancing and Innovating in Medi-Cal (CalAIM) implementation timeline, the oversight and monitoring activities resumption, which include focus reviews and MEDS alerts processing, shall begin 14 months after the onset of the continuous coverage requirement unwinding activities; therefore, the new implementation date to initiate these activities is May 1, 2024. In the interim, Health Care Services is in the process of providing counties with updated guidance on prioritizing MEDS alerts processing that directly impacts eligibility. Health Care Services is also considering the feasibility of developing additional MEDS training for county staff. In addition, Health Care Services will review county data to identify counties that are not meeting renewal and application processing timelines during the unwinding period. Health Care Services will then perform an informal review of those counties to identify the reasons for the delay in processing time. However, during the unwinding, counties are not subject to any adverse actions as a result of these reviews. Reference Number: 2021-011 Assistance Listing Number: 93.917 State Administering Department: California Department of Public Health (Public Health) California State Auditor Report 2022-002 94 June 2024 Audit Finding: Eligibility. Our sample of 60 participants from a population of 28,417 participants who received benefits during the fiscal year identified 1 participant’s annual recertification was not conducted in a timely manner and 16 participants who did not submit all required documentation, including proof of HIV/AIDS diagnosis, proof of residency, and income documentation to verify their annual MAGI did not exceed 500 percent Federal Poverty Level based on household size and income. The AIDS Drug Assistance Program (ADAP) Branch should continue to monitor compliance with its policies to ensure enrollment workers and secondary reviews of ADAP applications follow the established guidelines and retain acceptable documentation to support eligibility determinations and timely annual recertification. Applications that have been granted an eligibility exception (i.e., Temporary Access Period, Medi-Cal Eligibility Exception Request, or Eligibility Exception Request) should be reviewed in a timely manner to ensure clients who do not provide the required documentation within the approved extension period are disenrolled in a timely manner. Status of Corrective Action: Remains Uncorrected. ADAP developed and implemented the internal quality assurance (QA) process in April 2022 to ensure that secondary reviews of ADAP applications consistently enforce the existing guidelines, including maintaining acceptable supporting documentation and meeting eligibility requirements. During 2020-21 and through December 2021, ADAP issued multiple policy memos to respond to the COVID-19 pandemic. These policy memos enabled staff and enrollment workers to defer documentation collection when necessary, and ensure clients impacted by the pandemic and associated site closures did not lose eligibility and access to life-saving medications and comprehensive healthcare. These flexibilities in Public Health’s guidelines were implemented based on guidance from the Health Resources and Services Administration (HRSA), which encouraged ADAP to reassess Public Health’s eligibility and recertification policies and procedures and remove barriers that may impede social distancing or other public health strategies necessary to minimize COVID-19 transmission. This documentation deferral expired on December 31, 2021. Starting January 1, 2022, ADAP enforced full documentation and eligibility requirements, combined with ongoing QA efforts, to mitigate future findings in ADAP applications dated January 1, 2022 onward. Refer to finding 2022-010. Reference Number: 2021-012 Assistance Listing Numbers: 93.044 93.045 93.053 California State Auditor Report 2022-002 95 June 2024 State Administering Department California Department of Aging (Aging) Audit Finding: Reporting. We examined the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Aging Cluster for the fiscal year ended June 30, 2021, pertaining to 7 subrecipients of federal funds out of a population of 33. The required FFATA reporting submissions pertaining to these subawards were made; however, the submission occurred in July 2022, 21 months after the official submission due date. We recommend that Aging update its current practices for managing subaward reporting under the FFATA to ensure that applicable subawards are identified and the required submissions are made timely. Status of Corrective Action: Fully Corrected. Aging developed and implemented the FFATA Reporting procedures in June 2023 and dedicated staff to manage the subaward and reporting processes. Aging met the federal reporting due date for the 2022-23 FFATA reporting. Reference Number: 2021-013 Assistance Listing Numbers: 93.767 93.778 State Administering Department: California Department of Health Care Services (Health Care Services) Audit Finding: Reporting. We examined the Federal Funding Accountability and Transparency Act (FFATA) reporting for the Medicaid Cluster and Children’s Health Insurance Program for the fiscal year ended June 30, 2021. The required FFATA reporting submissions pertaining to these subawards were not made. We recommend that DHCS update its current practices for managing subaward reporting under the FFATA to ensure that applicable subawards are identified and the required submissions are made timely. Status of Corrective Action: Partially Corrected. Health Care Services is reviewing current guidance related to FFATA and the definitions of pass-through payments to subrecipients and subcontractors. Health Care Services will assess if changes or improvements are needed for the process to ensure compliance with FFATA as appropriate. Reference Number: 2021-014 Assistance Listing Number: 93.323 State Administering Department: California Department of Public Health (Public Health) California State Auditor Report 2022-002 96 June 2024 Audit Finding: Public Health did not establish a formal risk assessment process over its subrecipients of federal awards to determine the frequency and extent of subrecipient monitoring to be performed. While Public Health received reimbursement invoices from subrecipients, there did not appear to be other financial or programmatic monitoring to verify subrecipents compliance with applicable requirements. In addition, Public Health did not obtain Single Audit reports from those subrecipients as required. Status of Corrective Action: Remains Uncorrected. Public Health is in the process of developing formal procedures for conducting risk assessments and establishing procedures for monitoring and a process for obtaining single audit reports for its subrecipients. Refer to finding 2022-011 Reference Number: 2021-015 Assistance Listing Numbers: 93.767 93.778 State Administering Department: California Department of Health Care Services (Health Care Services) Audit Finding: Special Tests and Provisions. The Medical Assistance Program reporting of overpayments tested did not reflect the correct federal share because Form CMS-64 included all CHIP overpayments (42 CFR 433.320). All 20 CHIP overpayments tested did not reflect the correct federal share (Federal Financial Participation or FFP rate) and were not correctly reported on Form CMS-21 (42 CFR 433.320 via 42 CFR 457.628). Health Care Services should have a process in place to ensure that the CMS-64 and CMS-21 reports properly report CHIP and Medicaid overpayments. Health Care Services should update the system to assign the appropriate FFP rate for each overpayment. With this implementation, CHIP overpayments can be appropriately identified with the correct FFP rate and reported on the CMS-21. Status of Corrective Action: Fully Corrected. Effective September 1, 2021, System Development Notice (SDN) 20039 made updates to the Claims Processing Accounts Receivable System (AR system), allowing Health Care Services to use the correct Federal Medicaid Assistance Percentage (FMAP) rate, including the State Children’s Health Insurance Program (SCHIP), when reporting overpayments on the CMS-64 and CMS-21. The updates include the following: 1. High-level and detailed business requirements that include SCHIP: California State Auditor Report 2022-002 97 June 2024 a.Create a new field in the AR system for the budget program that includes SCHIP. b.The following California Omnibus Budget Reconciliation Act of 1985 (COBRA) reports have been updated to include the budget program and FFP rate fields: MCC-R- 001, MCC-R-002, MCC-R-027, MCC-R-028, MCC-R- 032 Part A, B, and C. 2. Coding modifications for COBRA reports: a.MCC-R-001 b.MCC-R-002 c.MCC-R-027 d.MCC-R-028 e.MCC-R-032 PART A f.MCC-R-032 PART B g.MCC-R-032 PART C 3. Test cases conducted that include SCHIP. The MCC-R-001 and MCC-R-002 are monthly reports that display FFP to be reported and FFP to be reclaimed that occurred in the reporting month at the designated budget program and FFP rate. These monthly reports are summarized for the reporting quarter under the “FFP To Be Reported” and “FFP To Be Reclaimed” sections of the MCC-R-032 Part A, B, and C quarterly FFP Summary reports. The MCC-R-027 and MCC-R-028 are monthly reports that display out-of-business and bankruptcy transactions that occurred in the reporting month, reclaiming the federal share of each overpayment using the same FMAP rate that was reported for the original overpayment. The FFP Rate, Computable, and FFP amounts from the MCC-R-027 and MCC-R-028 monthly reports are summarized for the reporting quarter under the “Bankruptcy and Out of Business” section of the MCC-R-032 Part A, B, and C quarterly FFP Summary reports. Reference Number: 2021-016 Assistance Listing Number: 97.050 State Administering Department California Employment Development Department (EDD) Audit Finding: Activities Allowed or Unallowed and Eligibility. During the fiscal year ended June 30, 2021, EDD implemented the Lost Wages Assistance (LWA) program, which was funded through the disaster relief funds from the Federal Emergency Management Agency (FEMA) under the Presidential Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019 (COVID-19). Under the memorandum, the LWA program was to be administered in accordance with the Robert T. Stafford Disaster California State Auditor Report 2022-002 98 June 2024 Relief and Emergency Assistance Act section 408(e)(2) and (f), Title 42 U.S.C §5174(e)(2), (f). In EDD’s administration of the LWA program, $1,013,541,600 in benefit payments were estimated by EDD to represent potentially fraudulent payments. The estimate was based on data parameters to identify claimants that received benefits which matched imposter fraud for identity or eligibility fraud for misrepresented information. Out of 223 LWA benefit payments tested, 20 claimants were determined to be ineligible for LWA benefits. EDD should continue to evaluate and enhance its fraud detection and prevention internal controls, increasing the use of automation features and other analytical tools in an effort to increase efficiency, continue to reduce workload, and enhance detection and timely identification of unemployment benefit fraud. Status of Corrective Action: Fully Corrected. The LWA program is no longer an active program in California. EDD completed the programming to end the LWA program on March 27, 2022. Since 2020-21, EDD has implemented dozens of strict anti-fraud measures to continue to evaluate and enhance its fraud detection. These measures, described in EDD’s response to 2019-20 California State Auditor Finding Reference Number 2020-005, included but were not limited to, crossmatching claimant information against law enforcement and government databases and implementing rigorous new identity verification procedures. As a result, EDD caught and stopped multiple fraud attempts using the enhancements placed into effect in September 2020. EDD implemented the following measures to address the nationwide fraud attempts perpetrated against the new emergency federal benefit programs in 2020-21: • Implemented additional crossmatches in September 2020 to detect multiple claims per address. • Ceased automatically backdating PUA claims under federal rules in September 2020. • Strengthened identity verification procedures in October 2020 by implementing ID.me. • Implemented additional crossmatches in November 2020 against state inmate information. • Vetted applications against law enforcement databases and other tools provided by Thomson Reuters in December 2020 to further curb identity and non-identity fraud. • Established a 1099-G call center to help victims of identity theft deal with any tax-related questions. • Ceased printing of social security numbers on mailed documents to reduce identity theft risk. • Enhanced benefit card security with Bank of America. California State Auditor Report 2022-002 99 June 2024 • Partnered with state, local, and federal law enforcement agencies to support thousands of criminal investigations, arrests, prosecutions, and convictions. • Enhanced Thompson Reuters fraud detection logic and reviewed the address verification process. Reference Number: 2020-001 – Partially Corrected – Refer to Finding 2022-001 2020-002 – Remains Uncorrected – Refer to Finding 2022-003 2020-004 – Remains Uncorrected – Refer to Finding 2022-006 2020-005 – Remains Uncorrected – Refer to Finding 2022-004 2020-006 – Remains Uncorrected – Refer to Finding 2022-005 2020-007 – Partially Corrected – Refer to Finding 2022-008 2020-008 – Partially Corrected – Due to the COVID-19 public health emergency CMS provided an exemption to redeterminations which expired March 2023. 2020-009 – Remains Uncorrected – Refer to finding 2022-010 2020-012 – Fully Corrected California State Auditor Report 2022-002 100 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 101 June 2024 Department of Finance Response Letter California State Auditor Report 2022-002 102 June 2024 This Page Intentionally Left Blank Transmitted via e-mail June 21, 2024 Macias Gini & O’Connell LLP 500 Capitol Mall, Suite 2200 Sacramento, CA 95814 Thank you for the opportunity to respond to the federal compliance audit report for the fiscal year ended June 30, 2022. This report was the result of your examination of the State of California's administration of federal programs and will be included in the Single Audit Report for this period. California is committed to ensuring all its state entities implement effective accounting, reporting, and operational practices. State entities with findings and recommendations provided responses directly to Macias Gini & O’Connell LLP (MGO). The attached responses and corrective action plans are compiled by MGO and provided to Finance. Finance will remind state entities of their responsibility for implementing corrective actions. Finance appreciates MGO’s efforts in completing California’s Single Audit. If you have any questions concerning this letter, please contact Cheryl L. McCormick, Chief, Office of State Audits and Evaluations, at (916) 322-2985. Sincerely, JOE STEPHENSHAW Director Enclosure California State Auditor Report 2022-002 104 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 105 June 2024 Management’s Response and Corrective Action Plan California State Auditor Report 2022-002 106 June 2024 This Page Intentionally Left Blank California State Auditor Report 2022-002 107 June 2024 STATE OF CALIFORNIA MANAGEMENT’S RESPONSE AND CORRECTIVE ACTION PLAN FOR THE FISCAL YEAR ENDED JUNE 30, 2022 Reference No. 2022-003: The California Department of Public Health (Public Health) Women, Infants, and Children (WIC) Division had agreed that the WIC Web Information System Exchange (WISE) system does not currently store eligibility history that should be included in the “Cert History Report,” and the initial eligibility data is overwritten when subsequent eligibility information is keyed into WIC WISE. However, WIC WISE does include preventative internal stops or checkpoints that do not allow ineligible individuals to be certified and issued benefits (e.g., over income, not a California resident, no nutrition risk factor, etc.). User acceptance testing vetted these items prior to system implementation in 2019/20. The certification history condition discussed was remediated via a system Defect Correction to WIC WISE that was in user acceptance testing for implementation in Fall 2023. Public Health/WIC has entered Defect Correction #6972 in TFS (Team Foundation Services), the tracking system previously used to capture system changes and defects. The defect correction supports a system change to ensure initial eligibility information is retained when subsequent eligibility information is entered into WIC WISE. Estimated Implementation Date: August 2023 Contact: William Welch, Assistant Division Chief, Operations Women, Infants, and Children Division California Department of Public Health Reference No. 2022-004: As reported in the prior year’s response, since fiscal year 2020-21, the Employment Development Department (EDD) has implemented dozens of strict anti-fraud measures and has continued to evaluate and enhance its fraud detection. EDD has also developed internal fraud working groups and a multiagency fraud task force that reviews fraud data and fraud reports on a continual basis and recommends adjustments to filters and tools as necessary. EDD has successfully halted two large fraud scheme attempts over the previous two years and continues to work towards immediate detection and prevention of fraud attempts. EDD will continue to analyze and assess our processes to stay ahead of the ever-evolving fraud landscape. As previously described, EDD implemented the following measures to address the nationwide fraud attempts perpetrated against the new emergency federal benefit programs in 2020-21: • Implemented additional cross-matches in September 2020 to detect multiple claims per address. • Ceased automatically backdating PUA claims under federal rules in September 2020. • Strengthened identity verification procedures in October 2020 by implementing ID.me. • Implemented additional cross-matches in November 2020 against state inmate information. • Vetted applications against law enforcement databases and other tools provided by Thomson Reuters in December 2020 to further curb identity and non-identity fraud. • Established a 1099-G call center to help victims of identity theft deal with any tax-related questions. • Ceased printing Social Security numbers on mailed documents to reduce identity theft risk. • Enhanced benefit card security with Bank of America. • Partnered with state, local and federal law enforcement agencies to support thousands of criminal investigations, arrests, prosecutions and convictions. California State Auditor Report 2022-002 108 June 2024 The EDD has and will continue to evaluate and enhance the fraud detection/prevention tools that have been put in place. Estimated Implementation Date: Annual reassessment to be completed September 2024 Contact: Diane Underwood, Division Chief Unemployment Insurance Branch California Employment Development Department Reference No. 2022-005: Given the unprecedented volume of unemployment insurance claims during the federal disaster— approximately 20 million claims compared to 3.8 million during the Great Recession—EDD took action to speed payments to eligible claimants whenever possible. For example, EDD launched in July 2021 a Conditional Payment Program to speed payments to claimants who certified for benefits and already received at least one week of benefits in the past but whose payments were later pending for more than two weeks. EDD also boosted its capacity to process workloads, prioritized timely payments, and employed automation among other measures. As reported in Reference Number 2020-006 in fiscal year 2019-2020, EDD began automatically cross- matching EDD wage records and Franchise Tax Board records in November 2020 to assist in verifying the income of PUA claimants who could not be automatically verified through these procedures. Such claimants were required to submit additional documentation to EDD for a manual review. Regarding the manual processing of the income documents to substantiate the PUA weekly benefit amounts that have been increased above the minimum California WBA of $167, and the verification of employment or self-employment substantiation (known in California as “Self-employment/Employment Substantiation” or “SEES”), on February 6, 2024, in accordance with the U.S. Department of Labor (DOL) Unemployment Insurance Program Letter 05-24, the California Employment Development Department (EDD) identified that the processing of PUA income documents and the SEES workloads must be considered resolved due to California’s finality laws. The EDD is prohibited by law from resolving these items by California Unemployment Insurance Code section 1376, which provides that EDD cannot establish overpayments more than one year after the close of the benefit year in which the overpayment was made unless the overpayment is found to be a result of fraud, misrepresentation, or willful nondisclosure. Given that there is no fraud or fault on the part of the individuals identified in these populations, EDD is unable to take the required actions to resolve the workload due to California’s finality law provisions. EDD is expecting a response from DOL agreeing with the application of California’s finality laws to the PUA income verification and the SEES workloads. Estimated Implementation Date: Upon DOL response, to be determined Contact: Diane Underwood, Division Chief Unemployment Insurance Branch California Employment Development Department California State Auditor Report 2022-002 109 June 2024 Reference No. 2022-006: The EDD resumed adjudicating all potential eligibility issues as of January 2021 and completed the retroactive determination workload on April 30, 2023. Estimated Implementation Date: April 2023 Contact: Diane Underwood, Division Chief Unemployment Insurance Branch California Employment Development Department Reference No. 2022-007: California received $27 billion in State Fiscal Recovery Funds (SFRF) under the American Rescue Plan Act of 2021 to cover costs and mitigate the impacts of the COVID-19 pandemic. States that lost revenue due to the pandemic are permitted to use an amount of SFRF equivalent to their lost revenue, as calculated pursuant to the U.S. Treasury’s Final Rule, to fund government services. The Department of Finance (Finance) acknowledges that its established review processes did not detect the inclusion of state employee contributions to deferred compensation plans in its revenue loss calculation and that these contributions did not constitute eligible revenue codes as they were not reported as revenues in the state’s basic financial statements. Due to unclear federal guidance, Finance’s original analysis and screening questions accounted for revenue codes that constituted revenues to the state from a budgetary perspective. Finance agrees that this oversight is a material weakness and has since adjusted its approach to the revenue loss calculation by excluding revenue codes that do not constitute revenues from a financial statement accounting perspective. However, Finance maintains that its overall controls and calculation process is sound and disagrees that this oversight was categorized as a material noncompliance finding. As stated in the finding, the overstated revenue loss amount did not impact expenditures reported for fiscal year 2022, and corrective action was taken before this finding and the state’s annual comprehensive financial report were released. The overstated revenue loss amount of $977,898,160 was not transferred from Fund 8506, which was established for the administration of the State Fiscal Recovery Funds received from the federal government, and was not used for the provision of government services. Estimated Implementation Date: January 2024 Contact: Mary Halterman, Assistant Program Budget Manager Federal Funds Cost Tracking & Accountability Unit California Department of Finance Reference No. 2022-008: The Local Governmental Financing Division, in collaboration with the Audits and Investigations Division, agrees that policies and procedures will be developed to take additional action for significantly late-cost reports and non-compliant counties. As of July 1, 2023, the California Department of Health Care Services transitioned counties away from cost reconciliation financing, and for any state fiscal year after July 1, 2023, counties will no longer be required to submit cost reports. California State Auditor Report 2022-002 110 June 2024 Estimated Implementation Date: July 2023 Contact: Wendy Griffe, Chief Internal Audits California Department of Health Care Services Reference No. 2022-009: The Behavioral Health Administrative support team will endeavor to ensure that timesheets are collected and submitted appropriately. As the payroll system (SCO) and leave accounting (HRIS) are two completely separate programs that do not interact, the Behavioral Health (BH) Administrative Support Team will maintain a master file detailing the funding information for each position. For example, if a position is funded by two different grants, the file would reflect the percentage of work associated with each. It must be noted that as employee leave is tracked and maintained in a separate system, the Absence and Additional Time Worked Reports (STD 634) only reflect hours worked and leave used and does not reflect how a position is funded. Additionally, staff who are in Work Week Group E and are exempt from coverage under the Fair Labor Standards Act (FLSA) are not required to document hours worked for payroll purposes. Therefore, this form would only reflect leave credits used in whole-day increments. This means that on their timesheets, you will only find time used to cover full-day leave usage. These are generally our Supervisors and Managers. Estimated Implementation Date: July 2024 Contact: Raberta Gannon, Chief Behavioral Health Administrative Support Services Section Deputy Diretor’s Office, Behavioral Health California Department of Health Care Services Reference No. 2022-010: Public Health’s Office of Aids (OA) agrees with the finding and recommendation. OA developed and implemented additional internal quality assurance (QA) processes in April of 2022 to ensure that secondary reviews of AIDS Drug Assistance Program (ADAP) applications are consistently enforcing the existing guidelines, including acceptable supporting documentation and accurate eligibility requirements. Prior to this audit period, and through December 2021, ADAP had issued multiple policy memos to respond to the COVID-19 pandemic, which enabled staff and enrollment workers to defer documentation collection, when necessary, to remain flexible and ensure clients impacted by the pandemic, and associated site closures, did not lose eligibility and access to life-saving medications and comprehensive healthcare. These flexibilities in our guidelines were implemented based on guidance received from our federal funder, the Health Resources and Services Administration, which encouraged ADAP to reassess its organization's eligibility and recertification policies and procedures, and remove any barriers that may impede social distancing, or other public health strategies, necessary to minimize COVID-19 transmission. This documentation deferral was terminated on December 31, 2021, and since January 1, 2022, full documentation and eligibility requirements have been enforced. This, combined with ongoing QA efforts, will help mitigate future findings in ADAP applications. California State Auditor Report 2022-002 111 June 2024 Estimated Implementation Date: Implemented as of April 2022 Contact: Joseph Lagrama, Branch Chief AIDS Drug Assistance Program Branch California Department of Public Health Reference No. 2022-011: Public Health’s Center for Preparedness and Response (CPR) agrees that it did not establish a formal risk assessment process over its subrecipients of ELC COVID-19 awards. CPR will establish and document formal procedures for conducting risk assessments of ELC subrecipients. Public Health will also develop and implement specific subrecipient monitoring procedures. CPR also agrees that it did not obtain single audit reports from ELC subrecipients. CPR will develop and implement procedures outlining the process for obtaining single audit reports from subrecipients, which will include a monitoring mechanism to track compliance with the single audit mandate. Estimated Implementation Date: December 2024 Contact: Melissa Relles, Assistant Deputy Director Division of Operations Center for Preparedness and Response California Department of Public Health Reference No. 2022-012: Public Health agrees that Form CMS-1539 should be signed. We are exploring reasons why so many forms were not signed, and we will work with our District office management to ensure that they are all signed going forward. Further, we will address this issue at our next meeting of District Managers, District Administrators, and Health Facilities Evaluator Supervisors, and will work to update our training materials as necessary. Finally, we will also explore periodically pulling a sample of completed CMS-1539 forms to verify that signatures are present. Estimated Implementation Date: May 1, 2024 Contact: Elizabeth Moreno, Section Chief Business Operation Section Center for Health Care Quality, Office of Internal Operations California Department of Public Health