In fiscal year (FY) 2007-08, state agencies administered $10.0 billion in
federal financial assistance through more than 1,600 federal programs
and grants, including 963 research and development grants awarded to
the University of Wisconsin (UW) System. We performed an independent
audit of compliance with federal grant requirements and followed up on
findings in our prior single audit report.
Our efforts focused on 23 programs that accounted for 74.8 percent of
Wisconsin’s federal financial assistance in FY 2007-08. Programs were
selected for review based on their size and the risk of noncompliance
with federal rules. We found that, overall, state agencies have properly
administered federal grant programs and complied with federal
requirements.
Our report includes an unqualified audit opinion on the Schedule of
Expenditures of Federal Awards, which provides an inventory of all
federal grants administered by state agencies during the period we
audited. However, we identified a number of audit issues related to
the administration of federal programs.
Beginning in FY 2008-09, the State is expected to receive a substantial
amount of additional funding under the federal American Recovery
and Reinvestment Act of 2009. We will be monitoring the State’s
administration of these additional funds. In future audits, we will
review compliance with federal requirements for their use.
Federal Funding
In FY 2007-08, state agencies
administered almost $8.8 billion
in cash assistance from the federal
government, as well as $1.2 billion
in outstanding federal loan balances
and $66.4 million in noncash assistance
such as food commodities.
In total, the amount of federal
financial assistance administered by
the State increased approximately
$700.0 million since FY 2003-04.
Federal funding has increased
for many programs that make
assistance payments to individuals.
For example, the federal share of
Medicaid expenditures increased
$136.9 million during FY 2007-08,
and federal funding for food stamps
increased $36.5 million. In addition,
expenditures under the Unemployment
Insurance program, which is
financed primarily by employer
contributions but subject to federal
rules, increased $68.6 million.
Programs Administered
Five state agencies administered
95.0 percent of the federal cash
and noncash assistance expended
during FY 2007-08. One of these
agenciesthe Department of Health
and Family Services (DHFS), which
was responsible for the largest share
of federal expenditures during the
period we auditedwas eliminated
under 2007 Wisconsin Act 20, which
created the Department of Health
Services (DHS) and the Department
of Children and Families (DCF).
Since July 1, 2008, DHS has administered
Medical Assistance, the
largest federal program administered
by the State of Wisconsin. In
FY 2007-08, Wisconsin expended
$3.0 billion in federal funds and
provided an additional $2.0 billion
in state funds for Medical Assistance.
Other large federal programs for
which DHS is responsible fund
food stamps and health insurance
for children.
Administrative responsibility for
the Foster CareTitle IV-E and
Adoption Assistance programs
was transferred from DHFS to
DCF on July 1, 2008. DCF has
also assumed responsibility for
Temporary Assistance for Needy
Families (TANF) and the Child Care
and Development Fund Cluster,
which were administered by the
Department of Workforce Development
(DWD) during FY 2007-08.
DWD continues to administer the
Unemployment Insurance and
Vocational Rehabilitation programs.
In FY 2007-08, UW System disbursed
a total of $1.3 billion in federal
funds, including $697.2 million in
student financial aid and $508.2 million
in research and development
grants. Most of the $759.9 million
in federal funding administered by
the Department of Transportation
(DOT) supported the Highway
Planning and Construction program,
for which expenditures totaled
$669.2 million. The Department of
Public Instruction (DPI) provided
the majority of its $707.4 million in
federal funding to local schools and
other entities for education and
nutrition programs for children.
Federal Reimbursement
Requests
Requests for federal reimbursement
of grant expenditures should be
made in a timely manner to ensure
that neither the federal government
nor the State earns interest income
at the expense of the other, and
to ensure the State receives all of
the federal revenue it is entitled
to receive.
In our review of student financial
aid funds, we found that three
UW campuses were not timely in
requesting federal reimbursement.
For example, as a result of our
audit work at UW-Madison, we
identified $6.7 million in federal
funds the State could claim as
reimbursement for financial aid
disbursed to students. We also identified
concerns with timeliness of
requests for federal reimbursement
at UW-Milwaukee and UW-Oshkosh. We estimate the State
lost $183,500 in interest earnings as
a result of the untimely requests of
the three campuses.
We have renewed concerns with
DWD’s process for claiming federal
reimbursement for the cost of
vocational rehabilitation services
provided to individuals who also
received federal disability benefits.
As a result of our audit, DWD
either plans to claim or has already
claimed an additional $227,167 from
the federal government.
Foster Care
We identified several concerns with
the Foster CareTitle IV-E program,
which provides substitute care for
children who need temporary placement
and care outside their homes.
First, among ten licensed foster care
providers selected for review, we
identified two for whom required
criminal background checks had not
been completed in a timely manner.
The State subsequently reviewed
records for all providers required
to have background checks since
July 1, 2007, and identified two
additional providers without the
appropriate background checks.
We question $49,900 in federal
reimbursements for payments made
to these providers for Foster CareTitle IV-E reimbursable children.
Second, to encourage students to
pursue careers in child welfare,
UW-Milwaukee uses Foster CareTitle IV-E funds to provide financial
support to students in its Master of
Social Work program who agree to
work in public child welfare upon
graduation. However, we found
that UW-Milwaukee charged the
foster care program twice for tuition
payments, resulting in an overbilling
of $112,923. Documentation
supporting the students’ fulfillment
of post-graduate employment
requirements was also lacking.
We identified concerns related to
incorrect eligibility determinations
made by a computer system for
certain unique foster care cases.
In addition, our report includes
recommendations for DCF to
continue efforts to improve federal
financial reporting for the Foster
Care—Title IV-E and Adoption
Assistance programs.
Internal Service Funds
For several years, we have expressed
concern because the Department of
Administration’s (DOA’s) billing
rates have allowed the State to
accumulate excess cash balances.
Under federal rules, billing rates for
certain centralized services provided
by the State, such as computer processing
services, should not generate
profits or a cash reserve of more
than 60 days’ operating expenses.
If a reserve exceeds that limit or is
used for other purposes, the State
is required to adjust user rates,
provide users with rebates, or return
the federal government’s share.
It would be preferable for DOA
to lower billing rates or provide
rebates, which would make funding
available for state agencies to spend
for other federal program purposes.
However, DOA continues to generate
excess balances and to lapse
some balances from these funds to
the General Fund.
During FY 2007-08,$2.2 million was
lapsed from an internal service fund
to the General Fund. We question
$449,645, representing the federal
government’s share related to this
lapse, which will have to be repaid
to the federal government, possibly
with interest.
Since FY 2002-03, DOA has returned
a total of $39.3 million to the federal
government related to excess balances
and lapses from the internal
service funds. The returned funds
could otherwise have been spent
for federal program purposes.
Other Audit Issues
DOT did not have proper controls
to ensure its contractors were paying
the prevailing wage to workers
on construction projects funded
through the Airport Improvement
Program, as required under the
Davis-Bacon Act. We identified
21 workers who were not paid the
prevailing wage during one pay
period and question $974, plus an
undetermined amount for pay
periods and projects we did not
review.
In addition, we continued to identify
errors in DPI’s reporting of match
expenditures for the Gaining
Early Awareness and Readiness
for Undergraduate Programs grant,
an early intervention and scholarship
program for low-income
students. We again recommend
that DPI ensure actual match
amounts are reported and that
documentation is maintained to
support the reported match.
Recommendations
Our report includes 35 recommendations
related to state agencies’
administration of federal grant
programs. In addition, we discuss
seven internal control concerns
related to our audit of the State’s
financial statements.
We questioned a minimum of
$669,799 in costs related to federal
programs administered by the State.
Agency responses and corrective
action plans are included in our
report. The federal government
will work with the state agencies
to resolve the questioned costs
and ensure that planned corrective
action is sufficient.