STATE OF COLORADO STATEWIDE SINGLE AUDIT FISCAL YEAR ENDED JUNE 30, 2018 FEBRUARY 2019 FINANCIAL AUDIT THE MISSION OF THE OFFICE OF THE STATE AUDITOR IS TO IMPROVE GOVERNMENT FOR THE PEOPLE OF COLORADO LEGISLATIVE AUDIT COMMITTEE Senator Nancy Todd–Chair Representative Lori Saine–Vice-Chair Representative Rod Bockenfeld Senator Paul Lundeen Senator Rhonda Fields Representative Dafna Michaelson Jenet Representative Tracy Kraft-Tharp Senator Jim Smallwood OFFICE OF THE STATE AUDITOR Dianne E. Ray State Auditor Kerri Hunter Deputy State Auditors Matt Devlin Crystal Dorsey Cindi Radke Audit Managers Marisa Edwards Pooja Tulsian Monica Power Brad Walcher Madeline Beasley John Kormos Team Leaders & Bryan Brune George Kossaras Independent Contributors Jarrett Ellis Selome Negassa Gina Faulkner Scott Reid Ferminia Hebert Maya Rosochacova Henry Hung Rachel Tipton Hema Anavatti Terry Paulson Staff Auditors Noah Arnold Xiuqing Skeates Stephen Donohoue Marina Vega Dana Dove Brayan Velazquez Rhiannon Ferguson Erica Walton Chris McClain Emma Webster Lynn Obremski Nina Frant Jenny Page Other Contributors Chris Harless Kate Sabott Brandon Haynes James Taurman Joy Helm Nicole Villarreal David Owens Meghan Westmoreland AN ELECTRONIC VERSION OF THIS REPORT IS AVAILABLE AT WWW.COLORADO.GOV/AUDITOR A BOUND REPORT MAY BE OBTAINED BY CALLING THE OFFICE OF THE STATE AUDITOR 303.869.2800 PLEASE REFER TO REPORT NUMBER 1801F WHEN REQUESTING THIS REPORT OFFICE OF THE STATE AUDITOR DIANNE E. RAY, CPA February 05, 2019 —— STATE AUDITOR Members of the Legislative Audit Committee: Included herein is the report of the Statewide Single Audit of the State of Colorado for the Fiscal Year Ended June 30, 2018. The audit was conducted under the authority of Section 2-3-103, C.R.S., which authorizes the State Auditor to conduct audits of all state departments, institutions, and agencies. The purpose of this report is to present the results of the Statewide Single Audit for the Fiscal Year Ended June 30, 2018. The report includes our Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards; our Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance; and our Report on Schedule of Expenditures of Federal Awards Required by Uniform Guidance. This report also contains our findings, conclusions, and recommendations, and the responses of the respective state departments, institutions, and agencies. Our opinion on the State's financial statements is presented in the State's Comprehensive Annual Financial Report for Fiscal Year 2018, which is available under separate cover. Governmental Auditing Standards allow for information that is considered OFFICE OF THE STATE AUDITOR sensitive in nature, such as detailed information related to information 1525 SHERMAN STREET 7TH FLOOR technology system security, to be omitted if the omission is disclosed because DENVER, COLORADO 80203 of the potential damage that could be caused by the misuse of this information. We consider the specific technical details of certain findings to 303.869.2800 be sensitive in nature and not appropriate for public disclosure and have provided the details of these findings to management in a separate, confidential memorandum. Findings with omitted information include a disclosure of this omission. In accordance with the federal Single Audit Act, this report includes all findings and questioned costs related to financial reporting and federal awards that came to our attention through either the Statewide Single Audit or other audits. The report is intended solely for the use of management and the Legislative Audit Committee and should not be used for any other purpose. This restriction is not intended to limit distribution of the report, which, upon release by the Legislative Audit Committee, is a matter of public record. CONTENTS Report Highlights I-1 SCHEDULE OF FINDINGS & QUESTIONED COSTS Summary of Auditor’s Results I-7 FINANCIAL STATEMENT FINDINGS Department of Corrections II-1 Office of the Governor II-17 Department of Health Care Policy and Financing II-51 Department of Higher Education II-57 Department of Labor and Employment II-79 Department of Personnel & Administration II-91 Department of Public Health and Environment II-137 Department of Revenue II-149 Department of the Treasury II-155 FEDERAL AWARD FINDINGS Department of Corrections III-1 Department of Health Care Policy and Financing III-27 Department of Higher Education III-121 Department of Human Services III-141 Department of Personnel & Administration III-169 Department of Treasury III-177 DISPOSITION OF PRIOR AUDIT RECOMMENDATIONS IV-1 REPORTS & FEDERAL AWARDS SCHEDULE Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards V-1 Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by Uniform Guidance; and Report on Schedule of Expenditures of Federal Awards Required by Uniform Guidance V-5 Schedule of Expenditures of Federal Awards V-11 Notes to the Schedule of Expenditures of Federal Awards V-69 REQUIRED COMMUNICATIONS LETTER VI-1 APPENDIX A Federal Single Audit Recommendation Locator VII-A-1 APPENDIX B Audit Misstatements VII-B-1 REPORT HIGHLIGHTS STATEWIDE SINGLE AUDIT, FISCAL YEAR ENDED JUNE 30, 2018 STATE OF COLORADO FINANCIAL AUDIT FORFURTHER INFORMAT FINANCIAL STATEMENT FINDINGS OVERVIEW . The State’s financial statements covered $39.8 billion in total assets and $37.3 This report presents our financial and billion in total expenditures for Fiscal Year 2018. compliance audit of the State of Colorado for Fiscal Year 2018. We have issued an unmodified opinion on the State’s financial statements for the Fiscal Year Ended June 30, 2018. This means that the State’s financial The report may not include all statements presented fairly, in all material respects, and that the State’s financial financial- and compliance-related ION ABOUTTHIS REPOR position, results of all financial operations, and cash flows were in conformance findings and recommendations from with generally accepted accounting principles. separately issued reports on audits of state departments, institutions, and . We identified 37 internal control weaknesses related to compliance with agencies. internal control over financial reporting and one issue that is not related to internal controls and is therefore not classified. However, in accordance with the federal Single Audit Act, this report OFFIC THE CONTACT T, FEDERAL PROGRAM FINDINGS includes all findings and questioned costs related to federal awards that . The State expended approximately $12.7 billion in federal funds in Fiscal Year came to our attention through our 2018. The four largest federal programs were: audit, including separately issued ► Medicaid: $5.5 billion reports on audits of state departments, ► Student Financial Assistance: $1.4 billion institutions, and agencies. ► Research and Development Cluster: $891 million AUDIT STATE THE OF E ► Highway Planning and Construction: $751 million We made 67 recommendations to state departments and higher . We identified 29 internal control issues related to the State’s compliance with education institutions. requirements applicable to major federal programs. Recommendations may be classified as both financial and federal; . We identified over $1.2 million in known questioned costs related to federal awards therefore, the total number of granted to the State. The federal portion of the questioned costs was over $628,000. recommendations given does not OR 303.869.2800 match the number noted in the individual sections of this summary. AUTHORITY, PURPOSE, AND SCOPE - This audit was conducted under the authority of Section 2-3-103, C.R.S., which authorizes the State Auditor to conduct WWW. audits of all departments, institutions, and agencies of state government. The audit was conducted in accordance with auditing standards generally accepted in the United States of America and with Government Auditing Standards issued by COLORADO.GOV the Comptroller General of the United States. We performed our audit work during the period of March 2018 through December 2018. The purpose of this audit was to: . Express an opinion on the State’s financial statements for the Fiscal Year Ended June 30, 2018. Express an opinion on the State’s Schedule of Expenditures of Federal Awards for the Fiscal Year Ended June 30, 2018. ReFINANCIALview internal accounting STATEMENT and administrative control FINDINGS procedures, as required by generally accepted auditing standards /AUDITOR and Government Auditing Standards. Evaluate compliance with applicable state and federal laws, rules, and regulations. Evaluate progress in implementing prior years’ audit recommendations. I–1 This section summarizes our report on the State’s compliance with internal controls Professional standards define the over financial reporting and on compliance and other matters based on an audit of following three levels of financial- financial statements performed in accordance with Government Auditing Standards. related internal control weaknesses. Prior to each recommendation in INTERNAL CONTROLS OVER FINANCIAL this report, we have indicated the ACTIVITY