Finding 2024-006: Improving Controls Over Procurement Requirements Federal Agency: U.S. Department of Education Award Name(s): Special Education Cluster Assistance Listing Number(s): 84.027, 84.173 Award Year: 2024 Compliance Requirement: Procurement and Suspension and Debarment Type of Finding: Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Per Uniform Guidance, all non-federal entities must follow documented procurement procedures which ensure that purchases are made in compliance with applicable federal, state, and local laws and regulations. Uniform Guidance does not provide an exemption for special education services from these requirements. Condition and Context: During the audit of federal expenditures, we noted that the City did not properly procure special education services provided by The Academy in accordance with the procurement standards set forth in 2 CFR Part 200 (Uniform Guidance). The City used a “blanket” purchase order for these services but did not formally conduct a competitive procurement process. Cause: The City was not aware that special education costs incurred under federal awards are not exempt from Uniform Guidance procurement requirements. As a result, the City did not initiate a formal procurement process for The Academy and relied on a blanket purchase order. Effect or Potential Effect: Failure to follow the required procurement procedures increases the risk of noncompliance with federal regulations and results in potential questioned costs. Questioned Costs: $101,963. Recommendation: The City should strengthen its controls and staff training regarding federal procurement requirements. Specifically, the City should ensure all purchases of professional services, including special education services, are subject to the appropriate procurement procedures under Uniform Guidance, and that documentation of competitive selection or other required steps is maintained. Views of Responsible Official: See Corrective Action Plan.
Finding 2024-003: Improve Controls and Documentation Over Reporting Federal Program Information Federal Agency: U.S. Department of the Treasury Award Name(s): Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number(s): 21.027 Award Year: 2024 Compliance Requirement: Reporting Type of Finding: Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Per 2 CFR 200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the award. SLFRF program guidance requires project and expenditure reports to be submitted by the required deadlines, and reported expenditures must be supported by underlying accounting records. Since the City is a Metropolitan City with a population below 250,000 residents that was allocated more than $10.0 million in funding, the City is required to submit a project and expenditure report 30 days after the end of each quarter. Condition and Context: During our audit, we tested a sample of two quarterly reports to determine that they were submitted timely and were supported by underlying documentation. As a result of our testing, it was identified that the City did not submit the quarterly SLFRF project and expenditure report for the quarter ended 3/31/2024 by the required deadline of 4/30/2024. Furthermore, current period and cumulative expenditures reported for the quarters ended 9/30/2023 and 3/31/2024 did not agree to the amounts recorded in the City’s general ledger. The City did not provide the auditor with documentation to support the discrepancies. Cause: The City did not have adequate controls in place to ensure timely submission of required reports or reconciliation of current period and cumulative reported expenditures to the general ledger prior to submission. Effect or Potential Effect: Due to the weakness in internal controls and compliance finding noted above, the City did not comply with the requirements of the Uniform Guidance and SLFRF program regarding timely and accurate reporting of quarterly project and expenditure reports. No questioned costs are reported as expenditures were tested for allowability during the audit, however, reporting inaccuracies were noted. Recommendation: The City should enhance internal controls over the reporting process for SLFRF funds, including timely preparation and submission of the reports and reconciliation of reported expenditures to the general ledger prior to report submission. Views of Responsible Official: See Corrective Action Plan
Finding 2024-004: Improve Controls and Documentation Over Allowability of Costs Federal Program Information Federal Agency: U.S. Department of Education Award Name(s): Title I Grants to Local Educational Agencies Assistance Listing Number(s): 84.010 Award Year: 2023, 2024 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Award Name(s): COVID-19 – Education Stabilization Fund Assistance Listing Number(s): 84.425 Award Year: 2022 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Award Name(s): Twenty-First Century Community Learning Centers Assistance Listing Number(s): 84.287, 84.287C Award Year: 2023, 2024 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Award Name(s): Special Education Cluster Assistance Listing Number(s): 84.027, 84.173 Award Year: 2023 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Grantees must provide reasonable assurance that federal awards are expended only for allowable activities and that the costs of goods and services charged to federal awards are allowable and in accordance with the applicable cost principles. Management of the City is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. The Code of Federal Regulations Section 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented and there must be sufficient documentation. Condition and Context: A sample of invoices were tested in order to determine if costs were allowable and adequately approved. As a result of our testing, it was determined that invoices were not approved for two transactions in the Title I Grants to Local Educational Agencies program and three invoices in the COVID-19 Education Stabilization Fund program. In addition, invoices were not able to be provided for three invoices in the COVID-19 Education Stabilization Fund program, one invoice in the Twenty-First Century Community Learning Centers program, and one invoice in the Special Education Cluster. Cause: The City did not have adequate controls in place to ensure invoices were properly approved and retained. Effect or Potential Effect: Due to the weakness in internal controls and compliance noted above, there is a risk that amounts charged to federal awards may not be allowable or in accordance with applicable cost principles. Questioned Costs: Due to the condition noted above, we were unable to determine if the costs charged to the applicable grants are allowable. AL Number(s) Name of Federal Program or Cluster Questioned Costs 84.010 Title I Grants to Local Educational Agencies $82,488 84.425 COVID-19 Education Stabilization Fund $136,876 84.287, 84.287C Twenty-First Century Community Learning Centers $1,305 84.027/84.173 Special Education Cluster $1,945 Recommendation: The City should enhance internal controls over the invoice approval and retention process in order to provide reasonable assurance that federal award transactions are allowable and in accordance with the applicable cost principles. Views of Responsible Official: See Corrective Action Plan
Finding 2024-005: Improve Controls and Documentation Over Allowability of Costs Federal Agency: U.S. Department of Education Award Name(s): Twenty-First Century Community Learning Centers Assistance Listing Number(s): 84.287, 84.287C Award Year: 2023, 2024 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Compliance Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Grantees must provide reasonable assurance that federal awards are expended only for allowable activities and that the costs of goods and services charged to federal awards are allowable and in accordance with the applicable cost principles. Management of the City is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. The Code of Federal Regulations Section 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented and there must be sufficient documentation. Condition and Context: A sample of payroll expenditures were tested in order to determine if costs were allowable and adequately approved. As a result of our testing, it was determined that one payroll transaction had no timesheet approval, and one payroll transaction was self-approved. Payroll expenditures charged to the programs are required to be supported with documentation substantiating that the employees are eligible to be charged to the grant and that the payroll charged relates to time spent accomplishing grant objectives. This supporting documentation should be standardized and should include all required elements in accordance with applicable cost principles. Cause: The City did not have adequate controls in place to provide sufficient documentation to demonstrate compliance with federal and state time and effort reporting requirements. Effect or Potential Effect: Due to the weakness in internal controls and compliance noted above, there is a risk that amounts charged to federal awards may not be allowable or in accordance with applicable cost principles. Questioned Costs: Due to the condition noted above, we were unable to determine if the costs charged to the applicable grants are allowable. AL Number(s) Name of Federal Program or Cluster Questioned Costs 84.287, 84.287C Twenty-First Century Community Learning Centers $5,450 Recommendation: Management should enhance procedures and controls in place over the time and effort reporting and documentation requirements that department heads must adhere with to ensure compliance with federal and state time and effort reporting requirements. Views of Responsible Official: See Corrective Action Plan