Audit 392478

Finding 2025-002: Significant Deficiency – Internal Control Over Federal Award Reporting (ESSER III) Type of Finding: Internal Control Federal Program: Education Stabilization Fund - ARP-ESSER ALN: 84.425U Federal Award Year: 2021 Federal Agency: Department of Education Pass-thru entity: PA Department of education Pass-thru nos: 223-21-0422 Questioned Costs: None Repeat Finding: No Type of Compliance Requirement: Reporting Criteria: 2 CFR 200.510(b) requires the Schedule of Expenditures of Federal Awards (SEFA) to fairly present total federal expenditures for each federal program in the period in which they are incurred. Condition: During testing of ESSER III, we noted that the District had unspent funds remaining after reconciling the grant expenditures to the Final Expenditure Report (FER). Upon further review of the FER and discussions with District staff, we determined that expenditures related to the Federal Set-Aside awards had been mistakenly included in the FER for ESSER III, despite the use of separate source codes for each. The District believed the Set-Aside funds were part of the ESSER III award, and therefore included the Set-Aside expenditures when preparing the FER for ESSER III. Because the District’s reports for ESSER III were including the Set-Aside expenditures, the District believe ESSER III had been fully expended when, in fact, allowable ESSER III expenditures remained unreported. During the current fiscal year, the District subsequently identified certain allowable ESSER III expenditures incurred during the 2023-24 fiscal year that were coded to non-federal sources and reclassified them as ESSER III expenditures for that year. These expenditures were not identified as ESSER III expenditures in the prior fiscal year and were not included in the SEFA until they were identified during the current fiscal year. As a result, the SEFA for the year ended June 30, 2024 understated ESSER III expenditures. Cause: The District misunderstood the structure of the ESSER III and Federal Set-Aside awards and believed that the Set-Aside funds were part of the ESSER III allocation. As a result of the misunderstanding, the District included the expenditures for the Set-Asides with the ESSER III expenditures when submitting the FER for ESSER III. Effect: Federal expenditures for ESSER III were understated on the District’s SEFA for the year ended June 30, 2024. A correction was made in the current fiscal year to properly report the expenditures in the period in which they were incurred. Context: The expenditures identified were allowable costs that were incurred during fiscal year 2023-24. The issue did not involve unallowable costs, eligibility violations, or misuse of federal funds. Rather, the finding resulted from misunderstanding the structure of ESSER III and the Federal Set-Aside awards, which led to miscoding and reporting errors. Once identified, the District worked with the auditors to correct the error and properly report the expenditures. Recommendation: We recommend the District provide additional training to staff responsible for federal grant accounting to ensure a clear understanding of grant award structures to facilitate proper grant tracking and reporting. View of Responsible Officials: The District agrees with the finding and the recommendation and will take steps to ensure the staff responsible are properly trained and educated on each grant received by the District.