Audit 396993

Assistance Listing Number 84.425 Education Stabilization Fund Department of Education Passed Through North Dakota Department of Public Instruction Passed Through Turtle Mountain Band of Chippewa Indians Allowable Costs/Cost Principles Criteria Under 2 CFR Part 200, Subpart E, costs must not only be allowable but also necessary and reasonable for the performance of the federal award. ESSER funds are intended to address learning loss, support safe school operations, and respond to pandemic-related impacts; however, expenditures must still adhere to federal cost principles regarding reasonableness and prudent stewardship. Condition During our review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund, we identified certain costs that were aligned with allowable programmatic activities but appeared excessive in nature. While the expenditures supported educational or COVID-19 recovery objectives, the cost of certain items exceeded what would be considered reasonable for the intended benefit. The District incurred the following expenditures to the program with the following items noted: Check 239348 Dated 8/6/2024 for $49,700 The expenditure amount for The Hunt day camp did not appear to be reasonable for the performance of the federal award. We believe the costs appear excessive for The Hunt day camp. Check 239417 Dated 8/21/2024 for $49,100 The expenditure amount for the Energy Sovereignty day camp did not appear to be reasonable for the performance of the federal award. We believe the costs appear excessive for the Energy Sovereignty day camp. Check 239161 Dated 7/16/2024 for $47,300 The expenditure amount for the STEM project did not appear to be reasonable for the performance of the federal award. We believe the costs appear excessive for the STEM day camp. Check 239873 Dated 9/19/2024 for $49,900 The expenditure amount for the Native American Literacy day camp did not appear to be reasonable for the performance of the federal award. We believe the costs appear excessive for the Native American Literacy day camp. Context In a total population exceeding 250 expenditures, forty (40) transactions were tested. Four (4) of these transactions were found with exceptions. The remaining untested population included 22 additional transactions that appear to be similar in nature. These additional transactions totaled $1,033,190.91. This appears to be a systemic issue affecting the District. Cause The condition appears to result from limited internal guidance defining what constitutes “reasonable” levels of spending for ESSER-funded activities. In some cases, urgency to deploy funds may have reduced the rigor of cost review processes. Effect Although the expenditures may have a valid programmatic purpose, the excessive nature of the costs increases the risk of being identified as waste or abuse. This may result in questioned costs, potential repayment obligations, and increased scrutiny from oversight bodies. Questioned Costs $196,000 Repeat Finding This is a repeat finding of 2024-003. Recommendation We recommend that management: • Implement enhanced cost analysis procedures, including price comparisons or cost reasonableness reviews prior to purchase • Require documentation supporting why higher-cost options are necessary • Strengthen supervisory review and approval processes for significant expenditures • Provide targeted training on federal cost principles, with emphasis on reasonableness and stewardship of ESSER funds Management’s Response See corrective action plan.

Assistance Listing Number 84.425 Education Stabilization Fund Department of Education Passed Through North Dakota Department of Public Instruction Passed Through Turtle Mountain Band of Chippewa Indians Equipment/Real Property Management Criteria 2 CFR sections 200.313(c) and (e) includes a requirement for the non-federal entity to not encumber the equipment without prior approval of the federal awarding agency. 2 CFR section 200.311 includes a requirement for the non-federal entity, with prior approval by the ED or passthrough entity, may also use ESF funds to purchase real property, perform construction or minor remodeling, and for improvements to land, buildings, or equipment. Condition The District did not obtain prior approval for equipment acquisition or construction projects. This condition was noted for the following expenditures: Check 241010 Dated 12/27/2024 for $104,931.00 Check 240640 Dated 11/14/2024 for $147,398.90 Check 239597 Dated 8/30/2024 for $121,240.00 Context Per discussion with the District staff and review of program expenditures, there were 22 capital asset acquisitions during the year, we tested three of them for prior state approval. All three of these purchases were made without prior state approval. Cause The District did not properly submit for prior approval for equipment acquisition or construction until after the expenditure had been incurred and in some instances there were no submissions for prior approval. Effect The District may have purchased capital items that were not allowed by the State. Questioned Costs Undeterminable. Repeat Finding See prior year finding 2024-004. Recommendation We recommend the District to review all compliance requirements of federal programs to ensure they have procedures to ensure compliance with those requirements and for the requests for acquisition to be made timely and for the appropriate expenditure amount. Management’s Response See corrective action plan.

Assistance Listing Number 84.181 Special Education Department of Education Passed Through Turtle Mountain Band of Chippewa Indians Procurement 2 CFR Part 200.317 through 200.327 Criteria Procurement Standards require for the District to maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in 2 CFR Part 200.317 through 200.327. Condition The District performed a procurement activity that did not follow District policies as well as standards found in 2 CFR Part 200.317 through 200.327. The District failed to obtain quotes or bids for a purchase exceeding $10,000. This condition was noted for the following expenditure: Check 240313 Dated 10/17/2024 for $10,219.00 Context Per discussion with the District staff and review of program expenditures, there were 2 expenditures incurred in which quotes or bids should have been obtained. Both transactions were tested and it was noted that 1 transaction did not have the necessary quotes or bids. Cause District’s internal controls in place failed to ensure all procurement policies are followed. Effect District is not in compliance with their internal procurement policies and procurement standards. Questioned Costs Undeterminable. Repeat Finding See prior year finding 2024-006 Recommendation Recommend the District to review internal controls to ensure all internal policies and compliance requirements are both being monitored and the District is remaining in compliance. Management’s Response See corrective action plan.