Audit 4087

Finding 2023-001 - Allowable Cost/Cost Principles U.S. Department of Education Pass-through S.C. Department of Education Elementary and Secondary School Emergency Relief Funds (ESSER) CFDA No: 84.425U Grant / FAIN: ESSER III / S425U210019 Grant Period: June 30, 2023 Questioned Costs: $77,740.98 Condition: When a District claims, for reimbursement, indirect costs related to a federal program, the District should ensure that all excluded costs have been removed from the total direct costs prior to applying the indirect cost rate per the District's indirect cost rate proposal. Reason Improvement Needed: Management is responsible for establishing and maintaining effective internal control over the applicable compliance requirements for each federal program. Without controls requiring the review of each claim, it is highly possible the District claim excess indirect cost by using excluded expenditures to inflate the indirect cost reimbursement. Cause of Condition: When calculating the current year indirect cost reimbursement, the District did not exclude the appropriate expenditures for capital improvements paid for by the grant, as required by the South Carolina Department of Education's indirect cost rate proposal. Effect of Condition: The District overstated its indirect cost allocation and claimed funds in excess of the allowable amount resulting in unallowable expenditures and a return of claimed funding. Perspective Information: We do not find this to be a systemic issue. This was the only program that this was found contained within and the District understands the rules and regulations related to indirect cost. Identification of Repeat Findings: This is a new finding for fiscal year 2023. Recommendation: It is our recommendation that the District review the indirect cost rate proposal, as presented by the SC Department of Education in line with federal guidelines, to all department heads, programmatic leaders and finance staff to refresh their knowledge and understanding of the requirements of expenditures to be utilized in the calculation. Benefits of Recommended Action: By ensuring that the internal controls for the District address the key controls above, and ensuring that District staff are trained appropriately on how to implement those controls, the District will reduce the likelihood that material misstatements will occur in future periods and that relevant, accurate information will be made available in a timely manner to make accurate District decisions. It will also ensure that the District effectively spends its federal funding and is not required to pay funding back in the future. Client Response: The Finance Director has already met with many of the various program leaders within the District to ensure they understand and grasp the concept of indirect cost calculations. They have also shared with them the excluded expenditure listing again to re-emphasize the need to accurately budget for indirect cost. The District has also looked into the potential to reduce its reliance on indirect cost and increase its direct spending from grants.

Finding 2023-001 - Allowable Cost/Cost Principles U.S. Department of Education Pass-through S.C. Department of Education Elementary and Secondary School Emergency Relief Funds (ESSER) CFDA No: 84.425U Grant / FAIN: ESSER III / S425U210019 Grant Period: June 30, 2023 Questioned Costs: $77,740.98 Condition: When a District claims, for reimbursement, indirect costs related to a federal program, the District should ensure that all excluded costs have been removed from the total direct costs prior to applying the indirect cost rate per the District's indirect cost rate proposal. Reason Improvement Needed: Management is responsible for establishing and maintaining effective internal control over the applicable compliance requirements for each federal program. Without controls requiring the review of each claim, it is highly possible the District claim excess indirect cost by using excluded expenditures to inflate the indirect cost reimbursement. Cause of Condition: When calculating the current year indirect cost reimbursement, the District did not exclude the appropriate expenditures for capital improvements paid for by the grant, as required by the South Carolina Department of Education's indirect cost rate proposal. Effect of Condition: The District overstated its indirect cost allocation and claimed funds in excess of the allowable amount resulting in unallowable expenditures and a return of claimed funding. Perspective Information: We do not find this to be a systemic issue. This was the only program that this was found contained within and the District understands the rules and regulations related to indirect cost. Identification of Repeat Findings: This is a new finding for fiscal year 2023. Recommendation: It is our recommendation that the District review the indirect cost rate proposal, as presented by the SC Department of Education in line with federal guidelines, to all department heads, programmatic leaders and finance staff to refresh their knowledge and understanding of the requirements of expenditures to be utilized in the calculation. Benefits of Recommended Action: By ensuring that the internal controls for the District address the key controls above, and ensuring that District staff are trained appropriately on how to implement those controls, the District will reduce the likelihood that material misstatements will occur in future periods and that relevant, accurate information will be made available in a timely manner to make accurate District decisions. It will also ensure that the District effectively spends its federal funding and is not required to pay funding back in the future. Client Response: The Finance Director has already met with many of the various program leaders within the District to ensure they understand and grasp the concept of indirect cost calculations. They have also shared with them the excluded expenditure listing again to re-emphasize the need to accurately budget for indirect cost. The District has also looked into the potential to reduce its reliance on indirect cost and increase its direct spending from grants.