FA 2025-002 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education Assistance Listing Numbers and Titles: 10.553 – School Breakfast Program; 10.555 – National School Lunch Program Federal Award Number: 255GA324N1199 (Year: 2025) Questioned Costs: $40,701 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were appropriately reviewed, approved, and documented. Background: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding is granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture, and GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $9,655,237 were expended and reported on the Liberty County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state, “(a)… the recipient or subrecipient must 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… (b) Recipients and subrecipients must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Procurement Methods provide guidance for informal procurement methods and state “If simplified acquisition procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 23 expenditures was randomly selected for testing using a nonstatistical sampling approach. These transactions were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For four expenditures, evidence of review and approval was not reflected within the voucher package. • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources or documentary evidence as justification for single source procurement for three small purchase expenditures. • The School District could not provide evidence that an adequate number of sealed bids or proposals were obtained from qualified sources or documentary evidence as justification for single source procurement for three simplified acquisition expenditures. • Two expenditures were not recorded in the correct fiscal year. Questioned Costs: Upon testing a sample of $1,659,140 in expenditure transactions, known questioned costs of $40,701 were identified. Using the total population of $5,920,045 in expenditure transactions, we project the likely questioned costs to be approximately $145,228. The following Assistance Listing Numbers were affected by known and likely questioned costs: 10.553 and 10.555. Cause: In discussing these deficiencies with the School District, they believe these issues are primarily due to employee turnover, the lack of proper documentation and not following its policies and procedures that govern the procurement process for federal programs. Effect: The School District was not in compliance with the Uniform Guidance or GaDOE guidance related to the Child Nutrition Cluster. Failure to ensure that expenditures are reviewed, approved, and documented appropriately and follow proper procurement procedures exposes the School District to unnecessary risk of error and misuse of federal funds. Additionally, failure to ensure that appropriate documentation exists to support the allowability of payments associated with the CNC fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should review current internal control procedures related to Child Nutrition Cluster expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures reflect evidence of review and approval prior to payment and follow appropriate procurement procedures. In addition, all expenditure voucher packages and procurement documentation should be maintained on-file according to the School District’s record retention policy and should contain all required components. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.
FA 2025-001 Improve Controls over Expenditures Compliance Requirements: Procurement and Suspension and Debarment Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: None Assistance Listing Number and Title: 93.243 – Substance Abuse and Mental Health Services Projects of Regional and National Significance Federal Award Number: H79SM088573 (Year: 2025) Questioned Costs: $80,321 Description: A review of expenditures charged to the Substance Abuse and Mental Health Services Projects of Regional and National Significance program revealed that the School District’s internal control procedures were not operating appropriately to ensure that the School District’s procurement and suspension and debarment procedures were followed. Background: The Substance Abuse and Mental Health Services Projects of Regional and National Significance (SAMH) program provides funds for the purpose of increasing student access to evidence-based and culturally relevant trauma support services and mental health care by developing innovative initiatives, activities, and programs to link local school systems with local trauma-informed support and mental health systems, including those under the Indian Health Service. SAMH funding is granted to Liberty County Board of Education by the U.S. Department of Health and Human Services. SAMH funds totaling $995,591 were expended and reported on the Liberty County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state, “(a)… the recipient or subrecipient must 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… (b) Recipients and subrecipients must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Procurement Methods provide guidance for informal procurement methods and state “If simplified acquisition procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. Furthermore, Title 2 CFR Section 180.300 states in part that the recipient or subrecipient must “verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person.” Condition: A sample of 17 expenditures was randomly selected for testing using a nonstatistical sampling approach. These transactions were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were identified: • One expenditure did not reflect evidence of supervisory review. • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources or documentary evidence as justification for single source procurement for one simplified acquisition expenditure reviewed. • For two expenditures, documentation could not be provided to support the entity’s verification that the vendor was not suspended or debarred or otherwise excluded from participating in the transaction. Questioned Costs: Upon testing a sample of $127,714 in expenditure transactions, known questioned costs of $80,321 were identified. Using the total population of $630,037 in expenditure transactions, we project the likely questioned costs to be approximately $396,237. The following Assistance Listing Numbers were affected by known and likely questioned costs: 93.243. Cause: In discussing these deficiencies with the School District, they believe these issues are primarily due to the lack of proper documentation and not following its policies and procedures that govern the procurement process for federal programs. Effect: The School District was not in compliance with the Uniform Guidance. Failure to ensure that expenditures are appropriately approved and implement procedures to address procurement and suspension and debarment compliance requirements exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds for unallowable purposes and/or with unqualified vendors. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should evaluate and improve internal control procedures to ensure that expenditures are reviewed and approved prior to payment, that required procurement methods are properly identified and followed and required procurement and suspension and debarment documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding.