2023-028 The Department of Commerce did not have adequate internal controls over and did not comply with requirements to monitor subrecipients and to ensure payments were allowable, properly supported, and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: SLFRP0002 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $75,251,225 Prior Year Audit Finding: No Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF), as part of the America Rescue Plan Act of 2021, delivered $350 billion to state, local, and tribal governments to support the response to and recovery from the COVID-19 public health emergency. Washington received $4.4 billion of SLFRF money from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent about $1.9 billion in SLFRF funds, more than $718 million of which was spent by the Department of Commerce. The Legislature appropriated SLFRF funding to the Department for the purpose of providing assistance to public and private water, sewer, garbage, electric, and natural gas utilities to reduce residential customer account balances that were accrued between March 1, 2020, and December 31, 2021, and were unpaid due to the COVID-19 pandemic and the related economic downturn. The Department’s Energy Division expended more than $101 million in payments to public and private utilities as subrecipients. Each utility that wished to participate in the program was required to submit an application for financial assistance documenting the current arrearage balances for residential customers as of March 31, 2022, as well as any available information on arrearage balances of low-income customers, including those receiving government assistance through the Low-Income Home Energy Assistance Program, Low-Income Water Assistance Program, or other ratepayer-funded Department programs as of March 31, 2022. In the event that the utility did not have access to this customer information, the Department distributed SLFRF funds to the community action program serving the same area as the utility. In determining the amount of funding that each utility could receive, the Department was required by the Legislature to consider: • Each participating utility’s proportion of the aggregate amount of arrearages among all participating utilities; • Utility service areas that are situated in locations experiencing disproportionate environmental health disparities; • American community survey poverty data; and • Whether the utility has leveraged other fund sources to reduce customer arrearages. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements to monitor subrecipients and to ensure payments were allowable, properly supported, and met period of performance requirements for the SLFRF program. During the audit period, the Department reimbursed more than $101 million in SLFRF funds to 62 different utilities and community action program subrecipients. Utilities were instructed to submit a request summarizing the outstanding arrearage balance for existing utility customers as of March 31, 2022. We determined the Department did not adequately monitor any of the 62 utilities and community action program subrecipients to ensure that payments issued by the Department were for allowable activities and only eligible households received assistance. The Department received the arrearage balances and awarded funds to utilities in November 2022. At the time the Department awarded funds, utilities were directed to provide updated balances. Several utilities reported changes to their arrearage balances, and no longer needed awards based on the initial data. These funds were returned to the Department and redistributed to other utilities that had remaining arrearage balances after the initial allotment of funds. We used a non-statistical sampling method to randomly select and examine 15 out of 94 payments to subrecipients, in addition to seven individually significant payments. Of the payments examined, we found none of the 22 payments had adequate documentation to support the payments were for allowable activities under the subaward, met cost principles, and occurred within the award’s period of performance. The Department did not obtain documentation from the utilities demonstrating when each household arrearage balance was accrued. Therefore, we cannot determine whether the amounts reimbursed to subrecipients were adequately supported, and that the underlying costs were incurred during the period of performance of the subaward. The Department also did not ensure subawards issued to subrecipient utilities contained accurate information. We randomly selected and examined 12 out of 62 subawards issued during the audit period, including five individually significant subawards, and found all 17 subawards (100 percent) did not include the correct period of performance of the federal SLFRF award. In each instance, the Department communicated to the subrecipient that the period of performance of the subaward should include low-income customer arrearages that were accrued between March 1, 2020, and December 31, 2021. However, the period of performance for the federal award began on March 3, 2021. In addition, the Legislature required participating utilities to submit reports to the Department by March 1, 2023, documenting how funds were used to support households. We determined the Department did not collect and review these reports from any of its subrecipients, and did not perform any additional fiscal or programmatic monitoring. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition Division management for the Department did not request reports on households served with program funding from its subrecipients, as the Legislature required. Instead, the Department instructed subrecipients to summarize the number of households that qualified for assistance, and the Department did not request supporting documentation to demonstrate that individual households were eligible to receive assistance and the amounts reimbursed to the subrecipient for each household’s utility arrearage were accurate and adequately supported. Additionally, the Legislature authorized the Department to expend these funds for activities that partly occurred outside of the period of performance for the federal award. Effect of Condition and Questioned Costs We determined the Department did not request and review adequate supporting documentation before paying subrecipients, and it did not perform adequate fiscal monitoring to ensure that funds paid to subrecipients were disbursed only for eligible households and for allowable activities. As a result, we identified $75,251,225 in known federal questioned costs and $101,433,722 in likely federal questioned costs. Without establishing adequate internal controls and reviewing required supporting documentation from subrecipients, the Department cannot reasonably ensure it is using federal funds for allowable purposes and that spending occurs within the allowed period of performance. Further, by not properly labeling the subawards, the subrecipients may not be aware that federal regulations pertaining to subrecipients apply to their subawards. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Establish internal controls to ensure payments to subrecipients are adequately supported, allowable and only reimburse costs incurred during the period of performance • Ensure each subaward contains all federally required elements, in accordance with Uniform Guidance, including clearly identifying it as a subaward • Ensure it collects the household reports from all subrecipients, as required by the Legislative mandate • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The COVID-19 pandemic caused a global economic slowdown and an economic downturn in Washington State, which resulted in layoffs and reduced work hours for a significant percentage of our workforce and reductions in business activity. The pandemic resulted in significant economic impacts on our economy including the threat of utility services being disconnected and late payment fees imposed. Maintaining utility services during the crises was an essential tool in sustaining and protecting the health and welfare of our businesses and citizens. On February 29, 2020 Proclamation 20-23.2 Ratepayer Assistance and Preservation of Essential Services was signed to protect the availability and affordability of essential utility services for those economically impacted by the COVID-19 pandemic through a variety of measures, including: suspending disconnection of utilities for nonpayment, waiving late fees, working with affected utility customers to establish payment arrangements, and improving access to energy assistance for affected customers. The result of this proclamation compounded customer account balances and generated over $160 million in arrearages for Washington utilities. ENGROSSED SUBSTITUTE SENATE BILL 5693, Section 128 (199), 2022 Supplemental Operating Budget provided the Legislature appropriate $100 million for public and private water, sewer, garbage, electric and natural gas utilities arrearages. The funding was used by utilities to reduce residential customer accrued arrearages. As a result of the bill, the Department received specific information from each utility provider expecting that information was appropriate documentation at that time. The Department acknowledges the information obtained did not include the appropriate supporting documentation as required by the Code of Federal Regulations. The Department funded the arrearages for the period of performance allowed in the Senate Bill from March 1, 2020 through December 31, 2021. The Senate Bill approved and provided the incorrect period of performance which may have resulted in unallowable costs of arrearages paid between March 1, 2020 through March 2, 2021. The Department will work with the legislature and Office of Financial Management (OFM) on next steps. OFM has already been notified of this circumstance. The Department will also work with utility providers to obtain detailed supporting documentation to reconcile all arrearages paid to determine and verify the amounts expended. All variances will be reviewed. The Department will work with OFM to determine next steps for the reporting of any variances or deficiencies identified. All deficiencies reported will be used to strengthen internal controls and compliance for future awards. In 2022, prior to this audit, all Department federal contract templates were updated to identify if the contract recipient type was a contractor or subrecipient. The Department’s use of the term “contractor’ was in reference to the contract, it was not intended to designate the recipient type. The updated templates now remove any confusion of the recipient type. We thank the Washington State Auditor’s Office for the opportunity to provide a response to the audit finding and provide the steps the Department is actively taking to remediate all deficiencies. Auditor’s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes the requirements for all pass-through entities. Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the general criteria in order for a cost to be allowable under federal awards, including being adequately documented. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 31 CFR Part 35, Pandemic Relief Programs, section 5, Use of funds, establishes the period of performance for the Coronavirus State and Local Fiscal Recovery Funds and states, in part: 35.5 Use of funds. (a) In general. A recipient may only use funds for the purposes enumerated in § 35.6 (b) through (f) to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable. A recipient may only use funds for the purposes enumerated in § 35.6 (g) through (h) to cover costs incurred during the period beginning December 29, 2022, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2), 602(c)(5)(C), 603(c)(2), and 603(c)(6)(B) of the Social Security Act, as applicable. (b) Costs incurred. A cost shall be considered to have been incurred for purposes of paragraph (a) of this section if the recipient has incurred an obligation with respect to such cost by December 31, 2024. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. State of Washington Engrossed Substitute Senate Bill 5092, 67th Legislature 2021 Regular Session, Operating Budget, states in part: Section 128. FOR THE DEPARTMENT OF COMMERCE Coronavirus State Fiscal Recovery Fund – Federal The appropriations in this section are subject to the following conditions and limitations; (1) $100,000,000 of the coronavirus state fiscal recovery fund – federal appropriation is provided solely for grants for public and private water, sewer, garbage, electric, and natural gas utilities to address low-income customer arrearages compounded by the COVID-19 pandemic and the related economic downturn that were accrued between March 1, 2020, and December 31, 2021. a. By May 27, 2022, each utility that wishes to participate, must opt-in to the grant program by providing the department the following information: i. Current arrearage balances for residential customers as of March 31, 2022; and ii. Available information on arrearage balances of low-income customers, including customers who received assistance from the low-income home energy assistance program, low-income water assistance program, or ratepayer-funded assistance programs between April 1, 2020, and March 31, 2022, as of March 31, 2022. If a utility does not have access to information regarding customer participation in these programs, the department must distribute funding to the community action program serving the same service area as the utility instead of the utility. b. In determining the amount of funding each utility may receive, the department must consider: i. Each participating utility’s portion of the aggregate amount of arrearages among all participating utilities; ii. Utility service areas that are situated in locations experiencing disproportionate environmental health disparities; iii. American community survey poverty data; and iv. Whether the utility has leveraged other fund sources to reduce customer arrearages. c. The department may retain up to one percent of the funding provided in this subsection to administer the program. d. Each utility shall disburse funds directly to customer accounts by December 31, 2022. Funding shall only be distributed to customers that have participated in the low-income home energy assistance program, low-income water assistance program, or ratepayer-funded assistance programs. e. Utilities may, but are not required to, work with other utilities or use community action agencies to administer these funds following the eligibility criteria for the low-income home energy assistance program and the low-income household water assistance program. f. By March 1, 2023, each utility who opted into the grant program must report to the department, utilities and transportation commission, and state auditor on how the funds were utilized and how many customers were supported. g. Utilities may account for and recover in rates administrative costs associated with the disbursement of funds provided in this subsection.
2023-029 The Department of Social and Health Services did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the Coronavirus State and Local Fiscal Recovery Funds. Assistance Listing Number and Title: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: None Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Subrecipient Monitoring Known Questioned Cost Amount: $312,659,850 Prior Year Audit Finding: No Background The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program provides direct payments to states to respond to the COVID-19 pandemic and its negative economic effects. Washington received about $4.4 billion of SLFRF funds from the U.S. Department of the Treasury, which the state’s Office of Financial Management allocated to state agencies for various programs. In fiscal year 2023, state agencies spent more than $1.7 billion in SLFRF funds, $344 million of which was spent by the Department of Social and Health Services. The Department spent more than $332 million to administer financial assistance through the Washington Immigrant Relief Fund to people in Washington who lacked permanent legal status. The purpose of this program was to provide cash grants to residents of Washington who were at least 18 years old and were ineligible to receive federal economic impact payments or unemployment benefits due to their immigration status. The Legislature appropriated $340 million to the Department in SLFRF funding to administer one-time grants to eligible recipients during fiscal year 2023. Under the legislative mandate, the Department could not spend more than 10 percent of the appropriated funds for the administration of the program. In total, the Department paid more than $312 million in cash grants to approved recipients. According to the legislative mandate, people needed to complete an application and meet the following eligibility requirements to receive a grant: • The person must live in Washington state. • The person must be age 18 years, or older. • After January 1, 2021, and before June 30, 2023, the person must have been significantly affected by the COVID-19 pandemic. • The person must not be eligible to receive federal economic impact payments or unemployment insurance benefits due to immigration status. • The person may not receive more than three grants. The Department was required to prioritize granting payments to people who had the greatest need of assistance. The factors used to prioritize need included: • People who had a total household income at or below 250 percent of the federal poverty level • People who were the primary or sole income earner of their household • People who experienced housing instability • People who contracted or were at high risk of contracting COVID-19 During the audit period, the Department contracted with a for-profit subrecipient to implement and manage the program. The funds expended in the audit period were the final round of funding for this program. In prior years, there were two other rounds of funding, each of which provided $1,000 cash grants to approved recipients. For the final round of funding, the Department reimbursed the subrecipient for issuing additional grants of $3,075 to 101,678 approved recipients in the form of either a check or prepaid debit card. Each round of funding was managed by a different subrecipient. To receive a grant, the Department instructed its subrecipients to approve applications for people who met all criteria outlined above, as well as demonstrate the applicants had not yet received the maximum allowable number of three grants. Applicants were allowed to participate in all three rounds of funding, provided they met all eligibility requirements to receive assistance. In total, the same recipient could have received $5,100 in cash grants from the state as part of the Immigrant Relief program. Pass-through entities are required to monitor the activities of subrecipients to ensure they are properly using federal funds for allowable activities and expenditures. Some federal awards may be passed through to for-profit entities, who are accountable to the pass-through entity for the use of the federal funds provided. Because for-profit subrecipients are not subject to audit requirements under the Uniform Guidance, Subpart F, the Department is responsible for establishing requirements, as necessary, to ensure the for-profit subrecipient complies with the terms and conditions of its subaward. The agreement with the for-profit subrecipient should describe applicable compliance requirements and the for-profit subrecipient’s compliance responsibility. Methods to ensure for-profit subrecipients’ compliance may include pre-award audits, monitoring the subrecipient during the agreement, and conducting post-award audits. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with requirements for monitoring subrecipients to ensure payments were allowable, properly supported and met period of performance requirements for the SLFRF program. During the audit period, the Department awarded funds to its subrecipient to implement and manage the program, including creating an application platform, determining the eligibility of applicants to receive financial assistance, and distributing Department funds to third-party vendors to facilitate payments to recipients. However, the application developed by the subrecipient and approved by the Department did not address each eligibility criterion established by the Legislature. In addition, the application’s questions were written in a way that a person’s responses could be truthful and make them appear to be eligible for assistance but not meet the criteria of the legislative mandate. Specifically, the application: • Asked applicants to answer whether they “received a federal stimulus check” or “received unemployment benefits during the pandemic,” without specifically asking if it was due to their immigration status, which was a core eligibility requirement • Included two scenarios that did not necessarily indicate whether someone had been significantly affected by the COVID-19 pandemic. These scenarios were whether applicants had borrowed money from a friend or relative, and whether they were past due on rent, mortgage payments, utility bills, or had lost their housing. The Department’s award contract to the subrecipient outlined that for the subrecipient to receive funds for the grant award, it would need to submit a list of all approved applicants when requesting payments. However, the subrecipient was required to redact all personally identifiable information before submitting the list of applicants to the Department. The contract also specified the Department would complete a review of applications to ensure the subrecipient was correctly determining eligibility. The subrecipient included the list of approved applicants when it submitted invoices to the Department requesting reimbursement for funds rendered to clients. However, these invoices contained only the application identification numbers for approved applicants and their payment amounts. The invoices did not include any information to identify the applicant or support the subrecipient’s eligibility determination. Department officials said the subrecipient maintained all supporting documentation to demonstrate an applicant was eligible. However, because the Department did not request documentation from the subrecipient to support those grant payments to applicants, the Department could not determine if the applicants were eligible and the payments were actually dispersed to them. Ultimately, due to the lack of supporting documentation, we could not determine whether the Department used program funds for allowable activities, or that recipients who received grants met all requirements established by the Legislature. On four separate occasions, the Department requested the subrecipient to provide 250 beneficiary applications so staff could review them to determine whether the subrecipient correctly determined that applicants were eligible to receive financial assistance. The subrecipient picked the samples each time, and the Department did not receive details about the sampling methodology the subrecipient used to determine the samples. Each batch only included de-identified samples that did not have any personally identifiable information. Therefore, the Department did not have sufficient information to review to ensure all eligibility and prioritization criteria, as outlined in the legislative mandate, were met. In addition, the Department did not retain any of the supporting documentation it did receive from the subrecipient. We determined the Department’s monitoring design for the subrecipient was insufficient to determine whether only eligible applicants received grants, or if all recipients actually existed. Specifically, the Department could not determine whether the recipients: • Had already applied for and were denied eligibility for unemployment insurance benefits by the state, due to their immigration status • Were not eligible to receive federal economic impact payments due to their immigration status • Were residents of Washington state • Did not already receive the maximum allowable number of grants under the program • Met the income requirement to be at or below 250 percent of the federal poverty level Once the application period ended, the subrecipient provided the Department with a list of all approved applicants, which totaled 101,678 people. Although the first two awards given to recipients were $1,000 each, the Department decided it would evenly distribute the remaining funds between everyone who had been approved to receive a grant. Department management said they chose to distribute the remaining funds this way to minimize public concerns about unallocated grants. Based on the total number of applicants and the remaining funds, management in the Department’s Office of Refugee and Immigrant Assistance determined each grant award would be $3,075. While the Department did perform some fiscal monitoring of the subrecipient’s administrative costs, management chose not to complete any fiscal monitoring of the grant award payments. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department approved the eligibility application that the subrecipient created, but the application did not ensure only eligible applicants were approved because it included criteria that was not in the legislative mandate. In addition, management wrote the award contract in a way that restricted the subrecipient from providing any personally identifiable information for applicants. Without this information, the Department could not sufficiently monitor the subrecipient to ensure only eligible applicants were approved and received grant funds. Since the subrecipient was required to retain all supporting documentation, the Department could have performed fiscal monitoring to ensure the grant payments to the subrecipient were distributed only to eligible applicants. However, management said the Department had no plans to do so. Effect of Condition and Questioned Costs We determined the Department did not review adequate supporting documentation before paying the subrecipient for applications processed during the audit period. Since the Department did not perform adequate monitoring to ensure that expenditures were for allowable activities, it does not have assurance that the subrecipient spent program funds in accordance with the legislative mandate. As a result, we identified $312,659,850 in known federal questioned costs. Without establishing adequate internal controls and reviewing detailed supporting documentation from the subrecipient for grant awards, including verifying that only eligible applicants received grant funds, the Department did not reasonably ensure it used federal funds for allowable purposes and that spending occurred within the allowed period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Perform a sufficient level of subrecipient monitoring that meets federal requirements so the Department can reasonably determine whether its subrecipient only disbursed grant funds to eligible applicants • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The Department partially concurs with the Auditor’s findings. The Department’s Office of Refugee and Immigrant Assistance (ORIA) administered the fund and contracted with a subrecipient organization to conduct eligibility determinations and to approve and disburse funds to undocumented immigrants. The final payments went out in early 2023 and the Washington COVID-19 Immigrant Relief Fund is now closed and all subrecipient contracts have ended. We concur that we should have strengthened our internal controls to have reasonably determined the subrecipient only disbursed grant funds to eligible applicants. ORIA will work with contracts and accounting staff to develop effective internal controls and clear written procedures covering subrecipient monitoring requirements. ORIA will train all staff responsible for subrecipient monitoring on the newly established internal controls and written procedures. In addition, the Office of the Secretary will request the Department’s Internal Audit and Consultation office conduct an internal audit of ORIA to ensure the program implements strong internal controls, properly accounts for federal funds, and materially complies with federal requirements. The Department does not concur with the questioned costs. The Department used the funds to assist Washington workers/families who were affected by the COVID-19 pandemic but were unable to access federal stimulus programs and other social supports due to their immigration status. Repayment of these funds would only hinder the state’s ability to provide critical services to our clients. If the grantor contacts the Department regarding the questioned costs, the Department will discuss the manner in which we used the funds with the Department of Health & Human Services and will take additional action if appropriate. Auditor’s Remarks We appreciate the Department acknowledging that internal controls need to be strengthened. Regarding the Department not concurring with questioned cost, we determined the Department did not review supporting documentation from the subrecipient to demonstrate that assistance only went to eligible beneficiaries and therefore does not have assurance that federal funds were properly spent. We reaffirm our finding and will review the status of the Department’s corrective action during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200.403, Uniform Guidance establishes the factors affecting the allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. State of Washington Engrossed Substitute Senate Bill 5092, 67th Legislature 2021 Regular Session, Operating Budget, states in part: NEW SECTION. Section 205. FOR THE DEPARTMENT OF SOCIAL AND HEALTH SERVICES – ECONOMIC SERVICES PROGRAM Coronavirus State Fiscal Recovery Fund – Federal The appropriations in this section are subject to the following conditions and limitations: 15. $340,000,000 of the coronavirus state fiscal recovery fund – federal appropriation is provided solely for the Washington immigrant relief fund, a disaster assistance program to provide grants to eligible persons. Administrative costs may not exceed 10 percent of the funding in this subsection. a. A person is eligible for a grant who: I. Lives in Washington state; II. Is at least 18 years of age; III. After January 1, 2021, and before June 30, 2023, has been significantly affected by the coronavirus pandemic, such as loss of employment or significant reduction in work hours, contracting the coronavirus, having to self-quarantine as a result of exposure to the coronavirus, caring for a family member who contracted the coronavirus, or being unable to access childcare for children impacted by school or childcare closures; and IV. Is not eligible to receive federal economic impact (stimulus) payments or unemployment insurance benefits due to the person’s immigration status. b. The department may not deny a grant to a person on the basis that another adult in the household is eligible for federal economic impact (stimulus) payments or unemployment benefits or that the person previously received a grant under the program. However, a person may not receive more than three grants. c. The department’s duty to provide grants is subject to the availability of the amounts specified in this subsection, and the department must prioritize grants to persons who are most in need of financial assistance using factors that include, but are not limited to: (i) Having an income at or below 250 percent of the federal poverty level; (ii) being the primary or sole income earner of household; (iii) experiencing housing instability; and (iv) having contracted or being at high risk of contracting the coronavirus. The department may contract with one or more entities to administer the program. If the department engages in a competitive contracting process for administration of the program, experience in administering similar programs must be given weight in the selection process to expedite the delivery of benefits to eligible applicants.
2023-034 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $378,206 Prior Year Audit Finding: Yes, Finding 2022-025 Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identifies the amount of funds the Office must distribute to its LEAs on a formula basis, as well as the amount it can set aside for administration and other state-level activities. The Office was awarded $8,433,118 for the fiscal year 2021 IDEA Preschool Grant. From this award, $2,222,340 was earmarked to be spent on state-level activities. This is split between administrative costs of up to $444,468 and other state-level activities for the remaining amount. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. The prior finding number was 2022-025. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. During the audit period, the Office did not accurately track expenditures for administration and other state-level activities. For the life of the grant, the Office spent $2,600,340 on other state-level activities, which exceeded the maximum by $378,206. As a result, we are questioning the $378,206 as unallowable state-level costs. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Although management were aware of the required earmarks, the Office did not address identified variances in the spending plan for them. This was due in part to staff changes within the program that led to inconsistencies in tracking expenditures of the earmarked funds. Effect of Condition and Questioned Costs Without adequate internal controls, the Office cannot ensure that it meets the grant’s earmarking requirements. By not complying with the grant’s earmarking requirements, the Office improperly spent $378,206 on activities that exceeded the allowable earmarked amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Office: • Improve internal controls to ensure it does not exceed the maximum allowable amounts that are earmarked for administration and other state-level activities • Consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. When special education fiscal leadership transitioned in 2021, the incoming director identified necessary changes in agency procedures for closing out the fiscal year for special education. Since that time, the following internal controls have been fully implemented to ensure spending plans do not exceed the maximum allowable amounts earmarked for administration and other state-level activities: 1. At the beginning of the fiscal year, the Director of Operations/Budget Analysis meet to review the criteria for spending plans. 2. Copies of GAN and Grants to States Summary Table and Preschool Grants to States Summary Table are shared with the Budget Analysis. 3. Director of Operations/Budget Analysis meet to review the GAN and Grants to States Summary Table and Preschool Grants to States Summary Table. 4. Director of Operations/Budget Analysis meet to review spending plan and update the maximum allowable amounts earmarked for administration and other state-level activities in the spending plan. 5. Maximum allowable amounts earmarked for administration and other state-level activities are reviewed throughout the fiscal year. 6. Director of Operations/Budget Analysis meet weekly to review spending plan. 7. Spending Plan updated as requests are received. 8. Monthly expenditure reports are produced and during weekly meetings, Director of Operations/Budget Analysis review expenditures. These internal controls have contributed to increased communication and partnership between the Director of Operations/Budget Analysis. With implementing these consistent controls, we can ensure that maximum allowable amounts that are earmarked for administration and other state-level activities will meet compliance. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 300, Assistance to States for the Education of Children with Disabilities, states in part: Section 300.812 Reservation for State activities, states: a. Each State may reserve not more than the amount described in paragraph (b) of this section for administration and other State-level activities in accordance with §§ 300.813 and 300.814. b. For each fiscal year, the Secretary determined and reports to the SEA an amount that is 25% of the amount the State received under section 619 of the Act for fiscal year 1997 cumulatively adjusted by the secretary for each succeeding fiscal year by the lesser of – 1. The percentage increase, if any, from the preceding fiscal year in the State’s allocation under section 619 of the Act; or 2. The rate of inflation, as measured by the percentage increase, if any, from the preceding fiscal year in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics to the Department of Labor. Section 300.813 State administration, states: a. For the purpose of administering section 619 of the Act (including the coordination of activities under Part B with the Act with, and providing technical assistance to, other programs that provide services to children with disabilities), a State may use not more than 20 percent of the maximum amount the State may reserve under § 300.812 for any fiscal year. b. Funds described in paragraph (a) of this section may also be used for the administration of Part C of the Act. Section 300.814 Other State-level activities. Each State must use any funds the State reserves under § 300.812 and does not use for administration under § 300.813 – a. For support services (including establishing and implementing the mediation process required by section 615€ of the Act), which may benefit children with disabilities younger than three or older than five as long as those services also benefit children with disabilities aged three through five; b. For direct services for children eligible for services under section 619 of the Act; c. For activities at the State and local levels to meet the performance goals established by the State under section 612(a)(15) of the Act; d. To supplement other funds used to develop and implement a statewide coordinated services system designed to improve results for children and families, including children with disabilities and their families, but not more than one percent of the amount received under section 619 of the Act for a fiscal year; e. To provide early intervention services (which must include an educational component that promotes school readiness and incorporates preliteracy, language, and numeracy skills) in accordance with Part C of the Act to children with disabilities who are eligible for services under section 619 of the Act and who previously received services under Part C of the Act until such children enter, or are eligible under State law to enter, kindergarten; or f. At the State's discretion, to continue service coordination or case management for families who receive services under Part C of the Act, consistent with § 300.814(e) The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-035 The Office of Superintendent of Public Instruction improperly charged $42,265 to the Special Education Cluster. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $42,265 Prior Year Audit Finding: No Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identified that obligations charged to the fiscal year 2021 Special Education grants must be liquidated within 120 days after the budget period ended on September 30, 2022. Description of Condition The Office improperly charged $42,265 to the Special Education Cluster. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. However, we examined two charges that were coded to the fiscal year 2021 Special Education grants after the liquidation period ended. We reviewed the supporting documentation for each expenditure to ensure it was allowable and took place during the period of performance. We found that both charges were recorded after the liquidation period for services and purchases that occurred during the period of performance. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2021 IDEA, Part B grants after the liquidation period ended, and did not request a late liquidation from the U.S Department of Education. Effect of Condition and Questioned Costs We identified $42,265 in questioned costs that were paid outside the program’s period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response OSPI has established internal controls to address allowable periods for journal vouchers (corrections). The correction cycle will be aligned with federally established liquidation periods. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum • Complete expenditure corrections within the grant liquidation period • Liquidation is done on the last business day of January (or 120 days after the budget period ends) • Submit late liquidation requests to the appropriate federal point of contact, as needed Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2021 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H173A200074 and H027A200074 as July 1, 2018, through September 30, 2021. Title 20 United States Code 1225(b), Section 421(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months
2023-034 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $378,206 Prior Year Audit Finding: Yes, Finding 2022-025 Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identifies the amount of funds the Office must distribute to its LEAs on a formula basis, as well as the amount it can set aside for administration and other state-level activities. The Office was awarded $8,433,118 for the fiscal year 2021 IDEA Preschool Grant. From this award, $2,222,340 was earmarked to be spent on state-level activities. This is split between administrative costs of up to $444,468 and other state-level activities for the remaining amount. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. The prior finding number was 2022-025. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. During the audit period, the Office did not accurately track expenditures for administration and other state-level activities. For the life of the grant, the Office spent $2,600,340 on other state-level activities, which exceeded the maximum by $378,206. As a result, we are questioning the $378,206 as unallowable state-level costs. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Although management were aware of the required earmarks, the Office did not address identified variances in the spending plan for them. This was due in part to staff changes within the program that led to inconsistencies in tracking expenditures of the earmarked funds. Effect of Condition and Questioned Costs Without adequate internal controls, the Office cannot ensure that it meets the grant’s earmarking requirements. By not complying with the grant’s earmarking requirements, the Office improperly spent $378,206 on activities that exceeded the allowable earmarked amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Office: • Improve internal controls to ensure it does not exceed the maximum allowable amounts that are earmarked for administration and other state-level activities • Consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. When special education fiscal leadership transitioned in 2021, the incoming director identified necessary changes in agency procedures for closing out the fiscal year for special education. Since that time, the following internal controls have been fully implemented to ensure spending plans do not exceed the maximum allowable amounts earmarked for administration and other state-level activities: 1. At the beginning of the fiscal year, the Director of Operations/Budget Analysis meet to review the criteria for spending plans. 2. Copies of GAN and Grants to States Summary Table and Preschool Grants to States Summary Table are shared with the Budget Analysis. 3. Director of Operations/Budget Analysis meet to review the GAN and Grants to States Summary Table and Preschool Grants to States Summary Table. 4. Director of Operations/Budget Analysis meet to review spending plan and update the maximum allowable amounts earmarked for administration and other state-level activities in the spending plan. 5. Maximum allowable amounts earmarked for administration and other state-level activities are reviewed throughout the fiscal year. 6. Director of Operations/Budget Analysis meet weekly to review spending plan. 7. Spending Plan updated as requests are received. 8. Monthly expenditure reports are produced and during weekly meetings, Director of Operations/Budget Analysis review expenditures. These internal controls have contributed to increased communication and partnership between the Director of Operations/Budget Analysis. With implementing these consistent controls, we can ensure that maximum allowable amounts that are earmarked for administration and other state-level activities will meet compliance. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 300, Assistance to States for the Education of Children with Disabilities, states in part: Section 300.812 Reservation for State activities, states: a. Each State may reserve not more than the amount described in paragraph (b) of this section for administration and other State-level activities in accordance with §§ 300.813 and 300.814. b. For each fiscal year, the Secretary determined and reports to the SEA an amount that is 25% of the amount the State received under section 619 of the Act for fiscal year 1997 cumulatively adjusted by the secretary for each succeeding fiscal year by the lesser of – 1. The percentage increase, if any, from the preceding fiscal year in the State’s allocation under section 619 of the Act; or 2. The rate of inflation, as measured by the percentage increase, if any, from the preceding fiscal year in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics to the Department of Labor. Section 300.813 State administration, states: a. For the purpose of administering section 619 of the Act (including the coordination of activities under Part B with the Act with, and providing technical assistance to, other programs that provide services to children with disabilities), a State may use not more than 20 percent of the maximum amount the State may reserve under § 300.812 for any fiscal year. b. Funds described in paragraph (a) of this section may also be used for the administration of Part C of the Act. Section 300.814 Other State-level activities. Each State must use any funds the State reserves under § 300.812 and does not use for administration under § 300.813 – a. For support services (including establishing and implementing the mediation process required by section 615€ of the Act), which may benefit children with disabilities younger than three or older than five as long as those services also benefit children with disabilities aged three through five; b. For direct services for children eligible for services under section 619 of the Act; c. For activities at the State and local levels to meet the performance goals established by the State under section 612(a)(15) of the Act; d. To supplement other funds used to develop and implement a statewide coordinated services system designed to improve results for children and families, including children with disabilities and their families, but not more than one percent of the amount received under section 619 of the Act for a fiscal year; e. To provide early intervention services (which must include an educational component that promotes school readiness and incorporates preliteracy, language, and numeracy skills) in accordance with Part C of the Act to children with disabilities who are eligible for services under section 619 of the Act and who previously received services under Part C of the Act until such children enter, or are eligible under State law to enter, kindergarten; or f. At the State's discretion, to continue service coordination or case management for families who receive services under Part C of the Act, consistent with § 300.814(e) The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-035 The Office of Superintendent of Public Instruction improperly charged $42,265 to the Special Education Cluster. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $42,265 Prior Year Audit Finding: No Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identified that obligations charged to the fiscal year 2021 Special Education grants must be liquidated within 120 days after the budget period ended on September 30, 2022. Description of Condition The Office improperly charged $42,265 to the Special Education Cluster. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. However, we examined two charges that were coded to the fiscal year 2021 Special Education grants after the liquidation period ended. We reviewed the supporting documentation for each expenditure to ensure it was allowable and took place during the period of performance. We found that both charges were recorded after the liquidation period for services and purchases that occurred during the period of performance. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2021 IDEA, Part B grants after the liquidation period ended, and did not request a late liquidation from the U.S Department of Education. Effect of Condition and Questioned Costs We identified $42,265 in questioned costs that were paid outside the program’s period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response OSPI has established internal controls to address allowable periods for journal vouchers (corrections). The correction cycle will be aligned with federally established liquidation periods. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum • Complete expenditure corrections within the grant liquidation period • Liquidation is done on the last business day of January (or 120 days after the budget period ends) • Submit late liquidation requests to the appropriate federal point of contact, as needed Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2021 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H173A200074 and H027A200074 as July 1, 2018, through September 30, 2021. Title 20 United States Code 1225(b), Section 421(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months
2023-034 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $378,206 Prior Year Audit Finding: Yes, Finding 2022-025 Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identifies the amount of funds the Office must distribute to its LEAs on a formula basis, as well as the amount it can set aside for administration and other state-level activities. The Office was awarded $8,433,118 for the fiscal year 2021 IDEA Preschool Grant. From this award, $2,222,340 was earmarked to be spent on state-level activities. This is split between administrative costs of up to $444,468 and other state-level activities for the remaining amount. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. The prior finding number was 2022-025. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. During the audit period, the Office did not accurately track expenditures for administration and other state-level activities. For the life of the grant, the Office spent $2,600,340 on other state-level activities, which exceeded the maximum by $378,206. As a result, we are questioning the $378,206 as unallowable state-level costs. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Although management were aware of the required earmarks, the Office did not address identified variances in the spending plan for them. This was due in part to staff changes within the program that led to inconsistencies in tracking expenditures of the earmarked funds. Effect of Condition and Questioned Costs Without adequate internal controls, the Office cannot ensure that it meets the grant’s earmarking requirements. By not complying with the grant’s earmarking requirements, the Office improperly spent $378,206 on activities that exceeded the allowable earmarked amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Office: • Improve internal controls to ensure it does not exceed the maximum allowable amounts that are earmarked for administration and other state-level activities • Consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. When special education fiscal leadership transitioned in 2021, the incoming director identified necessary changes in agency procedures for closing out the fiscal year for special education. Since that time, the following internal controls have been fully implemented to ensure spending plans do not exceed the maximum allowable amounts earmarked for administration and other state-level activities: 1. At the beginning of the fiscal year, the Director of Operations/Budget Analysis meet to review the criteria for spending plans. 2. Copies of GAN and Grants to States Summary Table and Preschool Grants to States Summary Table are shared with the Budget Analysis. 3. Director of Operations/Budget Analysis meet to review the GAN and Grants to States Summary Table and Preschool Grants to States Summary Table. 4. Director of Operations/Budget Analysis meet to review spending plan and update the maximum allowable amounts earmarked for administration and other state-level activities in the spending plan. 5. Maximum allowable amounts earmarked for administration and other state-level activities are reviewed throughout the fiscal year. 6. Director of Operations/Budget Analysis meet weekly to review spending plan. 7. Spending Plan updated as requests are received. 8. Monthly expenditure reports are produced and during weekly meetings, Director of Operations/Budget Analysis review expenditures. These internal controls have contributed to increased communication and partnership between the Director of Operations/Budget Analysis. With implementing these consistent controls, we can ensure that maximum allowable amounts that are earmarked for administration and other state-level activities will meet compliance. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 300, Assistance to States for the Education of Children with Disabilities, states in part: Section 300.812 Reservation for State activities, states: a. Each State may reserve not more than the amount described in paragraph (b) of this section for administration and other State-level activities in accordance with §§ 300.813 and 300.814. b. For each fiscal year, the Secretary determined and reports to the SEA an amount that is 25% of the amount the State received under section 619 of the Act for fiscal year 1997 cumulatively adjusted by the secretary for each succeeding fiscal year by the lesser of – 1. The percentage increase, if any, from the preceding fiscal year in the State’s allocation under section 619 of the Act; or 2. The rate of inflation, as measured by the percentage increase, if any, from the preceding fiscal year in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics to the Department of Labor. Section 300.813 State administration, states: a. For the purpose of administering section 619 of the Act (including the coordination of activities under Part B with the Act with, and providing technical assistance to, other programs that provide services to children with disabilities), a State may use not more than 20 percent of the maximum amount the State may reserve under § 300.812 for any fiscal year. b. Funds described in paragraph (a) of this section may also be used for the administration of Part C of the Act. Section 300.814 Other State-level activities. Each State must use any funds the State reserves under § 300.812 and does not use for administration under § 300.813 – a. For support services (including establishing and implementing the mediation process required by section 615€ of the Act), which may benefit children with disabilities younger than three or older than five as long as those services also benefit children with disabilities aged three through five; b. For direct services for children eligible for services under section 619 of the Act; c. For activities at the State and local levels to meet the performance goals established by the State under section 612(a)(15) of the Act; d. To supplement other funds used to develop and implement a statewide coordinated services system designed to improve results for children and families, including children with disabilities and their families, but not more than one percent of the amount received under section 619 of the Act for a fiscal year; e. To provide early intervention services (which must include an educational component that promotes school readiness and incorporates preliteracy, language, and numeracy skills) in accordance with Part C of the Act to children with disabilities who are eligible for services under section 619 of the Act and who previously received services under Part C of the Act until such children enter, or are eligible under State law to enter, kindergarten; or f. At the State's discretion, to continue service coordination or case management for families who receive services under Part C of the Act, consistent with § 300.814(e) The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-035 The Office of Superintendent of Public Instruction improperly charged $42,265 to the Special Education Cluster. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $42,265 Prior Year Audit Finding: No Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identified that obligations charged to the fiscal year 2021 Special Education grants must be liquidated within 120 days after the budget period ended on September 30, 2022. Description of Condition The Office improperly charged $42,265 to the Special Education Cluster. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. However, we examined two charges that were coded to the fiscal year 2021 Special Education grants after the liquidation period ended. We reviewed the supporting documentation for each expenditure to ensure it was allowable and took place during the period of performance. We found that both charges were recorded after the liquidation period for services and purchases that occurred during the period of performance. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2021 IDEA, Part B grants after the liquidation period ended, and did not request a late liquidation from the U.S Department of Education. Effect of Condition and Questioned Costs We identified $42,265 in questioned costs that were paid outside the program’s period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response OSPI has established internal controls to address allowable periods for journal vouchers (corrections). The correction cycle will be aligned with federally established liquidation periods. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum • Complete expenditure corrections within the grant liquidation period • Liquidation is done on the last business day of January (or 120 days after the budget period ends) • Submit late liquidation requests to the appropriate federal point of contact, as needed Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2021 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H173A200074 and H027A200074 as July 1, 2018, through September 30, 2021. Title 20 United States Code 1225(b), Section 421(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months
2023-034 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Earmarking Known Questioned Cost Amount: $378,206 Prior Year Audit Finding: Yes, Finding 2022-025 Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identifies the amount of funds the Office must distribute to its LEAs on a formula basis, as well as the amount it can set aside for administration and other state-level activities. The Office was awarded $8,433,118 for the fiscal year 2021 IDEA Preschool Grant. From this award, $2,222,340 was earmarked to be spent on state-level activities. This is split between administrative costs of up to $444,468 and other state-level activities for the remaining amount. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. In the prior audit, we reported the Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. The prior finding number was 2022-025. Description of Condition The Office did not have adequate internal controls over and did not comply with requirements to ensure it met the earmarking requirements for the program. During the audit period, the Office did not accurately track expenditures for administration and other state-level activities. For the life of the grant, the Office spent $2,600,340 on other state-level activities, which exceeded the maximum by $378,206. As a result, we are questioning the $378,206 as unallowable state-level costs. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. Cause of Condition Although management were aware of the required earmarks, the Office did not address identified variances in the spending plan for them. This was due in part to staff changes within the program that led to inconsistencies in tracking expenditures of the earmarked funds. Effect of Condition and Questioned Costs Without adequate internal controls, the Office cannot ensure that it meets the grant’s earmarking requirements. By not complying with the grant’s earmarking requirements, the Office improperly spent $378,206 on activities that exceeded the allowable earmarked amount. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Office: • Improve internal controls to ensure it does not exceed the maximum allowable amounts that are earmarked for administration and other state-level activities • Consult with the federal grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. When special education fiscal leadership transitioned in 2021, the incoming director identified necessary changes in agency procedures for closing out the fiscal year for special education. Since that time, the following internal controls have been fully implemented to ensure spending plans do not exceed the maximum allowable amounts earmarked for administration and other state-level activities: 1. At the beginning of the fiscal year, the Director of Operations/Budget Analysis meet to review the criteria for spending plans. 2. Copies of GAN and Grants to States Summary Table and Preschool Grants to States Summary Table are shared with the Budget Analysis. 3. Director of Operations/Budget Analysis meet to review the GAN and Grants to States Summary Table and Preschool Grants to States Summary Table. 4. Director of Operations/Budget Analysis meet to review spending plan and update the maximum allowable amounts earmarked for administration and other state-level activities in the spending plan. 5. Maximum allowable amounts earmarked for administration and other state-level activities are reviewed throughout the fiscal year. 6. Director of Operations/Budget Analysis meet weekly to review spending plan. 7. Spending Plan updated as requests are received. 8. Monthly expenditure reports are produced and during weekly meetings, Director of Operations/Budget Analysis review expenditures. These internal controls have contributed to increased communication and partnership between the Director of Operations/Budget Analysis. With implementing these consistent controls, we can ensure that maximum allowable amounts that are earmarked for administration and other state-level activities will meet compliance. Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance, establishes definitions for improper payments. Part 200.410 establishes requirements for the collection of unallowable costs. Title 34 CFR Part 300, Assistance to States for the Education of Children with Disabilities, states in part: Section 300.812 Reservation for State activities, states: a. Each State may reserve not more than the amount described in paragraph (b) of this section for administration and other State-level activities in accordance with §§ 300.813 and 300.814. b. For each fiscal year, the Secretary determined and reports to the SEA an amount that is 25% of the amount the State received under section 619 of the Act for fiscal year 1997 cumulatively adjusted by the secretary for each succeeding fiscal year by the lesser of – 1. The percentage increase, if any, from the preceding fiscal year in the State’s allocation under section 619 of the Act; or 2. The rate of inflation, as measured by the percentage increase, if any, from the preceding fiscal year in the Consumer Price Index for All Urban Consumers, published by the Bureau of Labor Statistics to the Department of Labor. Section 300.813 State administration, states: a. For the purpose of administering section 619 of the Act (including the coordination of activities under Part B with the Act with, and providing technical assistance to, other programs that provide services to children with disabilities), a State may use not more than 20 percent of the maximum amount the State may reserve under § 300.812 for any fiscal year. b. Funds described in paragraph (a) of this section may also be used for the administration of Part C of the Act. Section 300.814 Other State-level activities. Each State must use any funds the State reserves under § 300.812 and does not use for administration under § 300.813 – a. For support services (including establishing and implementing the mediation process required by section 615€ of the Act), which may benefit children with disabilities younger than three or older than five as long as those services also benefit children with disabilities aged three through five; b. For direct services for children eligible for services under section 619 of the Act; c. For activities at the State and local levels to meet the performance goals established by the State under section 612(a)(15) of the Act; d. To supplement other funds used to develop and implement a statewide coordinated services system designed to improve results for children and families, including children with disabilities and their families, but not more than one percent of the amount received under section 619 of the Act for a fiscal year; e. To provide early intervention services (which must include an educational component that promotes school readiness and incorporates preliteracy, language, and numeracy skills) in accordance with Part C of the Act to children with disabilities who are eligible for services under section 619 of the Act and who previously received services under Part C of the Act until such children enter, or are eligible under State law to enter, kindergarten; or f. At the State's discretion, to continue service coordination or case management for families who receive services under Part C of the Act, consistent with § 300.814(e) The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2023-035 The Office of Superintendent of Public Instruction improperly charged $42,265 to the Special Education Cluster. Assistance Listing Number and Title: 84.027 Special Education Grants to States (IDEA, Part B) 84.027 COVID-19 Special Education Grants to States (IDEA, Part B) 84.173 Special Education–Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education–Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A200074-20A; H027A210074-21A; H027A220074–21A; H027X210074; H173A200074; H173A210074; H173A220074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $42,265 Prior Year Audit Finding: No Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local educational agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction that addresses students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $282 million in federal IDEA grant funds during fiscal year 2023, and passed about $278 million of that funding through to LEAs and educational service districts. IDEA, Part B identified that obligations charged to the fiscal year 2021 Special Education grants must be liquidated within 120 days after the budget period ended on September 30, 2022. Description of Condition The Office improperly charged $42,265 to the Special Education Cluster. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. However, we examined two charges that were coded to the fiscal year 2021 Special Education grants after the liquidation period ended. We reviewed the supporting documentation for each expenditure to ensure it was allowable and took place during the period of performance. We found that both charges were recorded after the liquidation period for services and purchases that occurred during the period of performance. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2021 IDEA, Part B grants after the liquidation period ended, and did not request a late liquidation from the U.S Department of Education. Effect of Condition and Questioned Costs We identified $42,265 in questioned costs that were paid outside the program’s period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response OSPI has established internal controls to address allowable periods for journal vouchers (corrections). The correction cycle will be aligned with federally established liquidation periods. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum • Complete expenditure corrections within the grant liquidation period • Liquidation is done on the last business day of January (or 120 days after the budget period ends) • Submit late liquidation requests to the appropriate federal point of contact, as needed Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office’s corrective action during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Guidance establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2021 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H173A200074 and H027A200074 as July 1, 2018, through September 30, 2021. Title 20 United States Code 1225(b), Section 421(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months
2023-002 U.S. Department of the Treasury COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – ALN 19.027 Criteria: The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Per 2 CFR 200.1, an obligation is an order placed for property and services, contracts and subawards made, and similar transactions that require payment. Condition: The Town reported its entire award on the March 31, 2023 Project and Expenditure report as fully obligated and expended in error. Cause: The Town did not have a clear understanding of the reporting requirements for obligations and expenditures. Effect: The Town overstated amounts obligated by $1,084,963 and overstated expenditures by $1,728,100 on the March 31, 2023 Project and Expenditure report. Questioned Costs: None Repeat Finding from Prior Year: No Recommendation: The Town should implement procedures reconcile reported expenditures to its general ledger and to only report obligations on the Project and Expenditure reporting for items that meet the federal criteria for reporting as an obligation. Views of Responsible Official: Management agrees with the finding.
2023-003 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education COVID-19 – Education Stabilization Fund – ALN 84.425, 84.425D, 84.425U, 84.425W Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.1, proper internal controls should be implemented to ensure transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition: The District recorded a duplicate deposit of $133,868 in federal funds to the general ledger. Cause: There is a lack of reconciling the general ledger activity to the final financial reporting before submission to the Department of Elementary and Secondary Education. Effect: Material audit adjustments were required to the District’s general ledger for financial reporting purposes. The client did not duplicate the deposit on the final financial report submitted to the Department of Elementary and Secondary Education. Repeat Finding from Prior Year: No. Recommendation: The District should implement a process to reconcile final financial reports to the general ledger before submission. Views of Responsible Official: Management agrees with the finding.
2023-003 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education COVID-19 – Education Stabilization Fund – ALN 84.425, 84.425D, 84.425U, 84.425W Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.1, proper internal controls should be implemented to ensure transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition: The District recorded a duplicate deposit of $133,868 in federal funds to the general ledger. Cause: There is a lack of reconciling the general ledger activity to the final financial reporting before submission to the Department of Elementary and Secondary Education. Effect: Material audit adjustments were required to the District’s general ledger for financial reporting purposes. The client did not duplicate the deposit on the final financial report submitted to the Department of Elementary and Secondary Education. Repeat Finding from Prior Year: No. Recommendation: The District should implement a process to reconcile final financial reports to the general ledger before submission. Views of Responsible Official: Management agrees with the finding.
2023-003 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education COVID-19 – Education Stabilization Fund – ALN 84.425, 84.425D, 84.425U, 84.425W Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.1, proper internal controls should be implemented to ensure transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition: The District recorded a duplicate deposit of $133,868 in federal funds to the general ledger. Cause: There is a lack of reconciling the general ledger activity to the final financial reporting before submission to the Department of Elementary and Secondary Education. Effect: Material audit adjustments were required to the District’s general ledger for financial reporting purposes. The client did not duplicate the deposit on the final financial report submitted to the Department of Elementary and Secondary Education. Repeat Finding from Prior Year: No. Recommendation: The District should implement a process to reconcile final financial reports to the general ledger before submission. Views of Responsible Official: Management agrees with the finding.
2023-003 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education COVID-19 – Education Stabilization Fund – ALN 84.425, 84.425D, 84.425U, 84.425W Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.1, proper internal controls should be implemented to ensure transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition: The District recorded a duplicate deposit of $133,868 in federal funds to the general ledger. Cause: There is a lack of reconciling the general ledger activity to the final financial reporting before submission to the Department of Elementary and Secondary Education. Effect: Material audit adjustments were required to the District’s general ledger for financial reporting purposes. The client did not duplicate the deposit on the final financial report submitted to the Department of Elementary and Secondary Education. Repeat Finding from Prior Year: No. Recommendation: The District should implement a process to reconcile final financial reports to the general ledger before submission. Views of Responsible Official: Management agrees with the finding.
2023-003 U.S. Department of Education Passed-through the Commonwealth of Massachusetts’ Department of Elementary and Secondary Education COVID-19 – Education Stabilization Fund – ALN 84.425, 84.425D, 84.425U, 84.425W Material Weakness in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.1, proper internal controls should be implemented to ensure transactions are properly recorded and accounted for in order to permit the preparation of reliable financial statements and federal reports. Condition: The District recorded a duplicate deposit of $133,868 in federal funds to the general ledger. Cause: There is a lack of reconciling the general ledger activity to the final financial reporting before submission to the Department of Elementary and Secondary Education. Effect: Material audit adjustments were required to the District’s general ledger for financial reporting purposes. The client did not duplicate the deposit on the final financial report submitted to the Department of Elementary and Secondary Education. Repeat Finding from Prior Year: No. Recommendation: The District should implement a process to reconcile final financial reports to the general ledger before submission. Views of Responsible Official: Management agrees with the finding.
2 CFR § 3474.1 provides the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 2 CFR § 200.207(a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE. 2 CFR § 200.329(a) provides that the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332. 2 CFR § 200.302(b)(2) provides, in part, that the financial management system of each non-Federal entity must provide for accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. 2 CFR § 200.332(d) provides, in part, that a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity. The Ohio Department of Education requires school districts to file a Final Expenditure Report each year by September 30, unless stated otherwise in the grant application. ODE further requires subgrantees to obligate funds within the approved project period as set forth in the approved application and to liquidate said obligations not later than 90 days after the end of the project period for electronic applications for grants, with obligations having the same meaning as in 2 CFR §§ 200.343 and 200.1. ODE also requires all allowable grant expenditures obligated by the project end date as designated in the grant agreement to be reported in the FER. The District did file the Final Expenditure Report with ODE before the required reporting deadline, however, due to deficiencies in the internal policies and procedures over Federal compliance, the District did not exclude the prior grant year expenditures obligated during the prior fiscal year, but not paid until after June 30, 2022. This resulted in expenditures being overreported in the amount of $78,795; however, this oversight did not result in additional federal funding. Failure to file accurate financial information in the Final Expenditure Report could lead to material misstatements and could impact future grant funding. The District should review the Final Expenditure Report before submission to help ensure all required amounts are included.
2 CFR § 3474.1 provides the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 2 CFR § 200.207(a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE. 2 CFR § 200.329(a) provides that the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also § 200.332. 2 CFR § 200.302(b)(2) provides, in part, that the financial management system of each non-Federal entity must provide for accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. 2 CFR § 200.332(d) provides, in part, that a pass-through entity must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity. The Ohio Department of Education requires school districts to file a Final Expenditure Report each year by September 30, unless stated otherwise in the grant application. ODE further requires subgrantees to obligate funds within the approved project period as set forth in the approved application and to liquidate said obligations not later than 90 days after the end of the project period for electronic applications for grants, with obligations having the same meaning as in 2 CFR §§ 200.343 and 200.1. ODE also requires all allowable grant expenditures obligated by the project end date as designated in the grant agreement to be reported in the FER. The District did file the Final Expenditure Report with ODE before the required reporting deadline, however, due to deficiencies in the internal policies and procedures over Federal compliance, the District did not exclude the prior grant year expenditures obligated during the prior fiscal year, but not paid until after June 30, 2022. This resulted in expenditures being overreported in the amount of $78,795; however, this oversight did not result in additional federal funding. Failure to file accurate financial information in the Final Expenditure Report could lead to material misstatements and could impact future grant funding. The District should review the Final Expenditure Report before submission to help ensure all required amounts are included.
Program: Housing Opportunities for Persons with AIDS (HOPWA) ALN #: 14.241 Federal Agency: Housing and Urban Development Federal Award Numbers: MAH22-F005, MAH20-F005, and MAH21-F005 Award Year: July 1, 2022–June 30, 2023 Reporting Type of finding: Material weakness and noncompliance Prior-year finding: No Statistically valid sample: No Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The City’s Community Development Department did not report awards granted to subrecipients for the HOPWA program by the end of the month following the month in which the City awarded the subrecipient award that is greater than or equal to $30,000 as required by FFATA. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of four subawards, we also noted reporting exceptions as subawards were not reported in the required time. Cause The condition found was due to the City not reporting any amounts passed through to subrecipients for the period from July 2022 to June 2023, as the responsible officials were not aware of the reporting timeline requirements. As a result, all subawards were reported on a one-year lag. Effect Failure to submit all subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government Questioned Costs None Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of Responsible Officials and Corrective Actions HOPWA contracts have typically been obligated over the course of several or more months, as some subrecipients operate in different ways. Going forward, the City will use the contract start date (7/1) as the Obligation date, and will submit the FFATA report accordingly. Implementation Date 8/31/2024 (representing the end of the month following the obligation of funds). Responsible Officials Robert Keller, Project Planner, Cambridge Community Development Department, and Judith Tumusiime, Federal Grants Manager, Cambridge Community Development Department
Program: Housing Opportunities for Persons with AIDS (HOPWA) ALN #: 14.241 Federal Agency: Housing and Urban Development Federal Award Numbers: MAH22-F005, MAH20-F005, and MAH21-F005 Award Year: July 1, 2022–June 30, 2023 Reporting Type of finding: Material weakness and noncompliance Prior-year finding: No Statistically valid sample: No Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The City’s Community Development Department did not report awards granted to subrecipients for the HOPWA program by the end of the month following the month in which the City awarded the subrecipient award that is greater than or equal to $30,000 as required by FFATA. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testwork of four subawards, we also noted reporting exceptions as subawards were not reported in the required time. Cause The condition found was due to the City not reporting any amounts passed through to subrecipients for the period from July 2022 to June 2023, as the responsible officials were not aware of the reporting timeline requirements. As a result, all subawards were reported on a one-year lag. Effect Failure to submit all subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government Questioned Costs None Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of Responsible Officials and Corrective Actions HOPWA contracts have typically been obligated over the course of several or more months, as some subrecipients operate in different ways. Going forward, the City will use the contract start date (7/1) as the Obligation date, and will submit the FFATA report accordingly. Implementation Date 8/31/2024 (representing the end of the month following the obligation of funds). Responsible Officials Robert Keller, Project Planner, Cambridge Community Development Department, and Judith Tumusiime, Federal Grants Manager, Cambridge Community Development Department
2023-001 U.S. Department of the Treasury COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027 Criteria: The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Per 2 CFR 200.1, an obligation is an order placed for property and services, contracts and subawards made, and similar transactions that require payment. Condition: Obligations were overstated by approximately $650,000 on the March 31, 2023 Project and Expenditure report. Cause: The Town did not have a clear understanding of the reporting requirements for obligations and reported the entire grant award as obligated. Effect: The Town did not properly report amounts obligated in the March 31, 2023 Project and Expenditure report. Questioned Costs: None Repeat Finding from Prior Year: No Recommendation: The Town should implement procedures to only report obligations on the Project and Expenditure reporting for items that meet the federal criteria for reporting as an obligation. Views of Responsible Official: Management agrees with the finding.
Reference Number: 2023-005 Prior Year Finding: 2022-004 Federal Agency: U.S. Department of Agriculture State Agency: Department of Elementary and Secondary Education Federal Program: Child and Adult Care Food Program Assistance Listing Number: 10.558 Award Number and Year: 202222N202044 (10/1/2021 – 9/30/2022), 202323N202044 (10/1/2022 – 9/30/2023), 202323N119944 (1/1/2022 – 9/30/2023), 202323N202044 (10/1/2022 – 9/30/2023), 202323N119944 (10/1/2022 – 9/30/2023) Compliance Requirement: Eligibility, Subrecipient Monitoring Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or Specific Requirement: Compliance: Eligibility – Per 7 CFR section 226.2, subrecipients must meet the definition of “independent center” or “sponsoring organization”. In addition, all institutions must also meet the eligibility requirements stated in 7 CFR section 226.15 and 42 USC 1766(a)(6) and (d)(l). Definitions include: 1) Independent center means a child care center, at-risk afterschool care center, emergency shelter, outside-school-hours care center or adult day care center which enters into an agreement with the state agency to assume final administrative and financial responsibility for program operations. 2) Sponsoring organization means a public or nonprofit private organization that is entirely responsible for the administration of the food program. 3) For-profit center means a child care center, outside-school-hours care center, or adult day care center providing nonresidential care to adults or children that does not qualify for tax-exempt status under the Internal Revenue Code of 1986. For-profit centers serving adults must meet the criteria described in paragraph (a) of this definition. For-profit centers serving children must meet the criteria described in paragraphs (b )(1) or (b )(2) of this definition, except that children who only participate in the at-risk afterschool snack and/or meal component of the program must not be considered in determining the percentages under paragraphs (b )( 1) or (b)(2) of this definition. Subrecipient Monitoring – Per 2 CFR section 200.332(a), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient's unique entity identifier; iii. Federal Award Identification Number (FAIN); iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; v. Subaward Period of Performance Start and End Date; vi. Subaward Budget Period Start and End Date; vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xiii. Identification of whether the award is R&D; and xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per section 200.414. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Elementary and Secondary Education (Department) was unable to provide documentation that it issued subawards in compliance with federal regulations. Context: Sixty subawards were selected for testing. The Department documents subrecipient eligibility in a permanent agreement with each subrecipient. The following exceptions were noted: • For one of sixty subawards selected for testing, the Department could not provide documentation that it had obtained the subrecipient’s Unique Entity Identifier prior to the issuance of the subaward. • For six of sixty subrecipients selected for testing, the Department did not have an approved permanent agreement on file prior to the start date of the contract. Therefore, the Department was unable to provide documentation that it had determined subrecipient eligibility prior to the start date of the contract. Questioned costs: Undetermined. Cause: The Department’s procedures and controls were not sufficient to ensure that subawards were issued in compliance with federal regulations and that subrecipient eligibility was determined prior to issuance of contracts. Effect: Failure to ensure subrecipients are eligible to receive program funding and failure to ensure subrecipients have a registered unique entity identification number could result in unauthorized entities receiving program funding. Recommendation: The Department should review and enhance internal controls and procedures to ensure that all subrecipients are eligible to receive program funds and that required information is obtained prior to entering into a subrecipient agreement. Views of Responsible Officials: Management agrees with the finding.
Reference Number: 2023-005 Prior Year Finding: 2022-004 Federal Agency: U.S. Department of Agriculture State Agency: Department of Elementary and Secondary Education Federal Program: Child and Adult Care Food Program Assistance Listing Number: 10.558 Award Number and Year: 202222N202044 (10/1/2021 – 9/30/2022), 202323N202044 (10/1/2022 – 9/30/2023), 202323N119944 (1/1/2022 – 9/30/2023), 202323N202044 (10/1/2022 – 9/30/2023), 202323N119944 (10/1/2022 – 9/30/2023) Compliance Requirement: Eligibility, Subrecipient Monitoring Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or Specific Requirement: Compliance: Eligibility – Per 7 CFR section 226.2, subrecipients must meet the definition of “independent center” or “sponsoring organization”. In addition, all institutions must also meet the eligibility requirements stated in 7 CFR section 226.15 and 42 USC 1766(a)(6) and (d)(l). Definitions include: 1) Independent center means a child care center, at-risk afterschool care center, emergency shelter, outside-school-hours care center or adult day care center which enters into an agreement with the state agency to assume final administrative and financial responsibility for program operations. 2) Sponsoring organization means a public or nonprofit private organization that is entirely responsible for the administration of the food program. 3) For-profit center means a child care center, outside-school-hours care center, or adult day care center providing nonresidential care to adults or children that does not qualify for tax-exempt status under the Internal Revenue Code of 1986. For-profit centers serving adults must meet the criteria described in paragraph (a) of this definition. For-profit centers serving children must meet the criteria described in paragraphs (b )(1) or (b )(2) of this definition, except that children who only participate in the at-risk afterschool snack and/or meal component of the program must not be considered in determining the percentages under paragraphs (b )( 1) or (b)(2) of this definition. Subrecipient Monitoring – Per 2 CFR section 200.332(a), all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient's unique entity identifier; iii. Federal Award Identification Number (FAIN); iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; v. Subaward Period of Performance Start and End Date; vi. Subaward Budget Period Start and End Date; vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xiii. Identification of whether the award is R&D; and xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per section 200.414. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Elementary and Secondary Education (Department) was unable to provide documentation that it issued subawards in compliance with federal regulations. Context: Sixty subawards were selected for testing. The Department documents subrecipient eligibility in a permanent agreement with each subrecipient. The following exceptions were noted: • For one of sixty subawards selected for testing, the Department could not provide documentation that it had obtained the subrecipient’s Unique Entity Identifier prior to the issuance of the subaward. • For six of sixty subrecipients selected for testing, the Department did not have an approved permanent agreement on file prior to the start date of the contract. Therefore, the Department was unable to provide documentation that it had determined subrecipient eligibility prior to the start date of the contract. Questioned costs: Undetermined. Cause: The Department’s procedures and controls were not sufficient to ensure that subawards were issued in compliance with federal regulations and that subrecipient eligibility was determined prior to issuance of contracts. Effect: Failure to ensure subrecipients are eligible to receive program funding and failure to ensure subrecipients have a registered unique entity identification number could result in unauthorized entities receiving program funding. Recommendation: The Department should review and enhance internal controls and procedures to ensure that all subrecipients are eligible to receive program funds and that required information is obtained prior to entering into a subrecipient agreement. Views of Responsible Officials: Management agrees with the finding.
Finding 2023-002: Late Reporting and Noncompliance with Reporting Requirements Federal Agency: U.S. Department of the Treasury Pass through agency: State of Alaska Department of Commerce Community and Economic Development Federal Programs: Coronavirus State and Local Fiscal Recovery Funds and Local Government Lost Revenue ALN 21.027 Grant Numbers: AK0031 and 22-LGLR-07 Award Period: 2022 Type of Finding: Significant Deficiency/ Noncompliance Condition and context: The City did not adhere to the Uniform Guidance requirement of submitting the project performance report by the annual deadline. Criteria: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. The nonfederal entity must submit performance reports at the interval required by the federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity as outlined in 2 CFR 200.329. Cause: Due to staff turnover the City was unable to access their reporting log in within the required timeframe, and subsequently were also late in submission of the expenditure Report. Effect: The City is not in compliance with Uniform Guidance requirements. Questioned Costs: None. Repeat finding: No. This appears to be an isolated instance of noncompliance. Recommendation: The City needs to work on getting financial information more timely (i.e. submit the reporting package with the guidelines of Uniform Guidance). Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2023-002: Late Reporting and Noncompliance with Reporting Requirements Federal Agency: U.S. Department of the Treasury Pass through agency: State of Alaska Department of Commerce Community and Economic Development Federal Programs: Coronavirus State and Local Fiscal Recovery Funds and Local Government Lost Revenue ALN 21.027 Grant Numbers: AK0031 and 22-LGLR-07 Award Period: 2022 Type of Finding: Significant Deficiency/ Noncompliance Condition and context: The City did not adhere to the Uniform Guidance requirement of submitting the project performance report by the annual deadline. Criteria: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. The nonfederal entity must submit performance reports at the interval required by the federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity as outlined in 2 CFR 200.329. Cause: Due to staff turnover the City was unable to access their reporting log in within the required timeframe, and subsequently were also late in submission of the expenditure Report. Effect: The City is not in compliance with Uniform Guidance requirements. Questioned Costs: None. Repeat finding: No. This appears to be an isolated instance of noncompliance. Recommendation: The City needs to work on getting financial information more timely (i.e. submit the reporting package with the guidelines of Uniform Guidance). Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2023-030: U.S. Department of Education ALN #84.425F, Education Stabilization Fund (ESF) (COVID-19) Grant #P425F202518 Criteria: Federal regulation, 2 CFR 200.1, defines period of performance as the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions or budget periods. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part H) for the Higher Education Emergency Relief Fund (HEERF) program state in the Coronavirus Aid, Relief, and Economic Security Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan Act Certification and Agreements, all institutions were given one calendar year (12 months) from the date of award in their HEERF Grant Award Notifications (GAN) to complete the performance of their HEERF grants. The Office of Management and Budget 2023 Compliance Supplement (Section III, Part H) for the HEERF program states the performance period was extended to June 30, 2023, as of April 24, 2022, for all HEERF grant awards in an open status (grant awards that had not entered the closeout phase and had a balance of $1,000 or more). Federal regulation, 31 CFR 205.33, requires a state to minimize the time between the drawdown and their disbursement for federal program purposes. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part C) for the HEERF program refer to the Certification Supplemental Agreements for the Coronavirus Response and Relief Supplemental Appropriations Act and American Rescue Plan Act signed by grantees. The compliance supplement and the supplemental agreements indicate the Institutional Aid Portion should be disbursed within three calendar days of the drawdown from the grant system. The Office of Management and Budget 2023 Compliance Supplements (Section III, Part L) for the HEERF program requires quarterly budget and expenditure reporting for all HEERF grant funds. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were insufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) spent the HEERF institutional funds within the period of performance or that the university only drew and reported actual construction project expenses for the HEERF institutional funds. We identified multiple instances where MSU Bozeman did not comply with the period of performance, cash management, and reporting requirements for the HEERF institutional funds. Questioned Costs: No questioned costs identified. Context: MSU Bozeman reported approximately $27.6 million in HEERF expenditures during fiscal years 2022 and 2023, approximately $11.7 million of which were institutional funds. While there were many allowable uses for these funds, the university chose to allocate $5,000,000 to the renovation of HVAC systems in three buildings: • AJM Johnson Hall data center HVAC upgrades for $2,300,000 • Renne Library data center HVAC upgrades for $2,300,000 • Haynes Hall ventilation upgrades for $400,000 In January and May 2023, MSU Bozeman recorded the full amount discussed above for these projects as transfer expenditures in the HEERF fund, which moved the associated cash to its capital projects funds. The university drew the federal funds for these expenditures and reported them on its quarterly reports for the quarters ended 3/31/23 and 6/30/23. However, there were only $45,293 in project expenses for all three projects during the audit period. MSU Bozeman should have transferred only the amount of project expenses, $45,293, to the capital project fund, made a draw, and reported expenditures for this amount, not the full $5,000,000 of the estimated HVAC project costs. The HEERF program did not allow institutions to obligate funds for expenditure after the June 30, 2023, period of performance end date and required all funds to be spent by that date. By recording the transfer expenditures in the HEERF fund and moving the associated cash to the capital projects funds without the same amount of underlying project expenditures, the university violated the period of performance requirements. The HEERF program allowed institutions to apply for no-cost extensions for up to twelve months, but the university did not apply. Effect: By not spending the HEERF institutional funds by the end of the grant period, the university is not in compliance with the period of performance requirements. It has $4,954,707 of unspent HEERF funds sitting in its capital projects fund earning interest. MSU’s project funds are invested through the Montana Board of Investments. Using the average Short Term Investment Pool return for fiscal year 2024, the unspent funds would have earned approximately $267,000 in interest as of the end of the year. Additionally, by drawing and reporting based on the transfer amounts instead of actual construction project expenses during the period, MSU Bozeman did not comply with cash management and reporting requirements. Without effective internal controls that ensure MSU Bozeman manages federal awards according to federal statutes and regulations, the university is not in compliance with the federal requirement to maintain effective internal control over federal awards. The potential consequences of noncompliance include increased scrutiny from the Department of Education and placement on “High Risk Status,” which could impact the university’s ability to receive other grants from the Department of Education. Cause: MSU Bozeman staff attributed the issue to their unfamiliarity with federal grant requirements, as the office managing the HEERF funds does not typically handle federal grants, and to their desire to spend the funds before the end of the grant period. Additionally, university staff stated the university did not have project expenses during the period due to navigating market conditions related to consultant interest and contractor pricing in the construction industry. Staff further stated that due to the construction delays, the importance of these projects, and the lack of another funding source, they had no choice but to record the transactions they did in order to have the funds available to complete the projects. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure the university complies with cash management, period of performance, and reporting requirements for any new federal programs received; B. Comply with federal regulations for cash management, period of performance, and reporting for any new federal programs; and C. Work with the Department of Education to resolve the use of the funds, including returning the $4,954,707 of excess HEERF funds and approximately $267,000 of interest to the Department of Education, if required. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-030: U.S. Department of Education ALN #84.425F, Education Stabilization Fund (ESF) (COVID-19) Grant #P425F202518 Criteria: Federal regulation, 2 CFR 200.1, defines period of performance as the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions or budget periods. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part H) for the Higher Education Emergency Relief Fund (HEERF) program state in the Coronavirus Aid, Relief, and Economic Security Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan Act Certification and Agreements, all institutions were given one calendar year (12 months) from the date of award in their HEERF Grant Award Notifications (GAN) to complete the performance of their HEERF grants. The Office of Management and Budget 2023 Compliance Supplement (Section III, Part H) for the HEERF program states the performance period was extended to June 30, 2023, as of April 24, 2022, for all HEERF grant awards in an open status (grant awards that had not entered the closeout phase and had a balance of $1,000 or more). Federal regulation, 31 CFR 205.33, requires a state to minimize the time between the drawdown and their disbursement for federal program purposes. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part C) for the HEERF program refer to the Certification Supplemental Agreements for the Coronavirus Response and Relief Supplemental Appropriations Act and American Rescue Plan Act signed by grantees. The compliance supplement and the supplemental agreements indicate the Institutional Aid Portion should be disbursed within three calendar days of the drawdown from the grant system. The Office of Management and Budget 2023 Compliance Supplements (Section III, Part L) for the HEERF program requires quarterly budget and expenditure reporting for all HEERF grant funds. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were insufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) spent the HEERF institutional funds within the period of performance or that the university only drew and reported actual construction project expenses for the HEERF institutional funds. We identified multiple instances where MSU Bozeman did not comply with the period of performance, cash management, and reporting requirements for the HEERF institutional funds. Questioned Costs: No questioned costs identified. Context: MSU Bozeman reported approximately $27.6 million in HEERF expenditures during fiscal years 2022 and 2023, approximately $11.7 million of which were institutional funds. While there were many allowable uses for these funds, the university chose to allocate $5,000,000 to the renovation of HVAC systems in three buildings: • AJM Johnson Hall data center HVAC upgrades for $2,300,000 • Renne Library data center HVAC upgrades for $2,300,000 • Haynes Hall ventilation upgrades for $400,000 In January and May 2023, MSU Bozeman recorded the full amount discussed above for these projects as transfer expenditures in the HEERF fund, which moved the associated cash to its capital projects funds. The university drew the federal funds for these expenditures and reported them on its quarterly reports for the quarters ended 3/31/23 and 6/30/23. However, there were only $45,293 in project expenses for all three projects during the audit period. MSU Bozeman should have transferred only the amount of project expenses, $45,293, to the capital project fund, made a draw, and reported expenditures for this amount, not the full $5,000,000 of the estimated HVAC project costs. The HEERF program did not allow institutions to obligate funds for expenditure after the June 30, 2023, period of performance end date and required all funds to be spent by that date. By recording the transfer expenditures in the HEERF fund and moving the associated cash to the capital projects funds without the same amount of underlying project expenditures, the university violated the period of performance requirements. The HEERF program allowed institutions to apply for no-cost extensions for up to twelve months, but the university did not apply. Effect: By not spending the HEERF institutional funds by the end of the grant period, the university is not in compliance with the period of performance requirements. It has $4,954,707 of unspent HEERF funds sitting in its capital projects fund earning interest. MSU’s project funds are invested through the Montana Board of Investments. Using the average Short Term Investment Pool return for fiscal year 2024, the unspent funds would have earned approximately $267,000 in interest as of the end of the year. Additionally, by drawing and reporting based on the transfer amounts instead of actual construction project expenses during the period, MSU Bozeman did not comply with cash management and reporting requirements. Without effective internal controls that ensure MSU Bozeman manages federal awards according to federal statutes and regulations, the university is not in compliance with the federal requirement to maintain effective internal control over federal awards. The potential consequences of noncompliance include increased scrutiny from the Department of Education and placement on “High Risk Status,” which could impact the university’s ability to receive other grants from the Department of Education. Cause: MSU Bozeman staff attributed the issue to their unfamiliarity with federal grant requirements, as the office managing the HEERF funds does not typically handle federal grants, and to their desire to spend the funds before the end of the grant period. Additionally, university staff stated the university did not have project expenses during the period due to navigating market conditions related to consultant interest and contractor pricing in the construction industry. Staff further stated that due to the construction delays, the importance of these projects, and the lack of another funding source, they had no choice but to record the transactions they did in order to have the funds available to complete the projects. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure the university complies with cash management, period of performance, and reporting requirements for any new federal programs received; B. Comply with federal regulations for cash management, period of performance, and reporting for any new federal programs; and C. Work with the Department of Education to resolve the use of the funds, including returning the $4,954,707 of excess HEERF funds and approximately $267,000 of interest to the Department of Education, if required. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-030: U.S. Department of Education ALN #84.425F, Education Stabilization Fund (ESF) (COVID-19) Grant #P425F202518 Criteria: Federal regulation, 2 CFR 200.1, defines period of performance as the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions or budget periods. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part H) for the Higher Education Emergency Relief Fund (HEERF) program state in the Coronavirus Aid, Relief, and Economic Security Act, Coronavirus Response and Relief Supplemental Appropriations Act, and American Rescue Plan Act Certification and Agreements, all institutions were given one calendar year (12 months) from the date of award in their HEERF Grant Award Notifications (GAN) to complete the performance of their HEERF grants. The Office of Management and Budget 2023 Compliance Supplement (Section III, Part H) for the HEERF program states the performance period was extended to June 30, 2023, as of April 24, 2022, for all HEERF grant awards in an open status (grant awards that had not entered the closeout phase and had a balance of $1,000 or more). Federal regulation, 31 CFR 205.33, requires a state to minimize the time between the drawdown and their disbursement for federal program purposes. The Office of Management and Budget 2022 and 2023 Compliance Supplements (Section III, Part C) for the HEERF program refer to the Certification Supplemental Agreements for the Coronavirus Response and Relief Supplemental Appropriations Act and American Rescue Plan Act signed by grantees. The compliance supplement and the supplemental agreements indicate the Institutional Aid Portion should be disbursed within three calendar days of the drawdown from the grant system. The Office of Management and Budget 2023 Compliance Supplements (Section III, Part L) for the HEERF program requires quarterly budget and expenditure reporting for all HEERF grant funds. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were insufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) spent the HEERF institutional funds within the period of performance or that the university only drew and reported actual construction project expenses for the HEERF institutional funds. We identified multiple instances where MSU Bozeman did not comply with the period of performance, cash management, and reporting requirements for the HEERF institutional funds. Questioned Costs: No questioned costs identified. Context: MSU Bozeman reported approximately $27.6 million in HEERF expenditures during fiscal years 2022 and 2023, approximately $11.7 million of which were institutional funds. While there were many allowable uses for these funds, the university chose to allocate $5,000,000 to the renovation of HVAC systems in three buildings: • AJM Johnson Hall data center HVAC upgrades for $2,300,000 • Renne Library data center HVAC upgrades for $2,300,000 • Haynes Hall ventilation upgrades for $400,000 In January and May 2023, MSU Bozeman recorded the full amount discussed above for these projects as transfer expenditures in the HEERF fund, which moved the associated cash to its capital projects funds. The university drew the federal funds for these expenditures and reported them on its quarterly reports for the quarters ended 3/31/23 and 6/30/23. However, there were only $45,293 in project expenses for all three projects during the audit period. MSU Bozeman should have transferred only the amount of project expenses, $45,293, to the capital project fund, made a draw, and reported expenditures for this amount, not the full $5,000,000 of the estimated HVAC project costs. The HEERF program did not allow institutions to obligate funds for expenditure after the June 30, 2023, period of performance end date and required all funds to be spent by that date. By recording the transfer expenditures in the HEERF fund and moving the associated cash to the capital projects funds without the same amount of underlying project expenditures, the university violated the period of performance requirements. The HEERF program allowed institutions to apply for no-cost extensions for up to twelve months, but the university did not apply. Effect: By not spending the HEERF institutional funds by the end of the grant period, the university is not in compliance with the period of performance requirements. It has $4,954,707 of unspent HEERF funds sitting in its capital projects fund earning interest. MSU’s project funds are invested through the Montana Board of Investments. Using the average Short Term Investment Pool return for fiscal year 2024, the unspent funds would have earned approximately $267,000 in interest as of the end of the year. Additionally, by drawing and reporting based on the transfer amounts instead of actual construction project expenses during the period, MSU Bozeman did not comply with cash management and reporting requirements. Without effective internal controls that ensure MSU Bozeman manages federal awards according to federal statutes and regulations, the university is not in compliance with the federal requirement to maintain effective internal control over federal awards. The potential consequences of noncompliance include increased scrutiny from the Department of Education and placement on “High Risk Status,” which could impact the university’s ability to receive other grants from the Department of Education. Cause: MSU Bozeman staff attributed the issue to their unfamiliarity with federal grant requirements, as the office managing the HEERF funds does not typically handle federal grants, and to their desire to spend the funds before the end of the grant period. Additionally, university staff stated the university did not have project expenses during the period due to navigating market conditions related to consultant interest and contractor pricing in the construction industry. Staff further stated that due to the construction delays, the importance of these projects, and the lack of another funding source, they had no choice but to record the transactions they did in order to have the funds available to complete the projects. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure the university complies with cash management, period of performance, and reporting requirements for any new federal programs received; B. Comply with federal regulations for cash management, period of performance, and reporting for any new federal programs; and C. Work with the Department of Education to resolve the use of the funds, including returning the $4,954,707 of excess HEERF funds and approximately $267,000 of interest to the Department of Education, if required. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-014 – Noncompliance with Reporting Requirements Over Federal Grant – Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2022-014) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: In the review of fifty-five (55) expenditures for federal programs, five (5) instances were noted where the expenditures were not correctly reported on the Coronavirus State and Local Fiscal Recovery Funds compliance reports. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. See Part 2 of this guidance for a full overview of recipient reporting responsibilities. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
FINDING 2023-001 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States; Special Education Preschool Grants; COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-034-PN01, 23611-034-PN01, 22611-034-ARP, 21619-034-PN01; 22619-034-PN01, 23619-034-PN01, 22619-034-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. A total of 23 vendor claims were determined to require small purchase procedures. Of the vendor claims, totaling $113,815, 4 were selected for testing. For the 4 vendor claims tested, the School Corporation did not obtain an adequate number of price or rate quotations nor was its documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation, it was determined that the School Corporation ensures all service contracts include a provision regarding suspension and debarment. The contracts are reviewed and signed by a knowledgeable member of the School Corporation. A population of eight covered transactions for goods or services that equaled or exceeded $25,000 paid from SPED funds during the audit period was identified. A sample of two transactions, totaling $178,915, was selected for testing. For both transactions, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal control in the Federal Government' issued by the Comptroller General of the United States or the "Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Small purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States; Special Education Preschool Grants; COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-034-PN01, 23611-034-PN01, 22611-034-ARP, 21619-034-PN01; 22619-034-PN01, 23619-034-PN01, 22619-034-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. A total of 23 vendor claims were determined to require small purchase procedures. Of the vendor claims, totaling $113,815, 4 were selected for testing. For the 4 vendor claims tested, the School Corporation did not obtain an adequate number of price or rate quotations nor was its documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation, it was determined that the School Corporation ensures all service contracts include a provision regarding suspension and debarment. The contracts are reviewed and signed by a knowledgeable member of the School Corporation. A population of eight covered transactions for goods or services that equaled or exceeded $25,000 paid from SPED funds during the audit period was identified. A sample of two transactions, totaling $178,915, was selected for testing. For both transactions, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal control in the Federal Government' issued by the Comptroller General of the United States or the "Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Small purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States; Special Education Preschool Grants; COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-034-PN01, 23611-034-PN01, 22611-034-ARP, 21619-034-PN01; 22619-034-PN01, 23619-034-PN01, 22619-034-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. A total of 23 vendor claims were determined to require small purchase procedures. Of the vendor claims, totaling $113,815, 4 were selected for testing. For the 4 vendor claims tested, the School Corporation did not obtain an adequate number of price or rate quotations nor was its documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation, it was determined that the School Corporation ensures all service contracts include a provision regarding suspension and debarment. The contracts are reviewed and signed by a knowledgeable member of the School Corporation. A population of eight covered transactions for goods or services that equaled or exceeded $25,000 paid from SPED funds during the audit period was identified. A sample of two transactions, totaling $178,915, was selected for testing. For both transactions, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal control in the Federal Government' issued by the Comptroller General of the United States or the "Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Small purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States; Special Education Preschool Grants; COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-034-PN01, 23611-034-PN01, 22611-034-ARP, 21619-034-PN01; 22619-034-PN01, 23619-034-PN01, 22619-034-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. A total of 23 vendor claims were determined to require small purchase procedures. Of the vendor claims, totaling $113,815, 4 were selected for testing. For the 4 vendor claims tested, the School Corporation did not obtain an adequate number of price or rate quotations nor was its documentation detailing the history of procurement, which must include the reason for the procurement method used. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation, it was determined that the School Corporation ensures all service contracts include a provision regarding suspension and debarment. The contracts are reviewed and signed by a knowledgeable member of the School Corporation. A population of eight covered transactions for goods or services that equaled or exceeded $25,000 paid from SPED funds during the audit period was identified. A sample of two transactions, totaling $178,915, was selected for testing. For both transactions, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal control in the Federal Government' issued by the Comptroller General of the United States or the "Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF LAWRENCE TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Small purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2022-013 – Lack of Internal Controls and Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2022-013) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to the grant administrative contractor. The quarterly reports improperly classified payments totaling $177,465 to a contractor as a ‘Revenue Replacement’ expense instead of using the ‘Administrative’ expense category. Also, the quarterly reports improperly classified payments totaling $386,056 for the Resurrection House as a ‘Revenue Replacement’ expense instead of using the ‘Negative Economic Impact’ expense category as stated in the agreement with the Board of County Commissioners. This entity was also not reflected as a Beneficiary in the quarterly reports. Further, subrecipient agreements for the following pass-through entities were signed and approved by the Board of County Commissioners; however, the entities were not reported as subrecipients in the quarterly reports: • Grady County Fairgrounds • Town of Rush Springs • Grady County Rural Water #2 • Grady County Rural Water #6 Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance to grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the purchase of goods and services that fell within the small purchase threshold or were considered covered transactions. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that proper procurement procedures for small purchases were followed. A population of eight small purchase vendors was identified. All eight were selected for testing. For all eight small purchases, totaling $180,015, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. One covered transaction that equaled or exceeded $25,000 was identified and selected for testing. Payments to the vendor, totaling $81,295, were made without verifying if the vendor was suspended, debarred or otherwise excluded from participation in federal awards. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, price or rate quotes were not obtained for small purchases and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure rate or price quotes are obtained for small purchases and ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the purchase of goods and services that fell within the small purchase threshold or were considered covered transactions. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that proper procurement procedures for small purchases were followed. A population of eight small purchase vendors was identified. All eight were selected for testing. For all eight small purchases, totaling $180,015, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. One covered transaction that equaled or exceeded $25,000 was identified and selected for testing. Payments to the vendor, totaling $81,295, were made without verifying if the vendor was suspended, debarred or otherwise excluded from participation in federal awards. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, price or rate quotes were not obtained for small purchases and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure rate or price quotes are obtained for small purchases and ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the purchase of goods and services that fell within the small purchase threshold or were considered covered transactions. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that proper procurement procedures for small purchases were followed. A population of eight small purchase vendors was identified. All eight were selected for testing. For all eight small purchases, totaling $180,015, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. One covered transaction that equaled or exceeded $25,000 was identified and selected for testing. Payments to the vendor, totaling $81,295, were made without verifying if the vendor was suspended, debarred or otherwise excluded from participation in federal awards. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, price or rate quotes were not obtained for small purchases and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure rate or price quotes are obtained for small purchases and ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the purchase of goods and services that fell within the small purchase threshold or were considered covered transactions. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that proper procurement procedures for small purchases were followed. A population of eight small purchase vendors was identified. All eight were selected for testing. For all eight small purchases, totaling $180,015, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. One covered transaction that equaled or exceeded $25,000 was identified and selected for testing. Payments to the vendor, totaling $81,295, were made without verifying if the vendor was suspended, debarred or otherwise excluded from participation in federal awards. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, price or rate quotes were not obtained for small purchases and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure rate or price quotes are obtained for small purchases and ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the purchase of goods and services that fell within the small purchase threshold or were considered covered transactions. Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that proper procurement procedures for small purchases were followed. A population of eight small purchase vendors was identified. All eight were selected for testing. For all eight small purchases, totaling $180,015, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation had not designed or implemented internal controls, which would consist of policies and procedures, to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. One covered transaction that equaled or exceeded $25,000 was identified and selected for testing. Payments to the vendor, totaling $81,295, were made without verifying if the vendor was suspended, debarred or otherwise excluded from participation in federal awards. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, price or rate quotes were not obtained for small purchases and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure rate or price quotes are obtained for small purchases and ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Special Education Cluster (IDEA) - Procurement Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Number and Year (or Other Identifying Number): H027A190084 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. There were 27 vendors exceeding the small purchase threshold during the audit period. Of those, 5 vendors were selected for testing. For all 5 vendors tested, totaling $299,889, the School Corporation did not obtain price or rate quotes. Documentation detailing the history of procurement, which must include the reason for the procurement method used, selection of the vendor, and the basis for the price, was not available for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 24 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold. INDIANA STATE BOARD OF ACCOUNTS 25 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are adequate and appropriate procurement procedures for goods and services. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Lack of Internal Controls and Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to subrecipients. The quarterly reports improperly classified payments totaling $1,600,000 to subrecipients as a ‘Revenue Replacement’ expense instead of using the ‘Infrastructure’ expense category. In addition, it was noted the 2nd Quarter Report was not timely submitted. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Reporting 2023-015. General information: Grant Title: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Agency: U.S. Department of the Treasury CONDITION: During our engagement to audit, we noted that the annual Project and Expenditure Report (the report) submitted to the U.S. Treasury, covering the period from March 3, 2022 to March 31, 2023 included $807,021.75 ofexpenditures which were not incurred during the reporting period. CRITERIA: The U.S. Department of the Treasury Compliance and Reporting Guidance for the SLFRF Program, Part 2: Reporting Guidance. B. Project and Expenditure Report, 2. Annual Reporting states, in part: "The following recipients are required to submit annual Project and Expenditure Reports: '- Tribal governments that are allocated less than $30 million in SLFRF funding. '- Metropolitan cities and counties with a population below 250,000 residents that are allocated less than $10 million in SLFRF funding and NEUs that are allocated less than $10 million in SLFRF funding. For these recipients, the initial Project and Expenditure Report covered from March 3, 2022 to March 31, 2023 and was required to be submitted to Treasury by April 30, 2023. The subsequent annual reports will cover one calendar year and must be submitted to Treasury by April 30." Additionally, the U.S. Department of the Treasury Compliance and Reporting Guidance for the SLFRF Program, Part 1: General Guidance, D. Uniform Administrative Requirements, 10. Reporting states, in part: "…Expenditures may be reported on a cash or accrual basis, as long as methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1" QUESTIONED COSTS: $0 CAUSE: Management did not have adequate controls in place to ensure the expenditures reported on the annual Project and Expenditure Report were accurtately reported to the U.S. Treasury. EFFECT: Management reported incorrect expenditures to the U.S. Treasury on the Project and Expenditure Report. This necessitated an adverse opinion for the Assistance Listing 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds program. REPEAT FINDING: No RECOMMENDATION: The Municipality of Ravenswood is directed to review these regulations and comply with the provisions set forth therein. Expenditures reported on the annual Project and Expenditure Report should be cross-referenced to accounting ledgers prior to submission. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: We will ensure that all expenditures of COVD-19 funds are reported in the proper period.
Reference Number: 2023-006 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Transportation Assistance Listing Number: 20.205 Federal Program Title: Highway Planning and Construction Federal Award Numbers and Years: Q101310; 2023 Q101403; 2023 7500257; 2023 P020177; 2023 8801073; 2023 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Subrecipient Monitoring and Management §200.322 Requirements for pass-through entities (2 CFR 200.332): (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification. i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient’s unique entity identifier; Federal Award Identification Number (FAIN); iii. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; iv. Subaward Period of Performance Start and End Date; v. Subaward Budget Period Start and End Date; vi. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; vii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; viii. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; ix. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); x. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xi. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xii. Identification of whether the award is R&D; and xiii. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. 2. All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; 3. Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; 4. i. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: 1. The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; 2. The de minimis indirect cost rate. ii. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). 5. A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and 6. Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. Condition The California Department of Transportation (Caltrans) did not clearly identify subaward agreements made to subrecipients as subawards and did not include all required elements for 5 of 40 subrecipients sampled. Additionally, the monitoring of the 5 of 40 sampled subrecipients was not sufficient to detect whether the subrecipients’ expenditures were properly reported on the respective subrecipients’ schedules of expenditures of federal awards. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause Due to the decentralized administration of federal-aid highway projects, not all subaward agreements are administered in a consistent manner throughout various divisions and district offices. Effect Inadequate subaward communication may result in subrecipients being unaware of all federal laws, statutes and regulations that apply to the funding received and potentially expending the funds in an unallowable manner. Additionally, subrecipients may fail to report the expenditures made pursuant to the subawards of their schedule of expenditures of federal awards. Questioned Costs No questioned costs were identified. Context Expenditures passed to subrecipients totaled $1,222,104,172. Sampled expenditures totaled $14,694,125 and $670,937 of the total sampled expenditures related to the exceptions identified. Recommendation Caltrans should develop and implement a consistent policy and process for all divisions and district offices to use in making and monitoring subawards under the highway planning and construction program to ensure that all required subaward information is communicated to subrecipients at the time of the award and the federal funds disbursed to subrecipients are adequately monitored. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reference Number: 2023-006 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Transportation Assistance Listing Number: 20.205 Federal Program Title: Highway Planning and Construction Federal Award Numbers and Years: Q101310; 2023 Q101403; 2023 7500257; 2023 P020177; 2023 8801073; 2023 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Subrecipient Monitoring and Management §200.322 Requirements for pass-through entities (2 CFR 200.332): (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification. i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient’s unique entity identifier; Federal Award Identification Number (FAIN); iii. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; iv. Subaward Period of Performance Start and End Date; v. Subaward Budget Period Start and End Date; vi. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; vii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; viii. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; ix. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); x. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xi. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xii. Identification of whether the award is R&D; and xiii. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. 2. All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; 3. Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; 4. i. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: 1. The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; 2. The de minimis indirect cost rate. ii. The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). 5. A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial statements as necessary for the pass-through entity to meet the requirements of this part; and 6. Appropriate terms and conditions concerning closeout of the subaward. (b) Evaluate each subrecipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. Condition The California Department of Transportation (Caltrans) did not clearly identify subaward agreements made to subrecipients as subawards and did not include all required elements for 5 of 40 subrecipients sampled. Additionally, the monitoring of the 5 of 40 sampled subrecipients was not sufficient to detect whether the subrecipients’ expenditures were properly reported on the respective subrecipients’ schedules of expenditures of federal awards. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause Due to the decentralized administration of federal-aid highway projects, not all subaward agreements are administered in a consistent manner throughout various divisions and district offices. Effect Inadequate subaward communication may result in subrecipients being unaware of all federal laws, statutes and regulations that apply to the funding received and potentially expending the funds in an unallowable manner. Additionally, subrecipients may fail to report the expenditures made pursuant to the subawards of their schedule of expenditures of federal awards. Questioned Costs No questioned costs were identified. Context Expenditures passed to subrecipients totaled $1,222,104,172. Sampled expenditures totaled $14,694,125 and $670,937 of the total sampled expenditures related to the exceptions identified. Recommendation Caltrans should develop and implement a consistent policy and process for all divisions and district offices to use in making and monitoring subawards under the highway planning and construction program to ensure that all required subaward information is communicated to subrecipients at the time of the award and the federal funds disbursed to subrecipients are adequately monitored. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Reference Number: 2023-009 Category of Finding: Subrecipient Monitoring Type of Finding: Material Weakness and Material Instance of Noncompliance State Administering Department: California Department of Public Health (Public Health) Assistance Listing Number: 93.323 Federal Program Title: Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award Number and Year: NU50CK000539; 2021 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (e) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with §180.300. Verification methods are provided in §180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per §200.414. (c) Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraphs (f) of this section. When evaluating a subrecipient’s risk, a pass-through entity should consider the following: (1) The subrecipient’s prior experience with the same or similar subawards: (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with Subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). (e) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving cross-cutting findings. If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the passthrough entity may rely on the subrecipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section §200.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501. (g) Consider whether the results of the subrecipient’s audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity’s own records. Condition Public Health did not establish a formal risk assessment process over its subrecipients of federal awards by which to determine the frequency and extent of subrecipient monitoring to be performed. While Public Health received reimbursement invoices from subrecipients, there did not appear to be other financial or programmatic monitoring to verify subrecipients complied with applicable requirements. In addition, Public Health did not obtain supporting documentation for any expenditures invoiced by the subrecipients. Follow-up monitoring for subrecipients with no single audit reports did not appear to be performed. On-site monitoring visits were not completed. Public Health was unable to provide evidence that suspension and debarment status of subrecipients was checked prior to entering into subaward. Public Health used a Department Allocation Letter (DAL) for the COVID-19 program instead of an agreement or contract for the subaward to subrecipients. Certain required information for the subaward federal award information such as Assistance Listings number and Title and Federal Award Identification Number (FAIN) were not clearly identified in the DAL. Identification as a Repeat Finding Finding 2022-011 was reported in the immediate prior year. Cause Procedures to perform the required subrecipient monitoring were not established nor did Public Health perform an appropriate level of monitoring. Effect By not properly evaluating the risk of noncompliance, Public Health may inadvertently award grant funds to subrecipients who lack the necessary mechanisms or understanding to comply with federal statutes. This increases the likelihood of noncompliance arising during the performance of the grant-funded activities. Furthermore, failure to obtain and review single audit reports increases the risk of not properly identifying subrecipient program control weaknesses, noncompliance and performing sufficient follow-up on any subrecipient corrective action. Questioned Costs No questioned costs were identified. Context Disbursements to subrecipients for the ELC totaled $282,954,398, or 49% of total reported program expenditures. Recommendation Public Health should establish and document formal procedures for conducting risk assessments of subrecipient funding, including criteria for evaluating organizational capacity, financial stability, compliance history, and programmatic capabilities. Public Health should also develop and implement procedures outlining the process for obtaining single audit reports from subrecipients. Furthermore, a monitoring mechanism should be implemented to track compliance with the single audit mandate among subrecipients, including regular follow-ups and documentation of communication efforts. Public Health should ensure every subaward includes all requirements imposed on the subrecipient so that the federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the federal award. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Finding No. 2023-003 Procurement Federal Agency: U.S. Department of Agriculture; U.S. Department of Education; U.S. Department of the Treasury Federal Program Name: Child Nutrition Cluster; Special Education Cluster (IDEA); Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 10.CNC; 84.027/84.173; 21.027 Federal Award Identification Number and Year: 214RI306N1199 – 2023; H027A220054 – 2023; SLFRP4547 – 2021 Pass-Through Agency: RI Department of Elementary and Secondary Education, RI Department of Revenue Pass-Through Number(s): 2725-13202-301; 12060-OPM20600-29669 Award Period: 10/1/22-9/30/23; 7/1/22-6/30/23; 3/3/21-12/31/24 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement The Town and Coventry Public Schools must comply with procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). UG §200.318 General procurement standards. (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. §200.320 states that the non-Federal entity must use one of the prescribed methods of procurement. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in §200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (1) Micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro-purchase in §200.1). To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. (2) Small purchase. Procurement by small purchase is the acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a noncompetitive procurement can be used in accordance with §200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. Bids are publicly solicited, and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. (2) Proposals. Either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the allowed circumstances apply. Condition The Town and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326 noted above. Questioned Costs None Context Although the Town’s and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326, we did not identify transactions where contracts were awarded without proper justification in 9 of 9 procurement transactions tested. Cause Management was not aware of the procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Effect The Town and Coventry Public Schools are at risk for noncompliance with Federal grants as it relates to procurement. Repeat Finding Yes, repeat of prior year finding 2022-007. Recommendation We recommend that the Town and Coventry Public Schools updates its procurement policy to include all elements identified in 2 CFR sections 200.303 and 200.318 through 200.326. Views of Responsible Officials Management agrees with this finding.
Finding No. 2023-003 Procurement Federal Agency: U.S. Department of Agriculture; U.S. Department of Education; U.S. Department of the Treasury Federal Program Name: Child Nutrition Cluster; Special Education Cluster (IDEA); Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 10.CNC; 84.027/84.173; 21.027 Federal Award Identification Number and Year: 214RI306N1199 – 2023; H027A220054 – 2023; SLFRP4547 – 2021 Pass-Through Agency: RI Department of Elementary and Secondary Education, RI Department of Revenue Pass-Through Number(s): 2725-13202-301; 12060-OPM20600-29669 Award Period: 10/1/22-9/30/23; 7/1/22-6/30/23; 3/3/21-12/31/24 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement The Town and Coventry Public Schools must comply with procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). UG §200.318 General procurement standards. (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. §200.320 states that the non-Federal entity must use one of the prescribed methods of procurement. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in §200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (1) Micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro-purchase in §200.1). To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. (2) Small purchase. Procurement by small purchase is the acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a noncompetitive procurement can be used in accordance with §200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. Bids are publicly solicited, and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. (2) Proposals. Either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the allowed circumstances apply. Condition The Town and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326 noted above. Questioned Costs None Context Although the Town’s and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326, we did not identify transactions where contracts were awarded without proper justification in 9 of 9 procurement transactions tested. Cause Management was not aware of the procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Effect The Town and Coventry Public Schools are at risk for noncompliance with Federal grants as it relates to procurement. Repeat Finding Yes, repeat of prior year finding 2022-007. Recommendation We recommend that the Town and Coventry Public Schools updates its procurement policy to include all elements identified in 2 CFR sections 200.303 and 200.318 through 200.326. Views of Responsible Officials Management agrees with this finding.
Finding No. 2023-003 Procurement Federal Agency: U.S. Department of Agriculture; U.S. Department of Education; U.S. Department of the Treasury Federal Program Name: Child Nutrition Cluster; Special Education Cluster (IDEA); Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 10.CNC; 84.027/84.173; 21.027 Federal Award Identification Number and Year: 214RI306N1199 – 2023; H027A220054 – 2023; SLFRP4547 – 2021 Pass-Through Agency: RI Department of Elementary and Secondary Education, RI Department of Revenue Pass-Through Number(s): 2725-13202-301; 12060-OPM20600-29669 Award Period: 10/1/22-9/30/23; 7/1/22-6/30/23; 3/3/21-12/31/24 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement The Town and Coventry Public Schools must comply with procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). UG §200.318 General procurement standards. (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. §200.320 states that the non-Federal entity must use one of the prescribed methods of procurement. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in §200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (1) Micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro-purchase in §200.1). To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. (2) Small purchase. Procurement by small purchase is the acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a noncompetitive procurement can be used in accordance with §200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. Bids are publicly solicited, and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. (2) Proposals. Either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the allowed circumstances apply. Condition The Town and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326 noted above. Questioned Costs None Context Although the Town’s and Coventry Public Schools purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326, we did not identify transactions where contracts were awarded without proper justification in 9 of 9 procurement transactions tested. Cause Management was not aware of the procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Effect The Town and Coventry Public Schools are at risk for noncompliance with Federal grants as it relates to procurement. Repeat Finding Yes, repeat of prior year finding 2022-007. Recommendation We recommend that the Town and Coventry Public Schools updates its procurement policy to include all elements identified in 2 CFR sections 200.303 and 200.318 through 200.326. Views of Responsible Officials Management agrees with this finding.
FINDING 2023-006 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 24 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification. Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement process and procurement reviews. When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors were identified as falling within the small purchase threshold. Both vendors were selected for testing. Supporting documentation to show that an adequate number of price or rate quotations were obtained to ensure full and open competition could not be provided for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . INDIANA STATE BOARD OF ACCOUNTS 25 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services. INDIANA STATE BOARD OF ACCOUNTS 26 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 24 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification. Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement process and procurement reviews. When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors were identified as falling within the small purchase threshold. Both vendors were selected for testing. Supporting documentation to show that an adequate number of price or rate quotations were obtained to ensure full and open competition could not be provided for audit. The lack of internal controls and noncompliance were systemic issues throughout the audit. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . INDIANA STATE BOARD OF ACCOUNTS 25 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services. INDIANA STATE BOARD OF ACCOUNTS 26 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.