Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $768,525 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CSLFRF programs. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: 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. Recipients 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, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect -These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs – None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $768,525 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CSLFRF programs. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: 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. Recipients 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, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect -These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs – None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Disaster Grants - Public Assistance (Presidentially Declared Disasters) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $4,115,693 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the grants. Criteria - The state is required to make an accounting of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the State Agreement, all grants conditions were met, and the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect - These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs - None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Disaster Grants - Public Assistance (Presidentially Declared Disasters) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $4,115,693 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the grants. Criteria - The state is required to make an accounting of eligible costs. Similarly, the subrecipient must make an accounting to the state. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project in in compliance with the provisions of the State Agreement, all grants conditions were met, and the provisions for that project were made in accordance with the applicable payment provisions. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect - These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs - None
Federal Agency: Department of Health and Human Services Federal program title: Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: Illinois Department of Human Services Pass-Through Number: 45CCB03514; 45CCB04278; 45CCB00648 Award Period: 07/01/2023 – 06/30/2024 Type of Finding: Material Weakness in Internal Control over Compliance and Immaterial Noncompliance Criteria or specific requirement: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $7,311 Context: Four (4) of the twenty (20) transactions selected for testing. Cause: Oversight. Effect: The Organization may allocate unallowable costs to the federal grant. Repeat Finding: Yes, prior year finding number was 2023-004 Recommendation: Management should review and revise its process for allocating costs to federal grants to include additional layers of review and so that costs for which some or all are from outside of the period of performance, may be appropriately excluded from the federal grant. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: Department of Health and Human Services Federal program title: Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: Illinois Department of Human Services Pass-Through Number: 45CCB03514; 45CCB04278; 45CCB00648 Award Period: 07/01/2023 – 06/30/2024 Type of Finding: Significant Deficiency in Internal Control over Compliance and Immaterial Noncompliance Criteria or specific requirement: As described in § 200.403, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. Condition: The Organization incorrectly calculated indirect costs for one of thirteen transactions selected for testing. Questioned Costs: $41 Context: The Organization calculates the indirect costs to be reimbursed based on total direct expenses less contractual services. For one of the thirteen transactions selected for testing, the indirect cost was not calculated correctly. Cause: Oversight. Effect: The Organization requested reimbursement for indirect costs in excess of their provisional rate of 28.28%. Repeat Finding: No Recommendation: We recommend management recalculate the indirect cost rate based on the monthly grant invoice submitted to the funder for reimbursement to ensure indirect costs are appropriate. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury Federal Program: COVID 19 Coronavirus State and Local Fiscal Relief Fund Assistance Listing: 21.027 Pass-Through Entity: Maryland Department of Housing and Community Development Pass-Through Award Number and Period: (7/1/2023 - 6/30/2024) Compliance Requirement: Allowable Activities/Costs Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or Specific Requirement: 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). Compliance: The 2 CFR Part 200, Subpart E is applicable to expenditures under SLFRF unless stated otherwise. Given the purpose and very broad scope of eligible uses of the revenue replacement funds, only a subset of the requirements in 2 CFR Part 200, Subpart E apply to recipients use of such funds, as follows: 2 CFR 200.400(a) - (c), and (e) Policy guide; 200.403(a), (c), (d), (g), and (h) Factors affecting allowability of costs; and 200.404(e) Reasonable costs. Condition: The Town didnt maintain adequate documentation (i.e. invoices) to support the existence, allowability and approval of CSLFRF funds used to support programmatic costs. Context: The Town failed to provide supporting documentation to auditors for 16 out of 60 expenditures tested. Therefore, we could not determine if costs were allowable under the program. In addition, the town failed to provide supporting documentation for the review and approval of 24 out of 60 expenditures tested. Questioned Costs: $102,612. Cause: The Town transferred the funds to the grant in the accounting system but failed to maintain an audit trail to document the allowability and approval for the use of federal funds. Effect: Auditors were unable to verify the Towns compliance with program requirements. Recommendation: The Town should evaluate its current policies, implement proper controls, and perform additional training to ensure that, prior to charging costs to the program adequate documentation exists and maintained to support those costs, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of review is maintained. Views of Responsible Officials: Management agrees with the finding.
Inadequate Documentation for Expenses (Assistance Listing 21.019 ARPA) Criteria: 2 CFR §200.403–405 requires that costs charged to federal awards be adequately documented, allowable, and allocable. Condition: During our walk through of the expenditure cycle, we discovered the following issues: • Some vouchers were not prepared or lacked proper authorization and supporting source documents. • Multiple transactions were missing receipts or had incomplete vouchers. • Instances of the same check number being used twice in the general ledger. • Certain check numbers were not entered into the software program. Cause: Inadequate internal controls over documentation and expenditure tracking. Effect: Risk of unallowable costs being charged to federal programs and potential disallowance of expenses. Questioned Costs: Unable to determine exact amount due to lack of documentation. Recommendation: RTMC should enforce strict policies for maintaining proper documentation to verify and support costs. This ensures all expenses are allowable, reasonable, and allocable.
Inadequate Documentation for Expenses (Assistance Listing 21.019 ARPA) Criteria: 2 CFR §200.403–405 requires that costs charged to federal awards be adequately documented, allowable, and allocable. Condition: During our walk through of the expenditure cycle, we discovered the following issues: • Some vouchers were not prepared or lacked proper authorization and supporting source documents. • Multiple transactions were missing receipts or had incomplete vouchers. • Instances of the same check number being used twice in the general ledger. • Certain check numbers were not entered into the software program. Cause: Inadequate internal controls over documentation and expenditure tracking. Effect: Risk of unallowable costs being charged to federal programs and potential disallowance of expenses. Questioned Costs: Unable to determine exact amount due to lack of documentation. Recommendation: RTMC should enforce strict policies for maintaining proper documentation to verify and support costs. This ensures all expenses are allowable, reasonable, and allocable.
FA 2024-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Numbers: 245GA324N1199 (Year: 2024), 235GA32N1099 (Year: 2023) Questioned Costs: $7,388 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were reviewed and approved and that the School District’s procurement and suspension and debarment procedures were followed. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $1,087,437.24 were expended and reported on the Wilkinson County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 39 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. For eight of the 10 sample expenditures that were incurred outside of the School District’s Co-Op process, evidence of review and approval was not reflected within the voucher package. Additionally, auditor reviewed five of these same expenditures and a sample of 29 additional expenditures, which was randomly selected for testing using a non-statistical sampling approach, to determine if procurement transactions complied with the School District’s procurement procedures and proper oversight was maintained to ensure that contractors were performing according to their contracts. The following deficiencies were noted with expenditures incurred outside of the School District’s Co-Op process: • Evidence of review and approval was not reflected within the voucher package and/or purchase files for 17 additional expenditures. • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for eight small purchase expenditures reviewed. Questioned Costs: Upon testing a sample of $14,237 in procurement transactions that were incurred outside of the School District’s Co-Op process, known questioned costs of $7,388 were identified for expenditures that did not follow the School District’s procurement procedures. Using the population of procurements that were incurred outside of the School District’s Co-Op process of $56,274, we project the likely questioned costs to be approximately $29,200. Cause: The School District did not follow its policies and procedures that govern the nonpersonal services expenditure process for federal programs. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance related to CNC. Failure to ensure that expenditures are appropriately approved and procedures to address procurement and suspension and debarment compliance requirements are implemented exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds for unallowable purposes and/or with unqualified vendors. In addition, this deficiency could lead to the return of funding associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to CNC. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review and approval, required procurement methods are properly identified and followed and required procurement and suspension and debarment documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding.
FA 2024-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Numbers: 245GA324N1199 (Year: 2024), 235GA32N1099 (Year: 2023) Questioned Costs: $7,388 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were reviewed and approved and that the School District’s procurement and suspension and debarment procedures were followed. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $1,087,437.24 were expended and reported on the Wilkinson County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 39 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. For eight of the 10 sample expenditures that were incurred outside of the School District’s Co-Op process, evidence of review and approval was not reflected within the voucher package. Additionally, auditor reviewed five of these same expenditures and a sample of 29 additional expenditures, which was randomly selected for testing using a non-statistical sampling approach, to determine if procurement transactions complied with the School District’s procurement procedures and proper oversight was maintained to ensure that contractors were performing according to their contracts. The following deficiencies were noted with expenditures incurred outside of the School District’s Co-Op process: • Evidence of review and approval was not reflected within the voucher package and/or purchase files for 17 additional expenditures. • The School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for eight small purchase expenditures reviewed. Questioned Costs: Upon testing a sample of $14,237 in procurement transactions that were incurred outside of the School District’s Co-Op process, known questioned costs of $7,388 were identified for expenditures that did not follow the School District’s procurement procedures. Using the population of procurements that were incurred outside of the School District’s Co-Op process of $56,274, we project the likely questioned costs to be approximately $29,200. Cause: The School District did not follow its policies and procedures that govern the nonpersonal services expenditure process for federal programs. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance related to CNC. Failure to ensure that expenditures are appropriately approved and procedures to address procurement and suspension and debarment compliance requirements are implemented exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds for unallowable purposes and/or with unqualified vendors. In addition, this deficiency could lead to the return of funding associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to CNC. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review and approval, required procurement methods are properly identified and followed and required procurement and suspension and debarment documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding.
Finding 2024-010 - Material Weakness - Allowable Costs/Cost Principles Federal Assistance Listing Number: 84.010, 93.600 Federal Program Name: Title I Grants to Local Educational Agencies and Head Start Cluster Federal Agency Name: U.S. Department of Education and U.S. Department of Health and Human Services Pass-Through Entity Name: Wisconsin Department of Public Instruction Pass-Through Entity Identification Number: 2024-403619-DPI-TIA-141, 2024-403619-DPI-CSI-148 Criteria: In accordance with 2 CFR 200.303(a), 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. In accordance with 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, 2 CFR 200.403(g) requires that costs are adequately documented to be allowable under Federal awards. Condition/Context: The District supports time charged to federal awards via semi-annual certifications which are approved by the grant administrator or the building principal. In order for a cost to be supported at the time of final reimbursement, the semi-annual certifications should be approved by the grant administrator or the building principal. Title I Grants to Local Educational Agencies (ALN 84.010) The final reimbursement claim for the Title I Grants to Local Educational Agencies (Title I) program were due to Wisconsin Department of Public Instruction (DPI) on September 30, 2024; however, the final reimbursement claim for the Part A award was not submitted to DPI until November 18, 2024, and the CSI award was not submitted to DPI until October 1, 2024, due to an extension. Five of the 40 individuals sampled had their semi-annual certifications not approved timely and were approved after the due date of the final reimbursement claim, but before the date of the actual submission of the final reimbursement claim. An additional two individuals of the 40 sampled had their semi-annual certifications approved after the final reimbursement claims were submitted. Upon further review of all the spring semi-annual certifications for the Title I awards, there were an additional 50 individuals that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim but before the submission of the final reimbursement. Additionally, nine individuals had their semi-annual certifications approved after the final reimbursement date of the Part A award and another 59 individuals from Part A did not have their semi-annual certifications approved at all. Head Start Cluster (ALN 93.600) The final reimbursement claim for the program was submitted to the Federal agency on November 22, 2024. Four of the 40 individuals sampled had their semi-annual certifications approved by the Head Start administrator after the submission date of the final reimbursement claims. Upon further review of the all the spring semi-annual certifications, there was an additional individual that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim and another four individuals that did not have their semi-annual certifications approved at all. The samples were not statistically valid. Cause: There was a lack of internal control over the timely approval of the semi-annual certifications. Effect or Potential Effect: By not having an approved semi-annual certification before the date of the final reimbursement claims, unallowable costs may be submitted for reimbursement. Questioned Costs: The payroll costs and related fringe benefits charged at a rate of 52.48% are unallowable. Title I Grants to Local Educational Agencies (ALN 84.010) • 2024-403619-DPI-CSI-148: The two sampled individuals’ payroll and fringe benefits for the particular transaction totaled $507. • 2024-403619-DPI-TIA-141: The additional individuals' payroll and fringe benefits for the spring semi-annual certifications reviewed that were approved after the final reimbursement submission date and those that were not approved at all totaled $2,077,880. Head Start Cluster (ALN 93.600) • 05CH010537: After the additional testing, the total payroll and related fringe benefits for the spring semi-annual certifications that were approved after the final reimbursement request submission date or not approved at all totaled $241,794. Recommendations: We recommend that controls be implemented that will allow costs to be reviewed and fully supported prior to the date the final reimbursement claims are due to DPI. Views of Responsible Official: Management concurs with the finding.
Finding 2024-010 - Material Weakness - Allowable Costs/Cost Principles Federal Assistance Listing Number: 84.010, 93.600 Federal Program Name: Title I Grants to Local Educational Agencies and Head Start Cluster Federal Agency Name: U.S. Department of Education and U.S. Department of Health and Human Services Pass-Through Entity Name: Wisconsin Department of Public Instruction Pass-Through Entity Identification Number: 2024-403619-DPI-TIA-141, 2024-403619-DPI-CSI-148 Criteria: In accordance with 2 CFR 200.303(a), 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. In accordance with 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, 2 CFR 200.403(g) requires that costs are adequately documented to be allowable under Federal awards. Condition/Context: The District supports time charged to federal awards via semi-annual certifications which are approved by the grant administrator or the building principal. In order for a cost to be supported at the time of final reimbursement, the semi-annual certifications should be approved by the grant administrator or the building principal. Title I Grants to Local Educational Agencies (ALN 84.010) The final reimbursement claim for the Title I Grants to Local Educational Agencies (Title I) program were due to Wisconsin Department of Public Instruction (DPI) on September 30, 2024; however, the final reimbursement claim for the Part A award was not submitted to DPI until November 18, 2024, and the CSI award was not submitted to DPI until October 1, 2024, due to an extension. Five of the 40 individuals sampled had their semi-annual certifications not approved timely and were approved after the due date of the final reimbursement claim, but before the date of the actual submission of the final reimbursement claim. An additional two individuals of the 40 sampled had their semi-annual certifications approved after the final reimbursement claims were submitted. Upon further review of all the spring semi-annual certifications for the Title I awards, there were an additional 50 individuals that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim but before the submission of the final reimbursement. Additionally, nine individuals had their semi-annual certifications approved after the final reimbursement date of the Part A award and another 59 individuals from Part A did not have their semi-annual certifications approved at all. Head Start Cluster (ALN 93.600) The final reimbursement claim for the program was submitted to the Federal agency on November 22, 2024. Four of the 40 individuals sampled had their semi-annual certifications approved by the Head Start administrator after the submission date of the final reimbursement claims. Upon further review of the all the spring semi-annual certifications, there was an additional individual that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim and another four individuals that did not have their semi-annual certifications approved at all. The samples were not statistically valid. Cause: There was a lack of internal control over the timely approval of the semi-annual certifications. Effect or Potential Effect: By not having an approved semi-annual certification before the date of the final reimbursement claims, unallowable costs may be submitted for reimbursement. Questioned Costs: The payroll costs and related fringe benefits charged at a rate of 52.48% are unallowable. Title I Grants to Local Educational Agencies (ALN 84.010) • 2024-403619-DPI-CSI-148: The two sampled individuals’ payroll and fringe benefits for the particular transaction totaled $507. • 2024-403619-DPI-TIA-141: The additional individuals' payroll and fringe benefits for the spring semi-annual certifications reviewed that were approved after the final reimbursement submission date and those that were not approved at all totaled $2,077,880. Head Start Cluster (ALN 93.600) • 05CH010537: After the additional testing, the total payroll and related fringe benefits for the spring semi-annual certifications that were approved after the final reimbursement request submission date or not approved at all totaled $241,794. Recommendations: We recommend that controls be implemented that will allow costs to be reviewed and fully supported prior to the date the final reimbursement claims are due to DPI. Views of Responsible Official: Management concurs with the finding.
Finding 2024-010 - Material Weakness - Allowable Costs/Cost Principles Federal Assistance Listing Number: 84.010, 93.600 Federal Program Name: Title I Grants to Local Educational Agencies and Head Start Cluster Federal Agency Name: U.S. Department of Education and U.S. Department of Health and Human Services Pass-Through Entity Name: Wisconsin Department of Public Instruction Pass-Through Entity Identification Number: 2024-403619-DPI-TIA-141, 2024-403619-DPI-CSI-148 Criteria: In accordance with 2 CFR 200.303(a), 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. In accordance with 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, 2 CFR 200.403(g) requires that costs are adequately documented to be allowable under Federal awards. Condition/Context: The District supports time charged to federal awards via semi-annual certifications which are approved by the grant administrator or the building principal. In order for a cost to be supported at the time of final reimbursement, the semi-annual certifications should be approved by the grant administrator or the building principal. Title I Grants to Local Educational Agencies (ALN 84.010) The final reimbursement claim for the Title I Grants to Local Educational Agencies (Title I) program were due to Wisconsin Department of Public Instruction (DPI) on September 30, 2024; however, the final reimbursement claim for the Part A award was not submitted to DPI until November 18, 2024, and the CSI award was not submitted to DPI until October 1, 2024, due to an extension. Five of the 40 individuals sampled had their semi-annual certifications not approved timely and were approved after the due date of the final reimbursement claim, but before the date of the actual submission of the final reimbursement claim. An additional two individuals of the 40 sampled had their semi-annual certifications approved after the final reimbursement claims were submitted. Upon further review of all the spring semi-annual certifications for the Title I awards, there were an additional 50 individuals that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim but before the submission of the final reimbursement. Additionally, nine individuals had their semi-annual certifications approved after the final reimbursement date of the Part A award and another 59 individuals from Part A did not have their semi-annual certifications approved at all. Head Start Cluster (ALN 93.600) The final reimbursement claim for the program was submitted to the Federal agency on November 22, 2024. Four of the 40 individuals sampled had their semi-annual certifications approved by the Head Start administrator after the submission date of the final reimbursement claims. Upon further review of the all the spring semi-annual certifications, there was an additional individual that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim and another four individuals that did not have their semi-annual certifications approved at all. The samples were not statistically valid. Cause: There was a lack of internal control over the timely approval of the semi-annual certifications. Effect or Potential Effect: By not having an approved semi-annual certification before the date of the final reimbursement claims, unallowable costs may be submitted for reimbursement. Questioned Costs: The payroll costs and related fringe benefits charged at a rate of 52.48% are unallowable. Title I Grants to Local Educational Agencies (ALN 84.010) • 2024-403619-DPI-CSI-148: The two sampled individuals’ payroll and fringe benefits for the particular transaction totaled $507. • 2024-403619-DPI-TIA-141: The additional individuals' payroll and fringe benefits for the spring semi-annual certifications reviewed that were approved after the final reimbursement submission date and those that were not approved at all totaled $2,077,880. Head Start Cluster (ALN 93.600) • 05CH010537: After the additional testing, the total payroll and related fringe benefits for the spring semi-annual certifications that were approved after the final reimbursement request submission date or not approved at all totaled $241,794. Recommendations: We recommend that controls be implemented that will allow costs to be reviewed and fully supported prior to the date the final reimbursement claims are due to DPI. Views of Responsible Official: Management concurs with the finding.
Finding 2024-010 - Material Weakness - Allowable Costs/Cost Principles Federal Assistance Listing Number: 84.010, 93.600 Federal Program Name: Title I Grants to Local Educational Agencies and Head Start Cluster Federal Agency Name: U.S. Department of Education and U.S. Department of Health and Human Services Pass-Through Entity Name: Wisconsin Department of Public Instruction Pass-Through Entity Identification Number: 2024-403619-DPI-TIA-141, 2024-403619-DPI-CSI-148 Criteria: In accordance with 2 CFR 200.303(a), 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. In accordance with 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, 2 CFR 200.403(g) requires that costs are adequately documented to be allowable under Federal awards. Condition/Context: The District supports time charged to federal awards via semi-annual certifications which are approved by the grant administrator or the building principal. In order for a cost to be supported at the time of final reimbursement, the semi-annual certifications should be approved by the grant administrator or the building principal. Title I Grants to Local Educational Agencies (ALN 84.010) The final reimbursement claim for the Title I Grants to Local Educational Agencies (Title I) program were due to Wisconsin Department of Public Instruction (DPI) on September 30, 2024; however, the final reimbursement claim for the Part A award was not submitted to DPI until November 18, 2024, and the CSI award was not submitted to DPI until October 1, 2024, due to an extension. Five of the 40 individuals sampled had their semi-annual certifications not approved timely and were approved after the due date of the final reimbursement claim, but before the date of the actual submission of the final reimbursement claim. An additional two individuals of the 40 sampled had their semi-annual certifications approved after the final reimbursement claims were submitted. Upon further review of all the spring semi-annual certifications for the Title I awards, there were an additional 50 individuals that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim but before the submission of the final reimbursement. Additionally, nine individuals had their semi-annual certifications approved after the final reimbursement date of the Part A award and another 59 individuals from Part A did not have their semi-annual certifications approved at all. Head Start Cluster (ALN 93.600) The final reimbursement claim for the program was submitted to the Federal agency on November 22, 2024. Four of the 40 individuals sampled had their semi-annual certifications approved by the Head Start administrator after the submission date of the final reimbursement claims. Upon further review of the all the spring semi-annual certifications, there was an additional individual that had their semi-annual certifications approved by the principal after the due date of the final reimbursement claim and another four individuals that did not have their semi-annual certifications approved at all. The samples were not statistically valid. Cause: There was a lack of internal control over the timely approval of the semi-annual certifications. Effect or Potential Effect: By not having an approved semi-annual certification before the date of the final reimbursement claims, unallowable costs may be submitted for reimbursement. Questioned Costs: The payroll costs and related fringe benefits charged at a rate of 52.48% are unallowable. Title I Grants to Local Educational Agencies (ALN 84.010) • 2024-403619-DPI-CSI-148: The two sampled individuals’ payroll and fringe benefits for the particular transaction totaled $507. • 2024-403619-DPI-TIA-141: The additional individuals' payroll and fringe benefits for the spring semi-annual certifications reviewed that were approved after the final reimbursement submission date and those that were not approved at all totaled $2,077,880. Head Start Cluster (ALN 93.600) • 05CH010537: After the additional testing, the total payroll and related fringe benefits for the spring semi-annual certifications that were approved after the final reimbursement request submission date or not approved at all totaled $241,794. Recommendations: We recommend that controls be implemented that will allow costs to be reviewed and fully supported prior to the date the final reimbursement claims are due to DPI. Views of Responsible Official: Management concurs with the finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.309 and §200.403(g), only costs incurred during the period of performance specified in the federal award are allowable. Costs incurred outside this period are unallowable unless specifically authorized by the awarding agency. Condition: The County lacked sufficient documentation to demonstrate that all payroll costs charged to the grant were incurred within the grant’s period of performance. Questioned costs: Known questioned costs of $33,314. Context: Grant 20-CDBG-CV1-00122 had a period of performance ending February 28, 2024. The County charged $31,314 in payroll costs to this grant using the same allocation method described in Finding 2024-013. However, the allocation was based on hours worked throughout FY24, and the County could not provide a detailed transaction listing to isolate costs incurred within the grant’s performance period. While $25,755 in nonpayroll costs were confirmed to be within the allowable period, the payroll costs could not be verified. Cause: The County did not maintain detailed records of expenditures by grant and relied on an allocation method that did not align with the grant’s performance period. Effect: Payroll costs totaling $33,314 may have been charged outside the allowable period, resulting in questioned costs and a material weakness in internal controls. Repeat Finding: This is not a repeat finding. Recommendation: The County should implement procedures to ensure that all expenditures are tracked by grant and incurred within the specified period of performance. Detailed transaction listings should be maintained to support compliance testing. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and supported by adequate documentation. Indirect costs must be charged in accordance with an approved cost allocation plan under 2 CFR §200.412–§200.415. Condition: The County charged payroll costs using an internal allocation method that included salaries, benefits, and supplies, rather than actual expenditures. This method was not supported by an approved cost allocation plan. Additionally, the hours charged were based on total grant administration time, not specific to the CDBG program. Questioned costs: Known questioned costs of $21,643. Context: As part of the audit of the County’s FY24 expenditures under the CDBG program, CLA requested a reconciliation of payroll and nonpayroll costs. The County reported $67,219 in payroll expenses, but only $45,576 could be reconciled to supporting documentation. The remaining $21,643 could not be substantiated due to the preparer being on medical leave. Additionally, payroll costs were calculated using an internal allocation method that included indirect components (e.g., supplies) and were not supported by an approved cost allocation plan. The hours charged were based on general grant administration rather than specific CDBG activities. Cause: The County relied on an internally developed allocation method without formal approval or alignment with federal cost principles. Effect: The use of an unapproved allocation basis and insufficient documentation resulted in questioned costs totaling $21,643. The methodology overstated actual costs and did not ensure that charges were specific to the CDBG program. Repeat Finding: This is not a repeat finding. Recommendation: The County should ensure that all costs charged to federal programs are based on actual expenditures or an approved cost allocation plan. Documentation should be maintained to support all reported costs, and internal controls should be strengthened to prevent reliance on unsupported methodologies. Views of responsible officials: There is no disagreement with the audit finding.
Federal Program Information: Assistance Listing Number: 93.959 Federal Program Title: Block Grants for Substance Use Prevention, Treatment, and Recovery Services Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004383-W2, PH-004383-W1 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Assistance Listing Number: 93.531 Federal Program Title: Community Transformation Grants and National Dissemination and Support for Community Transformation Grants Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004921 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Criteria: Per the Uniform Guidance, 2 CFR §200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the actual work performed. Budget estimates may be used for interim purposes, but must be supported by contemporaneous documentation, reconciled to actual time worked, and adjusted as necessary. Additionally, 2 CFR §200.403(d) requires that costs be allocated to federal awards in accordance with the relative benefits received. The OMB Compliance Supplement (Part 6 – Internal Control and Part 3 – Compliance Requirements) reinforces that payroll and nonpayroll costs must be supported by reliable records and allocated using reasonable and consistent methodologies. Condition: During the testing of payroll costs, we noted that for Federal Assistance Listings 93.959 and 93.531, payroll charges in 4 out of 40 samples and 2 out of 11 samples, respectively, were based on budgeted rates rather than actual hours worked. Supporting documentation (e.g., timesheets or equivalent records) was not used to substantiate the final charges, and adjustments to actual time and effort were not made. For nonpayroll costs, we identified that in 3 out of 40 samples (93.959) and 5 out of 18 samples (93.531), costs were not allocated using a consistent and reasonable basis across all benefiting programs. Instead, the Organization either charged costs by maximizing the allowable budget under each program or have inadvertently used an incorrect basis due to oversight. Cause: The deficiencies occurred because the Organization’s internal controls were not sufficiently designed or implemented to ensure compliance with Uniform Guidance requirements. Specifically, payroll costs were charged to federal awards based on budget estimates rather than actual time and effort supported by records such as timesheets, and nonpayroll costs were either maximized to the budget or were allocated using an incorrect basis. These control gaps in review and documentation resulted in costs being charged to federal programs in a manner inconsistent with Allowable Costs/Cost Principles. Effect: As a result of these deficiencies, federal program expenditures reported to the awarding agency were misstated. Our testing identified questioned costs across both programs, consisting of payroll and nonpayroll overallocations. These represent unallowable costs under Uniform Guidance and may be subject to disallowance. Inaccurate cost allocations increase the risk of noncompliance with federal requirements, could lead to repayment of disallowed costs, and may negatively affect future federal funding decisions. Questioned Costs: Known and extrapolated costs for payroll and nonpayroll costs for Federal Assistance Listings 93.959 and 93.531 are summarized below. These amounts represent the overallocation to the programs, representing unallowable costs under Uniform Guidance. Recommendation: We recommend that the Organization strengthen its internal controls over payroll and nonpayroll cost allocations by requiring time and effort records to support all payroll charges to federal awards, ensuring nonpayroll costs are allocated using documented and equitable methodologies, and performing regular reconciliations of budgeted amounts to actual costs. In addition, staff responsible for preparing and reviewing cost allocations should receive training on Uniform Guidance requirements to ensure accuracy, compliance, and consistency across all federal programs. Views of responsible officials and planned corrective actions: For payroll, procedures will be implemented to ensure that payroll costs allocated to federal grants are supported by actual time. For nonpayroll, procedures will be enhanced to ensure proper allocation of nonpayroll costs to federal grants. Allocations will be reviewed and monitored on a monthly and quarterly basis to prevent misallocation and ensure compliance with the Uniform Guidance. Personnel responsible for implementation: Executive Director Christy Zamani and Beaulieu Accountancy Corporation. Date of implementation: August 5, 2025
Federal Program Information: Assistance Listing Number: 93.959 Federal Program Title: Block Grants for Substance Use Prevention, Treatment, and Recovery Services Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004383-W2, PH-004383-W1 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Assistance Listing Number: 93.531 Federal Program Title: Community Transformation Grants and National Dissemination and Support for Community Transformation Grants Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004921 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Criteria: Per the Uniform Guidance, 2 CFR §200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the actual work performed. Budget estimates may be used for interim purposes, but must be supported by contemporaneous documentation, reconciled to actual time worked, and adjusted as necessary. Additionally, 2 CFR §200.403(d) requires that costs be allocated to federal awards in accordance with the relative benefits received. The OMB Compliance Supplement (Part 6 – Internal Control and Part 3 – Compliance Requirements) reinforces that payroll and nonpayroll costs must be supported by reliable records and allocated using reasonable and consistent methodologies. Condition: During the testing of payroll costs, we noted that for Federal Assistance Listings 93.959 and 93.531, payroll charges in 4 out of 40 samples and 2 out of 11 samples, respectively, were based on budgeted rates rather than actual hours worked. Supporting documentation (e.g., timesheets or equivalent records) was not used to substantiate the final charges, and adjustments to actual time and effort were not made. For nonpayroll costs, we identified that in 3 out of 40 samples (93.959) and 5 out of 18 samples (93.531), costs were not allocated using a consistent and reasonable basis across all benefiting programs. Instead, the Organization either charged costs by maximizing the allowable budget under each program or have inadvertently used an incorrect basis due to oversight. Cause: The deficiencies occurred because the Organization’s internal controls were not sufficiently designed or implemented to ensure compliance with Uniform Guidance requirements. Specifically, payroll costs were charged to federal awards based on budget estimates rather than actual time and effort supported by records such as timesheets, and nonpayroll costs were either maximized to the budget or were allocated using an incorrect basis. These control gaps in review and documentation resulted in costs being charged to federal programs in a manner inconsistent with Allowable Costs/Cost Principles. Effect: As a result of these deficiencies, federal program expenditures reported to the awarding agency were misstated. Our testing identified questioned costs across both programs, consisting of payroll and nonpayroll overallocations. These represent unallowable costs under Uniform Guidance and may be subject to disallowance. Inaccurate cost allocations increase the risk of noncompliance with federal requirements, could lead to repayment of disallowed costs, and may negatively affect future federal funding decisions. Questioned Costs: Known and extrapolated costs for payroll and nonpayroll costs for Federal Assistance Listings 93.959 and 93.531 are summarized below. These amounts represent the overallocation to the programs, representing unallowable costs under Uniform Guidance. Recommendation: We recommend that the Organization strengthen its internal controls over payroll and nonpayroll cost allocations by requiring time and effort records to support all payroll charges to federal awards, ensuring nonpayroll costs are allocated using documented and equitable methodologies, and performing regular reconciliations of budgeted amounts to actual costs. In addition, staff responsible for preparing and reviewing cost allocations should receive training on Uniform Guidance requirements to ensure accuracy, compliance, and consistency across all federal programs. Views of responsible officials and planned corrective actions: For payroll, procedures will be implemented to ensure that payroll costs allocated to federal grants are supported by actual time. For nonpayroll, procedures will be enhanced to ensure proper allocation of nonpayroll costs to federal grants. Allocations will be reviewed and monitored on a monthly and quarterly basis to prevent misallocation and ensure compliance with the Uniform Guidance. Personnel responsible for implementation: Executive Director Christy Zamani and Beaulieu Accountancy Corporation. Date of implementation: August 5, 2025
Federal Program Information: Assistance Listing Number: 93.959 Federal Program Title: Block Grants for Substance Use Prevention, Treatment, and Recovery Services Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004383-W2, PH-004383-W1 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Assistance Listing Number: 93.531 Federal Program Title: Community Transformation Grants and National Dissemination and Support for Community Transformation Grants Federal Agency: U.S. Department of Health and Human Services Passed Through Entity: County of Los Angeles Public Health Federal Award Number: PH-004921 Federal Award Year: July 1, 2023 to June 30, 2024 Compliance Requirement: Allowable Costs/Cost Principles Criteria: Per the Uniform Guidance, 2 CFR §200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the actual work performed. Budget estimates may be used for interim purposes, but must be supported by contemporaneous documentation, reconciled to actual time worked, and adjusted as necessary. Additionally, 2 CFR §200.403(d) requires that costs be allocated to federal awards in accordance with the relative benefits received. The OMB Compliance Supplement (Part 6 – Internal Control and Part 3 – Compliance Requirements) reinforces that payroll and nonpayroll costs must be supported by reliable records and allocated using reasonable and consistent methodologies. Condition: During the testing of payroll costs, we noted that for Federal Assistance Listings 93.959 and 93.531, payroll charges in 4 out of 40 samples and 2 out of 11 samples, respectively, were based on budgeted rates rather than actual hours worked. Supporting documentation (e.g., timesheets or equivalent records) was not used to substantiate the final charges, and adjustments to actual time and effort were not made. For nonpayroll costs, we identified that in 3 out of 40 samples (93.959) and 5 out of 18 samples (93.531), costs were not allocated using a consistent and reasonable basis across all benefiting programs. Instead, the Organization either charged costs by maximizing the allowable budget under each program or have inadvertently used an incorrect basis due to oversight. Cause: The deficiencies occurred because the Organization’s internal controls were not sufficiently designed or implemented to ensure compliance with Uniform Guidance requirements. Specifically, payroll costs were charged to federal awards based on budget estimates rather than actual time and effort supported by records such as timesheets, and nonpayroll costs were either maximized to the budget or were allocated using an incorrect basis. These control gaps in review and documentation resulted in costs being charged to federal programs in a manner inconsistent with Allowable Costs/Cost Principles. Effect: As a result of these deficiencies, federal program expenditures reported to the awarding agency were misstated. Our testing identified questioned costs across both programs, consisting of payroll and nonpayroll overallocations. These represent unallowable costs under Uniform Guidance and may be subject to disallowance. Inaccurate cost allocations increase the risk of noncompliance with federal requirements, could lead to repayment of disallowed costs, and may negatively affect future federal funding decisions. Questioned Costs: Known and extrapolated costs for payroll and nonpayroll costs for Federal Assistance Listings 93.959 and 93.531 are summarized below. These amounts represent the overallocation to the programs, representing unallowable costs under Uniform Guidance. Recommendation: We recommend that the Organization strengthen its internal controls over payroll and nonpayroll cost allocations by requiring time and effort records to support all payroll charges to federal awards, ensuring nonpayroll costs are allocated using documented and equitable methodologies, and performing regular reconciliations of budgeted amounts to actual costs. In addition, staff responsible for preparing and reviewing cost allocations should receive training on Uniform Guidance requirements to ensure accuracy, compliance, and consistency across all federal programs. Views of responsible officials and planned corrective actions: For payroll, procedures will be implemented to ensure that payroll costs allocated to federal grants are supported by actual time. For nonpayroll, procedures will be enhanced to ensure proper allocation of nonpayroll costs to federal grants. Allocations will be reviewed and monitored on a monthly and quarterly basis to prevent misallocation and ensure compliance with the Uniform Guidance. Personnel responsible for implementation: Executive Director Christy Zamani and Beaulieu Accountancy Corporation. Date of implementation: August 5, 2025
FA 2024-001 Improve Budgetary Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principes Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 (Year: 2021) Questioned Costs: $21,615.33 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed instances in which expenditures had not been properly approved by the pass-through entity. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $11,379,058.14 were expended and reported on the Sumter County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. Lastly, LEA personnel must also provide program-specific assurances related to the ESSER program within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Condition: A sample of 40 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for two expenditures totaling $21,615.33 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system, as required. Questioned Costs: Upon testing a sample of $3,582,721.30 in nonpersonal service expenditures, known questioned costs of $21,615.33 were identified for expenditures that were not approved through the Consolidated Application process. Using the population being sampled, which totaled $6,624,968.03, we project the likely questioned costs to be approximately $39,969.86. Cause: The School District did not follow its policies and procedures that govern the nonpersonal services expenditure process for federal programs. The Elementary and Secondary School Emergency Relief Coordinator did not ensure that all expenditures were included on the related consolidated application for the federal program. Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER program. Failure to accurately develop and amend budget information through the Consolidated Application process and verify compliance with applicable policies and regulations prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unapproved and unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the ESSER program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all potential expenditures are approved through the Consolidated Application process and deemed allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that controls procedures are being followed. Views of Responsible Officials: The School District concurs with this finding per discussion with Jannie Carter, Finance Director, and Walter Knighton, Superintendent, on July 9, 2025.
Federal Agency: United States Department of Agriculture (USDA) Federal Program: 10.558 Child and Adult Care Food Program (CACFP) 2022, 2023, 2024 - CACFP 2022, 2023, 2024 - CACFP-CIL 2023 and 2024 - CACFP-SPON State Agency: Department of Health and Senior Services (DHSS) - Bureau of Community Food and Nutrition Assistance (BCFNA) Type of Finding: Internal Control (Material Weakness) and Material Noncompliance Questioned Costs: $0 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Subrecipient Monitoring As noted in our previous audit, during the year ended June 30, 2024, the BCFNA did not have sufficient controls and procedures to ensure CACFP reimbursements to subrecipients were allowable and supported with sufficient documentation, as required by federal regulations. As a result, significant unallowable and unsupported reimbursements were made without being prevented or detected timely. The BCFNA administers the CACFP through contracts with child and adult care centers and sponsors of centers (subrecipients) that provide meals to eligible children and adults under their care. The facilities/sponsors determine eligibility of each participant for free or reduced price meals, and are reimbursed at fixed rates for the number and type of meals served. During the year ended June 30, 2024, the BCFNA paid over 780 facilities/sponsors approximately $67.6 million for meal services. Disbursements to facilities/sponsors represented approximately 98 percent of the program's expenditures. To receive reimbursement for meals provided to eligible participants, CACFP facilities/sponsors submit monthly claims through the CNPWeb (CNP) claim system. The CNP system has edit checks to prevent and detect certain claim errors, such as meal claims that exceed facility/sponsor total enrollment and/or license capacity, or claims for types of meals the facility/sponsor was not approved to serve. Claims that pass the edit checks are reviewed by a BCFNA Public Health Program Associate, while claims that do not pass the edit checks are returned to the facility/sponsor for revision. Facilities/sponsors are not required to provide supporting documentation with their claim but are required to maintain and retain detailed records, including meal count, attendance, enrollment and eligibility determination records, receipt slips, menus, and other documentation to support meals claimed. Facility/sponsor records are maintained on a monthly basis, thus reviews or verifications of those records generally cover the entire month as opposed to a shorter period of time. BCFNA nutritionists perform periodic monitoring reviews of the facilities/sponsors and disallow costs associated with claim errors identified. These reviews have identified significant issues and claim errors, including some potentially fraudulent activity, and led to over 15 contract terminations in recent years. Since meal reimbursements are made without any supporting documentation, the BCFNA relies on system edit checks and subrecipient monitoring procedures to prevent and detect meal reimbursement claim errors. However, these edits and procedures alone were not sufficient to prevent and detect unallowable and unsupported meal reimbursement claims on a timely basis. The BCFNA has not implemented procedures to review supporting documentation, on a test basis, except for testing performed during routine monitoring reviews generally conducted once every 1 to 3 years for each facility/sponsor, and technical assistance reviews performed at the request of the facility/sponsor. Additionally, as noted in finding number 2024-009, weaknesses in the BCFNA monitoring procedures and noncompliance with subrecipient monitoring requirements were identified. Our review of documentation supporting a randomly-selected sample of 60 BCFNA monitoring reviews conducted for 60 CACFP facilities/sponsors during the year ended June 30, 2024, noted BCFNA disallowances (overclaims/underclaims) in 43 of 59 (73 percent) reviews for which meal reimbursement claims were tested. Overclaims totaled $48,508 (40 reviews) and underclaims totaled $10,144 (3 reviews), with a net overclaim of $38,364, or at least 7 percent of claims tested by the BCFNA. Disallowances resulted from various errors including incorrect or unsupported eligibility determinations, meal counts, attendance records, or noncompliance associated with menus and food purchases. The BCFNA adjusted subsequent claims to recoup or reimburse for the identified overclaims/underclaims. Erroneous and unsupported reimbursements represent at least 7 percent of meal reimbursements tested. If similar errors were made on the remaining population of CACFP meal reimbursements totaling approximately $67 million, unallowable costs could be significant. Without sufficient controls to ensure the accuracy of facility/sponsor meal reimbursement claims, the BCFNA cannot demonstrate adequate internal controls to ensure CACFP costs are allowable and supported, and the risk of paying unsupported and unallowable claims will continue. Regulation 7 CFR Section 226.7(k) requires the BCFNA to establish procedures for institutions to properly submit claims for reimbursement. Such procedures must include edit checks, including but not limited to, ensuring payments are made only for approved meal types and that the number of meals for which reimbursement is provided does not exceed the product of the total enrollment times operating days times approved meal types. Regulation 2 CFR Section 200.403 (within 2 CFR Part 200, known as the Uniform Guidance), provides that costs charged to federal programs should be necessary and reasonable for the performance of the federal award and adequately documented. Furthermore, 2 CFR Section 200.303(a) requires the non-federal entity to "[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-federal entity is managing that 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." The DHSS Summary Schedule of Prior Audit Findings for prior audit finding number 2023-012, submitted in July 2025, states the DHSS disagreed with the finding and did not take corrective action. However, an April 2025 email from a USDA - Food and Nutrition Service (USDA-FNS) official to the DHSS regarding the prior audit finding, provided to auditors by DHSS officials, indicates some corrective action was taken. The email states to prevent overclaims, the USDA-FNS expects the BCFNA to have internal controls that focus on the areas of subrecipient screening during the application process and training; and the USDA-FNS validated the DHSS's actions to improve internal control processes in these specific areas. The April 2025, USDA-FNS email also states the prior audit finding was not sustained by the FNS because (1) the FNS does not require or expect the BCFNA to validate claims at the time of claim submission, and (2) the BCFNA was in compliance with edit check requirements. While the prior audit finding neither recommended the BCFNA validate claims at the time of submission nor noted noncompliance with edit check requirements, it did recommend the BCFNA strengthen internal controls over meal reimbursements, such as those recommended and validated by the USDA-FNS. Finding classification This finding is classified as a material weakness in internal control and material noncompliance with the federal activities allowed, allowable costs, and subrecipient monitoring requirements. The noncompliance identified in the finding is material based on the results of our audit sample, which identified at least 7 percent of subrecipient meal reimbursements tested by the BCFNA were not in compliance with federal requirements. The 7 percent error rate exceeds our audit materiality threshold of 4 percent. While the errors identified in the finding were corrected, similar material noncompliance in the remainder of the payments not tested is likely. Our decisions regarding the classification of the internal control deficiencies were made in accordance with AU-C Section 935, Compliance Audits, and the AICPA Audit Guide: Government Auditing Standards and Single Audits (Audit Guide). The Audit Guide provides the following definitions regarding internal control deficiencies: "A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis." "A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis." "A reasonable possibility exists when the likelihood of the event is either reasonably possible or probable …" Reasonably possible is "[t]he chance of the future event or events occurring is more than remote but less than likely." Probable means "[t]he future event or events are likely to occur." The failure to design and implement adequate controls and procedures to ensure CACFP reimbursements to subrecipients are allowable and supported led to material noncompliance with the applicable requirements. The BCFNA's controls failed to prevent the material noncompliance identified. While the BCFNA's controls detected and corrected the payment errors identified, the detection and correction was not timely, occurring up to 3 years after the payments were made. Also, the detection and correction was limited to only 1 test month per subrecipient without any attempt to identify and correct noncompliance that occurred beyond the test month because, as noted at finding number 2024-009, the BCFNA's controls do not provide for expanded testing when significant errors are identified. Therefore, similar, material noncompliance in the remainder of the payments not tested is likely. Further, because the internal control deficiencies have not been corrected, similar, material noncompliance in future payments is likely. For these reasons, the deficiencies are considered a material weakness. Recommendation The DHSS through the BCNFA continue to strengthen internal controls over meal reimbursements to CACFP facilities/sponsors to ensure costs are allowable and supported. Auditee's Response We disagree with the auditor's finding. Our Corrective Action Plan includes an explanation and specific reasons for our disagreement. Auditor's Comment The DHSS Corrective Action Plan (CAP) states the DHSS disagrees with the finding and believes no corrective action is required because the prior year finding (finding number 2023-012) was not sustained by the USDA-FNS. However, as noted in the finding, an April 2025 email from a USDA-FNS official to the DHSS regarding the prior audit finding indicates some corrective action was made and validated by the USDA-FNS. Such corrective action was made after the current (fiscal year 2024) audit period. As noted in the finding, the prior audit finding recommended the BCFNA strengthen internal controls over meal reimbursements, such as those recommended and validated by the USDA-FNS. While the DHSS did not provide the State Auditor's Office information regarding the corrective action taken, any new procedures would have been implemented after the audit period, and will be subject to subsequent audits. Because the DHSS took no corrective action prior to or during the audit period, this finding is valid.
Finding 2024-002 – Material Weakness – Inadequate Documentation Federal Program: U.S. Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds – Assistance Listing Number 21.027 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Criteria All expenditures charged to federal programs must be clearly and completely supported by required documentation that agrees with amounts in the Corporation’s general ledger and periodic reports to the federal grantor in accordance with 2 CFR Section 200.403(g). Condition We selected a sample of both payroll and nonpayroll related expenditures for controls and compliance. During our testing of payroll expenditures, there were five instances out of eleven in which a timesheet or other documentation could not be located to support a payment made to an employee. During our testing of nonpayroll related expenditures, there were three instances out of eighteen in which an invoice for the selected expenditure lacked proper documented approvals. Cause The primary reason for the above issues is due to the Corporation experiencing turnover at the Chief Financial Officer ("CFO") position and other key positions in the Finance Department, which led to the oversights in the monitoring of the Corporation’s internal controls over compliance in certain instances. Effects Without proper support for payments made to the employees, it increases the risk that an incorrect amount was paid to the employee, or the payment should not have been charged to the major program. Without proper approval of disbursements, it increases the risk of unallowed expenses being charged to the grant. Questioned Costs The total known questioned costs for the payroll expenditures were $3,246. Payroll expenditures are approximately 43% of the total expenditures for this program. There were no questioned costs for nonpayroll related expenditures. Perspective This audit finding is systemic. Statistical Sample A statistical sample was used. Repeat Finding This audit finding is a repeat finding of Finding 2023-002. Recommendation: All employees in the Finance Department and associated with any federal program must be adequately trained in overall federal regulations and guidance as well as other requirements associated with each federal award. All such employees must read the grant-related policies and internal control policies. Management should check to ensure all federal grant expenditures are properly approved and have supporting documentation. View of Responsible Officials Impact has experienced staff turnover which resulted in process challenges. Nevertheless, Impact will take this recommendation and implement revised procedures to ensure that the Finance Department and other pertinent Impact resources receive federal regulations and guidance training, incorporate available systems and technology capabilities available from the technology service providers, and adopt best practices. Finance will schedule regular grant reviews, inclusive of program expenditures. These improvements will be in place by March 31, 2026.
Improve Controls Over Period of Performance Over Federal Awards (Significant Deficiency) Federal Agency: Department of Education Cluster/Program: Special Education Cluster AL Number(s): 84.027 Award Year: 2024 Compliance Requirement: Period of Performance Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Previously reported as 2023-001 Criteria or Specific Requirement A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Management of the School District is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal pro¬gram. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of per¬forming their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition and Context There were several payroll charges and invoices for costs that occurred prior to the start of the School District’s fiscal year 2024 IDEA special education grant. Since these costs occurred outside of the authorized period of performance, they are not eligible to be charged to that grant. Cause The School District has not established adequate procedures to ensure costs charged to the grant are within the authorized period of performance. Effect or Potential Effect Due to the weakness in internal control noted above, there are known and questioned costs reported related to salaries and contracted services incurred prior to the period of performance and charged to the grant, which could impact future grant funding. Questioned Costs The payroll charges and invoices for costs in question are below $25,000. Recommendation The School District should implement controls to ensure that no costs are charged to a grant prior to the authorized period of performance. Views of Responsible Official Management agrees with the finding. Planned Corrective Action Management’s corrective action plan is included at the end of this report after the schedule of prior year findings.
MW-2024-002 Improve Controls Over Period of Performance Over Federal Awards Federal Program(s) Information Federal Agency: U.S. Department of Education Cluster/Program: Special Education Cluster AL Number(s): 84.027/84.173 Award Year: 2022 Compliance Requirement: Period of Performance Type of Finding Material Noncompliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Management of the School Department is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of per¬forming their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition and Context There were invoices for costs incurred after the end of the School Department’s fiscal year 2022 ARP SPED IDEA/Preschool grant. Since these costs occurred outside the authorized period of performance, they are not eligible to be charged to the grant. Cause The School Department has not established adequate procedures to ensure costs charged to the grant are within the authorized period of performance. Effect or Potential Effect Due to the weakness in internal control noted above, there are known and questioned costs reported for expenditures incurred outside the period of performance and charged to the grant. Questioned Costs Questioned costs related to these invoices outside of the period of performance were approximately $60,000. Recommendation The School Department should implement controls to ensure that no costs are charged to a grant outside the authorized period of performance. Views of Responsible Officials Management’s corrective action plan is included at the end of this report after the schedule of prior year findings.
FINDING REFERENCE NUMBER 2024-002 FEDERAL PROGRAMS (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) – SPECIAL EDUCATION CLUSTER (IDEA) (ALN – 84.173) SPECIAL EDUCATION – PRESCHOOL GRANTS (IDEA PRESCHOOL) – SPECIAL EDUCATION CLUSTER (IDEA) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS H027A220003 – 22A (07/01/2022 – 09/30/2023); H027A230003 – 23A (07/01/2023 – 09/30/2024); H173A220002 (07/01/2022 – 09/30/2023); H173A230002 (07/01/2023 – 09/30/2024) COMPLIANCE REQUIREMENTS ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Section 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403 (b) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. STATEMENT OF CONDITION As part of our procedures over internal controls and compliance for the allowable activities’ requirement, we selected a sample of seventy-three (73) disbursements to suppliers made during the fiscal year under audit. We noted the following deficiencies: 1. In thirty-seven (37) disbursement receipts related to evaluation and therapy intervention services, service sheets with the signature or stamp of the institution that provided the services were not found. They were requested on several occasions and were not provided. 2. In nine (9) disbursement vouchers, the Excel master sheet and the adjustment report presented different amounts. No justification was provided for the differences in the reports. 3. In an evaluated disbursement voucher, a student was included who is billed $34,000 per month. In the student's file in MIPE, there is no breakdown of how the institution arrived at that amount in its service quote. The average monthly payments at that institution fluctuate between $9,300 and $20,800 per month. We were not provided with evidence of the educational cost analysis for this participant monthly cost. 4. In nine (9) disbursement vouchers, the payments to the suppliers for therapy services do not match the cost assigned by contract for these services. 5. In nine (9) disbursement voucher, the educational cost of a participant is not consistent with the proposal that the Institution includes in MIPE. 6. In four (4) disbursement vouchers evaluated, we were not provided with evidence of the supplier's proposals, nor was there evidence of receipt by the PRDE personnel demonstrating that the services were received as contracted. 7. In thirty-nine (39) vouchers evaluated, it was found that the invoiced expenses corresponded to both cluster programs (ALNs 84.027 and 84.173), and the invoices established this. However, the expenses in the system were recognized in grant ALN 84.027, not according to the participants attended and invoiced, according to their age. 8. In two (2) vouchers evaluated for training services, it was found that there were participants who were not employees of the IDEA program. 9. In a disbursement voucher, the cost per student could not be validated with the supplier's proposal per student, since it was not located in MIPE. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and controls that require standard evaluation, approval, and reporting of expenditures incurred. STATEMENT OF CAUSE According to interviews carried out and documentation evaluated, some goods and services are received in the different Regional Offices (ORE), and each one carries out similar, but not standard, processes when certifying as received or pre-intervening invoices. Regarding the distribution of expenses, according to interviews and evaluated documentation, it was found that at the time of binding a contract, an analysis of the assigned participants is not made, in order to be able to make a distribution between the two programs of the cluster according to the age of the participant. In addition, according to interviews, although the contract budget is validated, they only limit themselves to verifying the amount available in general and there is no distribution of the expense according to the service provider's invoice. POSSIBLE ASSERTED EFFECT The PRDE is reporting expenses within the cluster that do not necessarily reflect the actual expenses incurred by each program in the cluster, this deficiency requires that when the period of availability of funds is ending, some adjustments be made to reclassify expenses, up to the amount of the award. In addition, the PRDE may have incurred payments for which the service or goods were not provided as contracted. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2023-003). RECOMMENDATIONS We recommend that the PRDE establish standardized written guidelines and train the staff of the Regions to carry out and document the reviews and approvals of services, and ascertain that this information is uploaded in the accounting system of SIFDE. In addition, the personnel must be instructed to account for the budget and expense of therapy and related services, according to the enrollment of students who will attend, in accordance with the program that applies within the cluster. VIEWS OF RESPONSIBLE OFFICIALS The PRDE acknowledges the auditor’s finding. Management clarifies that all requested information was available and existed within the PRDE systems; however, it was not provided in a timely manner due to circumstances beyond the Department’s control, including competing deliverables required from the same operational areas. Regarding the disbursement vouchers referenced by the auditors, including the Excel Master and Adjustment Reports, the program area reviewed the documents and confirmed that they reconciled accurately. The timing differences were due to automatic and manual adjustments. All supporting information was available in PRDE’s databases, including SIFDE and MIPE, and has been included as part of this response for further reference. For the student billed for $34,000, all supporting documentation—such as the proposal, approval of payment, and related evidence—was and remains available in MIPE. As part of PRDE’s internal controls, all necessary documentation must be uploaded into the system before any transaction can proceed. It is also important to note that auditors were granted full access to both MIPE and SIFDE at the beginning of their audit procedures. In relation to Findings 4 and 5, documentation was available in MIPE. Management notes that certain contracts and proposals may have amendments, and it appears the auditors may have reviewed an incorrect version of the file. Similarly, for Finding 6, the area revalidated the information during the preparation of this response and confirmed that the documentation cited as missing was, in fact, available in the MIPE portal. Additionally, management evaluated the matter related to expense recognition. In accordance with federal regulations and to ensure compliance with IDEA requirements, PRDE is authorized to cover certain expenses of the Preschool Grant (84.173) using IDEA Part B (84.027) funds. As detailed in the prior Single Audit report: “IDEA Part B, Section 611 funds can be used for students ages 3 to 21. According to the description provided by OSEP, the Grants to States program assists states in meeting the excess costs of providing special education and related services to children with disabilities. States must serve all children with disabilities between the ages of 3 through 21, unless inconsistent with State law or court orders. Under 34 CFR § 300.202(a), the LEA must use IDEA Part B funds to pay the excess costs of providing special education and related services to children with disabilities.” Regarding the vouchers related to training services, PRDE does not concur with that portion of the finding, as the contract does not stipulate that the teachers must be an IDEA employee. This contract was previously evaluated as part of the auditors’ procedures. The PRDE accepts the auditors’ recommendations and will implement corrective actions to improve the timely submission of documentation and strengthen internal coordination among areas involved in responding to audit requests Auditor Comment on Management Response for Finding No. 2024-002 In response of the second paragraph, our Auditors held three (3) meetings with PRDE’s personnel and the amounts were not reconciled. For the third response, no justification exists in MIPE or SIFDE that the amount paid is reasonable and in accordance with the contract. In fact, if all costs disclosed in the contract were applied to that student, the amount is less than the $34,000 paid monthly. For the fourth response related to Conditions 4 and 5, our Auditors requested all information to be available. We held three (3) meetings, and the information did not reconcile and was not available for our evaluation. In addition, we understand and acknowledge that contracts have amendments; however, these amendments relate to increases in the total amount because an original contract is based on a certain quantity, and amendments are made as funds are received. The cost per student established in the contract or proposals remained unchanged in these amendments. The lack of verification between the supplier's cost as stated in the contract and the cost invoiced by the supplier is a significant problem because the supplier is billing for a cost that was not part of the original agreement or proposal. For the fifth through seven responses, the Uniform Guidance requires that financial management system record the expenditures in the program that benefited from the services; no in the program with more budget.. IMPLEMENTATION DATE None RESPONSIBLE PERSON Enid Díaz Executive Director Alayra Figueroa Associate Secretary of Special Education
FINDING REFERENCE NUMBER 2024-003 FEDERAL PROGRAM (ALN – 84.938A) HURRICANE EDUCATION RECOVERY – INMMEDIATE AID TO RESTART SCHOOL OPERATIONS (RESTART) U.S. DEPARTMENT OF EDUCATION AWARD NUMBER S938A180002 (04/26/2018 – 09/30/2025) COMPLIANCE REQUIREMENTS ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES // EQUIPMENT AND REAL PROPERTY MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR §200.302(b)(3)(4) establishes that the recipient's and subrecipient's financial management system must provide for the following: maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. 2 CFR §200.403 establishes that costs must meet the following criteria to be allowable under Federal awards: (g) be adequately documented. The Fiscal Process Guide – Program Funds Restart designed by the PRDE establishes that all movable and immovable property with a unit cost of five hundred dollars ($500.00) or more and a useful life of more than two (2) years will be capitalized. Both conditions must exist. These will be classified in the E5000 expense accounts, as appropriate. Also, indicate that capitalizable equipment (E5000) and non-capitalizable equipment (E4414) purchased with program funds will be labeled with the number assigned by the Property Registry System, as established in Section X of the "Procedure for the Control and Accounting of the Property of the Department of Education”. Also as stated in the Section 102(h)(3) of the 2018 Hurricane Relief Act, states that public control of funds and property for services provided to non-public schools must remain with a public agency, which also administers the funds and resources or contracts for services with public or private entities. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activities requirement, we selected a sample of forty (40) disbursements from a population of six hundred eighty-three (683) disbursements to suppliers made during the fiscal year 2023-2024. During our testing, the following deficiencies were noted: 1. For two (2) reimbursement payments issued by the PRDE to private schools, we found that they were made based on a quotation instead of the invoice, which should have been submitted by the private school. 2. We noted three (3) reimbursement payments made by the PRDE to private schools due to equipment purchases performed that did not have the receiving reports issued by the private schools for properly validating that the equipment was incorporated as part of the private school records and its regular operations. Furthermore, the Restart Fiscal Process Guide does not contain a control that mandates the submission of a private school receiving report as part of the reimbursement process for equipment-related expenses. 3. For five (5) reimbursement payments for purchase of equipment were incorrectly recorded in account E6170 (Donations and Contributions to Private Entities) rather than in one of the E5000-series accounts designated for equipment. Also, these equipment’s were not included in the property & equipment register of the PRDE. According to the Restart Fiscal Process Guide, all the equipment purchased or reimbursed to the private schools should be recorded as part of the property list that belongs to the PRDE. In other words, PRDE must maintain ownership over the property bought with the Restart funds. QUESTIONED COSTS None. PERSPECTIVE INFORMATION During the evaluation of the supporting documents for the voucher, we observed that the invoice and receiving report were not available in SIFDE, considering that it is the accounting system designated for the evaluation of supporting documentation before the approval of any disbursement of funds. Also the codifications of these transactions were not properly reviewed in order to avoid missed codification, considering that the PRDE has the Third-Party Fiduciary Agent that had reviewed them and did not detect the missing codification and the missing documentation for the proper accounting and authorization process. STATEMENT OF CAUSE 1. The PRDE did not perform an effective review procedure over the reimbursement supporting documentation before the authorization of the payment. 2. Before reimbursements are processed, the PRDE has no established internal control or procedure requiring the private schools to submit receiving report for equipment purchases. 3. The PRDE lack of training or oversight on proper accounting practices, which leads to equipment expenses being coded incorrectly in account E6170 rather than the proper E5000 series. POSSIBLE ASSERTED EFFECT 1. If the PRDE issue reimbursement payment without the invoice, this could lead the PRDE to incur improper payments. 2. The PRDE lack of obtaining the receiving report for equipment purchases could lead to the reimbursing unallowable costs under the Federal program. Without proper documentation, it becomes difficult to verify whether the equipment purchases were legitimate and necessary for the program. 3. The PRDE incorrect accounting of equipment expenses could result in inaccurate financial reporting and a potential noncompliance issue with Federal regulations that require proper codification of expenses. IDENTIFICATION OF REPEAT FINDING Not previously reported. RECOMMENDATIONS We recommend that the PRDE review the Restart Fiscal Process Guide in order to include a requirement for private schools to submit receiving reports or equivalent documentation to substantiate equipment purchases prior to reimbursement. Provide training to all relevant personnel on the importance of accurate accounting and documentation, particularly for equipment purchases, and ensure that such expenses are properly coded. Implement a review process to verify that equipment reimbursements are supported by the required receiving report, invoice and that disbursements are coded appropriately in the accounting system (SIFDE). VIEWS OF RESPONSIBLE OFFICIALS The PRDE does not agree with the recommendation to revise the Restart Fiscal Process Guide to require private schools to submit a receiving report or equivalent documentation to substantiate equipment purchases prior to reimbursement. These transactions correspond to reimbursements, not direct purchases made by PRDE; therefore, verification is performed through proof of payment submitted by the schools. When auditors requested confirmation of receipt, PRDE obtained photographs of the equipment from the schools to provide additional verification that the items were in the school. In addition, the PRDE wants to clarify that where quotations were used instead of invoices, the private schools provided valid proof of payment that matched the quotations submitted. This evidence demonstrated that the purchases were completed and consistent with the approved documentation, meeting the requirements for allowable and verifiable costs under Federal regulations. The PRDE does not agree with the recommendation to change the accounting classification or to implement additional review procedures related to the use of account E6170, “Donations and Contributions to Private Entities.” The use of account E6170 is appropriate given the nature of the transaction, which reflects a reimbursement to a private school rather than a direct purchase by PRDE that would otherwise be recorded under account E5500. The PRDE acknowledges the deficiencies noted during the audit regarding the omission of reimbursed equipment purchases from the PRDE Property and Equipment Register. To address this, the PRDE has prepared a list of reimbursed equipment purchased by private schools under the Restart Program. This list will be provided to the personnel responsible for maintaining the register to ensure the inclusion of these items in the Property and Equipment Register, in compliance with the capitalization and accountability requirements established in the Restart Fiscal Process Guide. The corrective action is scheduled for implementation on or before the end of the current fiscal year. Auditor Comment on Management Response for Finding No. 2024-003 In relation to situation #2 comments, the PRDE didn’t have evidence of the receiving report, which is required for all other purchases of equipment for which the PRDE is the owner. Internal controls over property and equipment should be the same for all equipment for which the PRDE is the owner. In relation to situation #3, all equipment purchased and registered in this account was not included in the inventory of the PRDE, because the general ledger account used is not recognized for purchase of property and equipment, instead is a general ledger account for donations. Further, in accordance with the “Guia de Procesos Fiscales – Fondos Programa Restart”, it is established that all reimbursement of equipment should be recorded in accounts E5000 or E4414. This is because the system recognizes that an addition of equipment was made and must be capitalized. IMPLEMENTATION DATE In process. RESPONSIBLE PERSON María de los A. Lizardi Valdés Office of Federal Affairs Director Edgar Delgado Serrano Office of Federal Affairs Associate Director Hamir M. Mojica Mojica Program Coordinator
FINDING REFERENCE NUMBER 2024-004 FEDERAL PROGRAMS (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.196A) EDUCATION FOR HOMELESS CHILDREN AND YOUTH (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425R) COVID-19 EDUCATION STABILIZATION FUND: CORONAVIRUS RESPONSE AND RELIEF SUPPLEMENTAL APPROPRIATIONS ACT, 2021 – EMERGENCY ASSISTANCE TO NON-PUBLIC SCHOOLS (CRRSA EANS) (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) (ALN – 84.425V) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – EMERGENCY ASSISTANCE FOR NON-PUBLIC SCHOOLS (ARP EANS) (ALN – 84.425W) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF – HOMELESS CHILDREN AND YOUTH (ARP HCY) (ALN – 84.938A) HURRICANE EDUCATION RECOVERY – INMMEDIATE AID TO RESTART SCHOOL OPERATIONS (RESTART) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS H027A220003 (0701/2022 – 09/30/2023); S196A220040 (0701/2022 – 09/30/2023); S196A230040 (0701/2023 – 09/30/2024); S425D210029 (01/05/2021 – 03/31/2025); S425R210053 (06/28/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026); S425V210053 (09/24/2021 – 03/28/2026); S425W210040 (04/23/2021 – 03/28/2026); S938A180002 (04/26/2018 – 09/30/2025); S938A180009 (09/29/2022 – 04/30/2026); CONSOLIDATED FUNDS COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E establish the requirements for Cost Principles – Allowable Costs under Federal awards. This Section at § 200.403 discloses factors affecting allowability of costs – states that costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and (g) Be adequately documented. Section § 200.404 Reasonable costs add: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost including (c) Market prices for comparable goods or services for the geographic area. Also, § 200.405 Allocable Costs include that: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received; including (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods. STATEMENT OF CONDITION During our internal control and compliance tests of disbursements for Federal programs, we selected four (4) payments of professional services of Third-Party Fiduciary Agent Services ("TPFA") as part of our samples of the different Federal major programs. During our tests, we noted the following conditions: 1. Reasonableness of costs: The payment made to the vendor is a "flat fee" monthly payment agreed to in the professional service contract. Although the vendor invoice includes a detail of hours of service and expense summary, this information is solely for "information purposes" and not to be taken into account for the actual invoice payment process. The monthly payment amount only consideration is the agreed upon "flat fee". In the invoices evaluated (see detail below), the vendor includes a total hours incurred for each invoice with a price per hour range from $195 to $695. Also, the invoices include an expense summary for the period. When we compared the actual payment to the hours incurred and related expenditures, we noted an unreasonable charge to the PRDE and its Federal funds based upon the payment being made versus the actual service hours/expenses included on the invoice; when it is compared to price estimates made during the RFP process when the per hour price ranges were from $65 to $352. VOUCHER NUMBER VOUCHER DATE VOUCHER AMOUNT INVOICE NUMBER INVOICE DATE SERVICE PERIOD TOTAL HOURS INVOICED INVOICE AMOUNT TOTAL RELATED EXPENSES AVERAGE HOURLY RATE CALCULATED 24AP7166 8/14/2023 $ 2,333,333.33 830311-2023-27 7/5/2023 June 2023 7,335.00 $ 2,333,333.33 $ 699,296.00 $ 222.77 01180123 9/6/2023 2,333,333.33 830311-2023-28 8/1/2023 July 2023 6,756.00 2,333,333.33 127,620.42 326.48 01184263 9/19/2023 2,333,333.33 830311-2023-29 9/1/2023 August 2023 7,633.30 2,333,333.33 104,084.01 292.04 01188131 10/19/2023 2,333,333.33 830311-2023-30 10/1/2023 September 2023 6,884.00 2,333,333.33 103,238.55 323.95 01195137 11/28/2023 2,333,333.33 830311-2023-31 11/1/2023 October 2023 6,929.00 2,333,333.33 137,665.35 316.88 01201906 1/10/2024 2,333,333.33 830311-2023-32 12/1/2023 November 2023 5,913.00 2,333,333.33 91,491.21 379.14 01210539 1/30/2024 476,208.71 830311-2023-33A 1/1/2024 December 2023 1,130.00 476,208.71 - 421.42 01210542 2/6/2024 1,857,124.62 830311-2023-33B 1/1/2024 December 2023 4,408.00 1,857,124.62 73,628.57 404.60 01221775 3/12/2024 2,333,333.33 830311-2024-34 2/1/2024 January 2024 6,018.00 2,333,333.33 86,982.26 373.27 01226705 4/9/2024 2,333,333.33 830311-2024-35 3/1/2024 February 2024 5,725.00 2,333,333.33 75,861.61 394.32 01235153 4/16/2024 2,333,333.33 830311-2024-36 4/1/2024 March 2024 6,200.00 2,333,333.33 109,583.33 358.67 01251041 5/23/2024 2,500,000.00 830311-2024-37 5/8/2024 April 2024 6,420.00 2,500,000.00 302,908.85 - 01261194 6/24/2024 53,700.00 830311-2024-38A 6/1/2024 May 2024 126.74 53,700.00 - 423.70 01261196 6/24/2024 1,678,208.00 830311-2024-38B 6/1/2024 May 2024 4,245.79 1,678,208.00 180,197.40 352.82 01261198 6/24/2024 768,092.00 830311-2024-38C 6/1/2024 May 2024 1,964.47 768,092.00 - 390.99 $ 28,333,333.30 $ 28,333,333.30 $ 2,092,557.56 2. Allocability – the payment made was distributed among several Federal programs and state funds as follows: CONSOLIDATED FUNDS (SEA/LEA) ALN 84.027 NON-MAJOR ALN 84.196A ALN 84.425D ALN 84.425R ALN 84.425U ALN 84.425V ALN 84.425W ALN 84.938A TOTAL ALLOCATED AMOUNT $ - $ 2,333,333.33 $ - $ - $ - $ - $ - $ - $ - $ - $ 2,333,333.33 - 2,333,333.33 - - - - - - - - 2,333,333.33 - 2,233,379.03 - 24,483.39 - - - - 75,470.91 - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 - - 35,000.00 19,542.04 300,000.00 100,000.00 1,523,791.29 55,000.00 - 300,000.00 2,333,333.33 - - - - - - 476,208.71 - - - 476,208.71 1,857,124.62 - - - - - - - - - 1,857,124.62 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,500,000.00 - - - - - - - - - 2,500,000.00 53,700.00 - - - - - - - - - 53,700.00 1,678,208.00 - - - - - - - - - 1,678,208.00 - 65,031.74 - 63,309.25 - - 500,000.00 - 139,751.01 - 768,092.00 $ 17,755,699.27 $ 6,965,077.43 $ 35,000.00 $ 107,334.68 $ 300,000.00 $ 100,000.00 $ 2,500,000.00 $ 55,000.00 $ 215,221.92 $ 300,000.00 $ 28,333,333.30 62.67% 24.58% 0.12% 0.38% 1.06% 0.35% 8.82% 0.19% 0.76% 1.06% Based on the payment documentation of the evaluated invoices, the allocations were made based on available budget of administrative allocation of Federal awards, the invoices didn't include any basis for the allocation of costs between Federal and non-Federal funds. For example, on invoice number 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received. In addition, several invoices for a total amount for the year of $6,965,077 or 24.58% of total payments were charged to Consolidated Funds which includes several Federal programs that could be incurred in unallowed costs. QUESTIONED COSTS Based on the Criterias established on Part II, § 200.403 and § 200.404 for Cost Principles – Allowable Costs under Federal awards, the based used for the costs distribution without specific services rendered to Federal Programs, as described in the Statement of Condition, we estimate as minimum the amount of $3,612,556.60 (including $107,334.68 on a Non-Major Program ALN 84.196A) as questioned costs for not supported documentation. This amount should increase if an evaluation of costs charged to Federal Programs included in Consolidated Funds. See also Perspective Information for more support. PERSPECTIVE INFORMATION The total contract amount awarded for the services over the two-year period is $79,675,000, with a flat fee of $3,143,750 for the first twelve months, and $3,495,833 for the next twelve months. In the fiscal year 2023 there were 3 amendments to the original contract where it was agreed to pay a total fee of $2,995,833 for the months of April and May 2023 and the total amount of $23,333,333 for 10 additional months or $2,333,333 monthly from June 2023 to March 2024. During fiscal year 2024 there were two (2) amendments to the original contract where it was agreed to pay a total monthly fee of $2,500,000 for the months of April 2024 to March 2025, and a total monthly fee of $2,375,000 for the months of April 2025 to October 2025. From the first year of the contract up to the last amendment the total contract amount is approximately $155,625,000. Based on the inconsistent cost allocation method and the lack of a requirement for the payments being made for actual works performed, we considered this a systematic problem in the contract management and payment. Based on the information provided and evaluated the allocation between Federal and non-Federal funds is not applied consistently, other eleven (11) invoices for a total amount of $17,755,699 were paid from non-Federal funds, during the fiscal year. In accordance with the documentation provided the allocation used is based on the budget amounts available from state and Federal funds; during this fiscal year the total amount paid to the supplier was $28,333,333. Of this amount 62.67% were covered with state funds, 24.58% with consolidated activities funds, and 12.75% with Federal programs funds. STATEMENT OF CAUSE The PRDE did not include on the RFP process and the contract negotiation a clause that requires that the payment of services will be made upon actual hours incurred or that a final reconciliation process will be made during the contract period of performance based on actual service hours and expense incurred. The PRDE agreed upon a "flat fee" contract based on an estimate / budget of hours presented by the vendor on its proposal without considering the requirement of adjusting the payment for actual workhours incurred as part of its contract negotiation. The PRDE staff could not provide the basis used to distribute the cost between the different programs and state funds in accordance with the benefit obtained from the costs incurred. There is no consistent treatment or basis for the allocation of the payment costs between Federal programs and state funds. The contract includes the accounting codes that can be charged for the contract costs; however, no amounts, limitations, or basis for the cost’s distributions were included on the contract or in the payment documentation. POSSIBLE ASSERTED EFFECT Unreasonable costs may be charged to the PRDE's Federal programs that may result in questionable or unallowable costs by the Federal grantors. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Numbers 2021-006; 2022-008; and 2023-004). RECOMMENDATIONS We recommend to the PRDE to establish an adequate and consistent allocation method of each invoice amount that reflects the relative benefits that the Federal program received from the services provided by the supplier during the invoice period, so the Federal program can be charged for the costs of that period. In addition, we recommend that the PRDE revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration. Also, we recommend that the PRDE should request that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE. VIEWS OF RESPONSIBLE OFFICIALS The PRDE does not agree with the Recommendation to establish an allocation method for TPFA invoices because TPFA services are overhead costs paid from administrative funds and are not tied to any specific federal grant. In addition, the PRDE does not agree that contract terms should be revised before the contract expiration to require a reconciliation of total hours and rates because again, payments to the TPFA are overhead costs not directly tied to any specific program. Finally, the PRDE does not agree with the recommendation that the TPFA submit supporting evidence for the reimbursement of expenses because (i) the TPFA contract is a fixed fee that is inclusive of all professional service fees and expenses and (ii) the TPFA provides an explanation of major expenses incurred within each monthly invoice. Auditor Comment on Management Response for Finding No. 2024-004 As stated in CONDITION 2., “…on invoice 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received.” Further, the 2 CFR 200.1, establishes that: “Indirect [facilities & administrative (F&A)] costs mean those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.” This information was not provided for our evaluation. Also, we made reference to the Program Determination Email for ALNs. 84.938 and 84.425 dated September 18, 2024 (Audit Control Number 02-21-39634), received from Ms. Catherine Miers of the Office of Elementary and Secondary Education of the US Department of Education (USDE), in which they required that the PRDE provide documentation for the following corrective actions: “revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration; requested that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE; and develop an adequate review of the vendors invoice to properly identify the actual hours of services that benefited the Federal programs so a correct allocation of the costs incurred can be made within Federal programs and state funds”. IMPLEMENTATION DATE None RESPONSIBLE PERSON Jullymar Octtaviani Vega Sub-Secretary of Administration María de los Angeles Lizardi Valdés Office of Federal Affairs Director
FINDING REFERENCE NUMBER 2024-005 FEDERAL PROGRAMS (ALN – 10.553) SCHOOL BREAKFAST PROGRAM (SBP) – CHILD NUTRITION CLUSTER (ALN – 10.555) NATIONAL SCHOOL LUNCH PROGRAM (NSLP) – CHILD NUTRITION CLUSTER (ALN – 10.559) SUMMER FOOD SERVICE PROGRAM FOR CHILDREN (SFSP) – CHILD NUTRITION CLUSTER (ALN – 10.582) FRESH FRUIT AND VEGETABLE PROGRAM (FFVP) – CHILD NUTRITION CLUSTER (ALN – 10.558) CHILD AND ADULT CARE FOOD PROGRAM (CACFP) U.S. DEPARTMENT OF AGRICULTURE (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.048A) CAREER AND TECHNICAL EDUCATION – BASIC GRANTS TO STATES (PERKINS V) (ALN – 84.367A) SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (formerly IMPROVING TEACHER QUALITY STATE GRANTS) (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS 1PRAEA18SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA19SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA20SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA21SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA22SCESUBA (10/01/2022 – 09/30/2023); 221PR300336E_A (10/01/2022 – 10/30/2024); S010A130052 (07/01/2013 – 09/30/2014); S010A140052 (07/01/2014 – 09/30/2015); S010A160052 (07/01/2015 – 09/30/2016); S010A160052 (07/01/2016 – 09/30/2017); H027A12003 (07/01/2012 – 09/30/2013); H027A14003 (07/01/2014 – 09/30/2015); H027A15003 (07/01/2015 – 09/30/2016); H027A18003 (07/01/2018 – 09/30/2019); H027A19003 (07/01/2019 – 09/30/2020); H027A20003 (07/01/2020 – 09/30/2021); H027A21003 (07/01/2021 – 09/30/2022); V048A180052 (07/01/2018 – 09/30/2019); S367A160052E (07/01/2016 – 09/30/2017); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Section 200.403 (g) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition 2 CFR Section 200.1, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient, any payment for ineligible goods or service, any duplicate payment, any payment for a good or service not received (except for those payments where authorized by law), any payment that is not authorized by law, and any payment that does not account for credit for applicable discounts. STATEMENT OF CONDITION As part of our audit procedures and interviews over financial reporting, we obtained a detail of accounts receivable related to duplicate or incorrect payments made for payroll transactions in the amount of $4,659,739. Invoices issued during the fiscal year ended June 30, 2024, balance, were distributed as federal and state, as follows: ALN Number Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 $ 167,694 10.558 1,240 84.010A 64,517 84.027A 228,284 84.041 546 84.048A 4,802 84.367A 1,027 84.425D 35,165 84.425U 27,501 Not Determined 2,357,671 Not Determined 25,907 Not Applicable 1,745,385 $ 4,659,739 Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) Special Education - Grants to States (IDEA, Part B) Impact Aid (Title VII of ESEA) Program Description Child Nutrition Cluster Child and Adult Care Food Program (CACFP) Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) COVID-19 Education Stabilizatiopn Fund: Elementary and Secondary School Emergency Relief Fund (ESSER) Total Invoices Issued Balance at 06/30/2024 Career and Technical Education - Basic Grants to States (Perkins V) Schoolwide Program (State and Federal Funds) Consolidated Funds (State and Federal Funds) State Funds COVID-19 Education Stabilizatiopn Fund: American Rescue Plan – Elementary and Secondary School Emergency (ARP ESSER) QUESTIONED COSTS Identified questioned costs are $530,776, which were identified as employees that didn't work for the Federal program. Other amount may be unallowed, if the PRDE can identify the portion of Federal funding incurred in Schoolwide and Consolidated activities. PERSPECTIVE INFORMATION The amount of $4,659,739, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2023-2024, the PRDE determined that an invoice for excess payroll payments proceeds. The PRDE was unable to indicate which amount of Schoolwide or Consolidated funds corresponds to Federal funding, because these funds close at year end. STATEMENT OF CAUSE The PRDE sends the Treasury Department of Puerto Rico a balance of the payroll, before the end of the fortnight, to speed up the payment process. By sending this information without balancing the hours worked, it causes errors in the payroll computations. POSSIBLE ASSERTED EFFECT The PRDE incurred payments to employees for hours not worked, and for which specific grants were received. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2023-005). RECOMMENDATIONS We recommend PRDE design and implement adequate internal controls and payroll processes that will identify in real – time or sooner any incorrect payroll payment made. FINDING REFERENCE NUMBER 2024-005 – continuation VIEWS OF RESPONSIBLE OFFICIALS Management agrees with the audit finding and has implemented a comprehensive corrective action plan to address payroll processing errors, strengthen internal controls, and ensure accurate and timely payments. As part of PRDE’s Fiscal Plan of 2020–2021, the Department launched the official integration project between the Time, Attendance, and Leave (TAL) system and the Payroll (RHUM) system. This integration ensures that payroll disbursements are made only after the employee’s attendance has been validated through the TAL system. Employees are required to record their attendance using biometric verification or have an authorized leave properly documented and approved by their supervisor before receiving payment. If attendance is not validated, the system automatically issues a notification and applies the necessary adjustment. This project, initiated in November 2020 with the collaboration of the Puerto Rico Fiscal Oversight and Management Board (FOMB), MS Consulting, the Department of the Treasury (Hacienda), the Financial Advisory Authority (AAFAF), and the Puerto Rico Innovation and Technology Service (PRITS), was fully integrated by February 2021. As a result, PRDE has significantly reduced overpayments, duplicate payments, and other payroll inconsistencies. To reinforce this effort, PRDE issued a new Time and Attendance Policy on December 7, 2021, later updated on April 11, 2022, which clearly defines employee responsibilities, authorized leaves, disciplinary procedures, and supervisor accountability. Under this policy, employees and supervisors are required to follow strict timekeeping procedures, and noncompliance triggers automatic system notifications and salary adjustments. The PRDE’s Time and Attendance staff continues to monitor and maintain compliance through: i. Ongoing training sessions for PRDE personnel; ii. System dashboards tracking attendance behaviors; iii. Issuance of notifications and payroll adjustments as required; and iv. Regular follow-up and evaluation activities. Additionally, PRDE’s Finance Office implemented a reconciliation process that integrates data from TAL, RHUM, and SIFDE, ensuring that payroll expenditures align with validated attendance records. The system now performs cross-checks before submission to the Treasury Department, preventing disbursements for unverified time. These combined measures—technological integration, policy enforcement, staff training, and reconciliation controls—have strengthened payroll accuracy, reduced the risk of overpayments, and improved financial accountability across the Department. IMPLEMENTATION DATE Done RESPONSIBLE PERSON Evelyn Rodríguez Cardé Finance Office Director Jullymar Octtaviani Vega Sub-Secretary of Administration
Criteria Per 2 CFR §200.403 and the Organization’s internal control policies, all expenditures must be properly authorized and documented to ensure allowability and compliance with federal requirements. Condition During disbursement testing, we noted that 6 out of 40 transactions tested did not have proper documentation evidencing required approvals prior to payment. Cause The lack of documentation appears to be due to inconsistent application of internal controls and inadequate maintenance of approval records. Effect Without proper approval documentation, there is an increased risk of unallowable or unauthorized expenditures being charged to the federal program. Questioned Costs Not applicable Perspective Our sample was not, and was not intended to be, statistically valid. Of the 40 disbursements selected for testing, 6 disbursements, or 15% of our sample, had no proper documentation with approval. Identification as a Repeat Finding, if applicable Not applicable Recommendation CVCA should strengthen its internal controls to ensure that all disbursements are properly reviewed and approved in accordance with established policies. This includes maintaining adequate documentation of approvals for all transactions. View of Responsible Officials CVCA agrees with the finding.
Finding 2024-002: Failure to Follow Recordkeeping Requirements for Expenditures (Material Weakness) Federal Agency: United States Department of Agriculture Federal Program Name: COVID-19 - Pandemic Relief Activities: Local Food Purchase Agreements with States, Tribes, and Local Governments Assistance Listing Number: 10.182 Pass-Through Entity: State of Florida Department of Agriculture Compliance Requirement: Allowable Costs/Cost Principles Criteria: 2 CFR Section 200.334, requires recipients and subrecipients to retain all Federal award records for three years from the date of submission of their final financial reports (quarterly or annually). Records include, but are not limited to, financial records, supporting documentation, and statistical information. Additionally, 2 CFR Section 200.403, requires that costs must meet certain criteria to be allowable under federal awards, specifically 2 CFR Section 200.403(g), requires adequate documentation of those costs. Condition: During our testing, the Organization was unable to provide appropriate supporting documentation that evidenced a proper activity was conducted using federal funding, and further we could not determine if the costs incurred were allowable. Additionally, we noted that the Organization did not establish adequate internal controls to ensure supporting documentation was maintained to evidence that compliance was achieved. Cause: The Organizations internal controls were not effectively designed over recordkeeping of food purchases. Known Questioned Costs: $166,610 Context: The total sample size was 100 items of expense, which was determined to be a statistically valid sample. 10 out of the 100 items tested were not supported by appropriate documentation. 5 out of 100 items tested included freight costs that were included in the food costs. Freight should have been separated and classified as an administrative cost. These items resulted in the questioned costs calculated above and the noncompliance reported. The total population of expenditures charged to the federal program, from which our sample was selected, was $14,401,876. Effect: Federal funds may have been used for unallowable costs and therefore the purpose of the award may not have been met. Overall, this results in noncompliance with federal award requirements. Recommendation: We recommend the Organization evaluate its internal controls over allowable costs, recordkeeping and recording of federal expenditures and implement internal control procedures to ensure documentation is appropriately maintained for the required timeframe. Ongoing monitoring of the controls designed should be established to ensure future failures are minimized.
FINDING 2024-243 The Division did not properly evaluate costs related to the Rehabilitation Services-Vocational Rehabilitation Grants to States program resulting in direct costs incorrectly being recorded as indirect costs for the grant. Type of Finding: Significant Deficiency, Noncompliance Assistance Listing Title: Rehabilitation Services – Vocational Rehabilitation Grants to States Assistance Listing Number: 84.126 Federal Award Number: H126A240016, H126A220016, H126A210016 Program Year: October 1, 2020 – September 30, 2022; October 1, 2021 – September 30, 2023; October 1, 2023 – September 30, 2024 Federal Agency: U.S. Department of Education, Rehabilitation Services Administration Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: None Criteria: The U.S. Code of Federal Regulations (CFR), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) included in 2 CFR 200.303 requires that a nonfederal entity receiving federal awards establish and maintain internal controls that provide reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions in the federal award. Section 2 CFR 200.403(d) describes factors affecting the allowability of costs. Except where otherwise authorized by statute, costs must meet a consistency treatment criterion to be allowable under federal awards. A cost should not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. This also applies for misapplying indirect costs as direct costs. Condition: We tested a sample of 60 transactions, plus 15 individually significant transactions, from the population of indirect costs incurred in State fiscal year 2022. Those costs were used to calculate the indirect cost rate used in fiscal year 2024. We identified 2 transactions from the sample of 60 (or 3 percent) and 1 (or 7 percent) individually significant transactions that should have been charged as direct costs. The 2 sampled transactions were $30 for training and $269 for postage. The individually significant transaction was $46,922 for laptops. We also tested a sample of 60 employee payroll transactions from the population of direct costs in fiscal year 2024 to determine that the costs were allowable and the Division’s internal control procedures were operating as intended. The Division could not provide documentation to confirm that 2 transactions (or 3 percent) were approved prior to entry in Luma. Cause: The Division has experienced a large amount of turnover in fiscal staff positions. Prior staff did not retain documentation, and current staff was unable to produce documentation to support the expenditure transactions or verify controls were in place and operating. Effect: The 3 indirect cost transactions that should have been recorded as direct costs caused the Division to draw a lower amount of grant funds than allowed. We did not find any compliance errors in our testing of payroll transactions; however, if control procedures are not operating as designed, errors could occur and not be detected. Recommendation: We recommend that the Division provide training to employees to correctly distinguish direct costs and indirect costs and design and establish procedures to ensure that documentation is retained to support transactions. Management’s View: To ensure all costs charged to federal grants are accurately classified as direct or indirect in accordance with federal cost principles, and to maintain documentation supporting all expenditures, approvals, and internal control activities in compliance with 2 CFR 200.303 and 2 CFR 200.403(d). Corrective Action: 7.1 Establish and Document Clear Cost Classification Procedures: Develop written procedures defining and distinguishing between direct and indirect costs. 7.2 Strengthen Internal Controls Over Cost Allocation: Implement review and approval controls to verify proper cost classification before posting transactions to Luma or inclusion in the indirect cost pool. 7.3 Enhance Staff Training and Knowledge: Provide targeted training for fiscal staff to ensure understanding of allowable cost principles and consistent application of cost classification policies. 7.4 Ensure Documentation Retention and Review: Maintain complete documentation supporting all cost allocations, including approval records, cost pool calculations, and reconciliations. 7.5 Perform Regular Monitoring and Verification: Conduct periodic reviews of both direct and indirect cost transactions to confirm classification accuracy and identify any required adjustments. Auditor’s Concluding Remarks: We thank the Division for its cooperation and assistance throughout the audit.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Compliance and Internal Control over Compliance Findings Lack of Supporting Documentation for Non-Payroll Disbursements - Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Significant Deficiency) AL Number and Title: 84.362A - Native Hawaiian Education Program Award Number: S362A200024-22 Award Period: October 1, 2022 - September 30, 2024 Federal Agency: Department of Education Criteria: Under 2 CFR § 200.302(b)(3) and 2 CFR § 200.403(g), non-Federal entities are required to maintain documentation to support costs charged to federal awards. Costs must be necessary, reasonable, allocable, and adequately documented to be allowable under a federal program. Internal controls should ensure proper retention of records for audit and compliance purposes. Condition: During our testing of compliance and internal controls over compliance for Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we selected a haphazard sample of 40 non-payroll disbursements and judgmentally selected 1 individually significant item for detailed testing. For one transaction totaling $145.85, the auditee was unable to provide any supporting documentation, such as invoices or receipts, to substantiate the expenditure. For a separate transaction totaling $57.03, the auditee was unable to provide evidence of proper approval prior to payment. Cause: The lack of documentation appears to result from weaknesses in the Organization’s record-keeping practices and non-compliance with established documentation retention policies. The Organization’s internal controls did not ensure that all supporting documentation for federal expenditures was consistently maintained. Effect: Without adequate supporting documentation, we were unable to determine whether these costs were allowable, allocable, and reasonable in accordance with federal grant requirements. We were also unable to determine whether management reviewed and approved these costs. This noncompliance increases the risk that unallowable or unauthorized costs could be charged to the federal program without detection. Repeat Finding? Yes - Finding 2023-001. Recommendation: We recommend that the Organization: 1. Enhance internal controls to ensure that all federal expenditures are properly supported and retained for compliance purposes; 2. Implement a centralized documentation retention system to track and store invoices, receipts, and other supporting records; 3. Provide staff training on documentation requirements for federal grant expenditures to ensure compliance with 2 CFR § 200.302(b)(3) and 2 CFR § 200.403(g); and 4. Conduct periodic internal reviews of disbursement records to verify that required documentation is maintained and readily available for audit purposes. Views of Responsible Officials and Planned Corrective Action: Mana Maoli agrees with the finding and the recommendation. See Part V, Corrective Action Plan.
FA 2024-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.010 – Title I Grants to Local Educational Agencies Federal Award Numbers: S010A220010 (Year: 2023), S010A230010 (Year: 2024) Questioned Costs: $9,307.29 Repeat of Prior Year Findings: FA 2023-001, FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it related to the Title I Grants to Local Educational Agencies program. Background: The Title I Grants to Local Educational Agencies (Title I) program was authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in high-poverty schools in particular for children failing or most at-risk of failing, to meet challenging State academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $812,681 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non- Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: All journal entries and general ledger adjustments that impacted Title I program expenditures were selected for testing. For six of the 14 items tested, appropriate evidence of review and approval was not maintained. Additionally, a sample of nine employees was randomly selected for testing using a non-statistical sampling approach. Personal services expenditures for these employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For three employees, supporting documentation was not maintained for additional payments totaling $400.00. • Timesheets to support additional payments totaling $950.00 were not approved for three employees. • One employee was underpaid by $100.00 per review of supporting documentation associated with additional pay amounts. • For one employee, the amount paid did not agree to the contract provided and resulted in an overpayment of $8,907.29. Questioned Costs: Upon testing a sample of $43,178.26 in personal services expenditures, known questioned costs of $9,307.29 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $381,740.79 (excluding benefits payments), we project the likely questioned costs to be approximately $82,286.14. Cause: In discussing this deficiency with the School District, they believe that these issues are primarily due to improper documentation retention. Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the Title I program. Failure to ensure that documentation exists to support the allowability of payments from the Title I fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to Title I program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District's purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2024-002 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425W – American Rescue Plan Elementary and Secondary School Emergency Relief Fund – Homeless Children and Youth Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021) Questioned Costs: $8,763.69 Repeat of Prior Year Findings: FA 2023-002, FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,581,012 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) …Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of 16 nonpersonal services expenditures was randomly selected for testing using a nonstatistical sampling approach. The expenditures were reviewed to determine if internal controls were implemented and applicable compliance requirements met. The following deficiencies were noted: • For three expenditures, evidence of review and approval was not reflected within the voucher package. • For one expenditure, unallowable costs totaling $14.35 were identified. All journal entries and general ledger adjustments impacting program expenditures were selected for testing. The following deficiencies were noted: • For five of the 13 items tested, appropriate evidence of review and approval was not maintained. • Sufficient supporting documentation was not provided for four journal entries posted to reverse expenditure activity. • For two journal entries used to record expenditures totaling $4,263.19 in the ESSER fund, it was determined that the charges recorded were not allowable and were not approved on the GaDOE consolidated application. Additionally, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. Personal services expenditures for these employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements met. The following deficiencies were noted: • For four employees, supporting documentation was not maintained for additional payments totaling $3,560.05. • For one employee, supporting documentation was not maintained for a pay adjustment resulting in a decrease of $500.00. • For three employees, the amount paid did not agree to board-approved salary scales and resulted in underpayments totaling $1,450.81 for two employees and an overpayment of $926.10 for one employee. Questioned Costs: Upon testing $64,812.64 of nonpersonal services expenditures, known questioned costs of $14.35 were identified for expenditures not supported by adequate documentation. Using the total nonpersonal services expenditures population of $560,743.52, we project the likely questioned costs to be approximately $124.15. In addition, upon testing a sample of $176,911.22 in personal services expenditures, known questioned costs of $4,486.15 were identified for overpayments and expenditures not supported by adequate documentation. Using the total personal services expenditures population of $873,826.11 (excluding benefits payments), we project the likely questioned costs to be approximately $22,158.66. Further, known questioned costs of $4,263.19 were identified for expenditures not supported by adequate journal entry documentation and were not tested as part of a sample; therefore, the known and likely questioned costs identified for unallowable payments throughout the expenditure testing totaled $8,763.69 and $26,546.00, respectively. Cause: In discussing these deficiencies with the School District, they believe these issues are due to improper documentation retention and the need for updated policies and procedures. Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District’s purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FINDING 2024-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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): SY 22-23, SY 23-24 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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 2022-003. Condition and Context The School Corporation had not designed nor implemented a system of internal controls to ensure that program costs were supported by proper documentation, were allowable, and were only for the operation of the food service program. INDIANA STATE BOARD OF ACCOUNTS 21 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Vendor Transactions A sample of 61 vendor transactions from the Food Service fund was selected for testing to verify the transactions were for allowable activities and costs under the Child Nutrition programs. There were 3 of the 61 transactions, totaling $3,698, that were paid to vendors for which the School Corporation could not provide documentation to support the costs. As such, the 3 transactions could not be verified as an allowable activity or cost for the food service program. In addition, 12 of the 61 vendor transactions, totaling $427, were refunds of student meal accounts that should have been paid out of the Prepaid Food fund. Of the 61 vendor transactions, there was 1 in the amount of $536 that was not related to food service. Payroll Transactions During testing, stipends totaling $1,142 were paid to 4 employees with no documentation to show support or approval of the stipend amount. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . INDIANA STATE BOARD OF ACCOUNTS 22 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (g) Be adequately documented. . . ." Cause Due to turnover of staffing in both the food service personnel and the School Corporation's administrative office, an effective system of internal controls was not established that would have ensured compliance, or that would have ensured supporting documentation would have been maintained and made available for audit, with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect Without a proper system in place, noncompliance remained undetected, resulting in grant expenditures being spent for unallowable costs and without the proper supporting documentation. Noncompliance with grant agreement and the Activities Allowed or Unallowed and the Allowable Cost/Costs Principles compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs We identified $5,803 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure that expenditures made from federal awards are allowable per the terms and conditions of the federal award as well as the Allowable Costs/Cost Principles compliance requirement and that adequate supporting documentation is retained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-006 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles 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): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 26 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-006. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls to ensure that proper documentation was retained for audit. A sample of 60 expenditures made from the School Corporation's Special Education funds during the audit period was selected for testing. Of the sample of 60, there were 47 transactions that were fringe benefit claims for which there was no detail to identify the employees included in the payment amount. In addition, documentation and contracts were not provided for another 6 transactions. As a result, 53 expenditures, totaling $32,097, could not be verified as allowable activities or costs for the Special Education program. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act— (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." INDIANA STATE BOARD OF ACCOUNTS 27 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act— (a) To children with disabilities aged three through five years; and (b) At a State's discretion, to two-year-old children with disabilities who will turn three during the school year." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 28 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Due to turnover of staffing in both the Special Education personnel and the School Corporation's administrative office, an effective system of internal controls was not established that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect Without a proper system of internal controls in place that operated effectively, the School Corporation did not retain and provide appropriate supporting documentation. This prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs We identified $32,097 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls to ensure documentation to support all grant expenditures will be maintained and made available for audit as related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-008 Subject: Special Education Cluster (IDEA) - Earmarking and Level of Effort Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 22619-045-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking 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 2022-008. Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the earmarking requirements of the Matching, Level of Effort, Earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 31 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Earmarking The nonpublic proportionate share of expenditures for the 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, and 22619-045-PN01 grant awards could not be verified for proper classification and do not meet the proportionate share requirement. In addition, 22611-045-PN01, 22611-045-ARP, and 22619-045-PN01 could not be verified as having any nonpublic expenses. The funds associated with these grants were, in some cases, comingled and/or overspent with multiple grant years and not adjusted properly. These errors were not corrected during the audit period. The nonpublic proportionate share of expenditures was determined by applying a percentage to the nonpublic school budgeted expenditures. These were the amounts reported to the Indiana Department of Education (IDOE). As such, we were unable to identify if the minimum amount per grant award was expended and properly reported to the IDOE as required. Level of Effort - Maintenance of Effort Maintenance of effort is a district-level test that determines whether the School Corporation is providing a consistent level of financial support to public schools from year-to-year. This rule ensures that the School Corporation does not use Special Education funds to shore up reductions in state and local support for public education. The IDOE performs the maintenance of effort calculation utilizing Form 9 information provided by the School Corporation from the prior year. As such, the amounts submitted to the IDOE in the prior year to be used in the computation are tested to ensure they were recorded properly in the School Corporation's records as to the account and object code. In fiscal years 2021-2022 and 2022-2023, 60 transactions were tested each year to ensure the disbursements were posted to the proper account and object code. For 30 of the 60 transactions selected in 2021-2022, as well as 47 of the 60 transactions selected in 2022-2023, appropriate supporting documentation was not provided for audit. As a result, 77 disbursements could not be verified as to whether they were posted to the proper account or object code. In addition, 60 disbursement line items were sampled from the IDOE Form 9 for both 2021-2022 and 2022-2023, to ensure the amounts agreed to the ledger. A total of 21 of the 60 disbursement line items in 2021-2022 and 2 of the 60 disbursement line items in 2022-2023 could not be traced to the ledger. Therefore, we were unable to determine if the disbursements for 23 disbursement line items were posted to the proper account or object code. 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 32 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of the nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Due to turnover of staffing in both the Special Education personnel and the School Corporation's administrative office and recordkeeping issues, the School Corporation's management had not developed a system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, as related to the Matching, Level of Effort, Earmarking compliance requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure compliance with the level of effort - maintenance of effort and earmarking requirements. As a result, amounts reported to the oversight agency were not accurately reported. 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 nonpublic proportionate share funds are appropriately allocated to the individual school based on expenses charged directly on behalf of that school. Supporting documentation for these expenses should be retained for audit. In addition, proper recordkeeping should be maintained to ensure compliance with the level of effort - maintenance of effort and earmarking requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.