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.
FINDING 2024-011 Subject: Title I Grants to Local Educational Agencies - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A210014, S010A220014 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 2022-010. 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 transactions charged to the Title I grant during the audit period was selected for testing. The following errors were noted: • A total of 29 transactions, totaling $13,621, were fringe benefit claims; however, the supporting documentation provided did not include details to identify the employees for which the benefit was paid. As a result, we were unable to determine if the payments were on behalf of allowable staff related to the Title I program. • The School Corporation was unable to provide supporting documentation for 2 transactions totaling $551. As such, these transactions were unable to be verified as allowable activities or costs for the Title I program. The errors noted above were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 39 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) 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; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Due to turnover of staffing in the School Corporation's administrative office, the School Corporation's management had not established an effective system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 40 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 $14,172 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 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 2024-012 Subject: Title I Grants to Local Educational Agencies - Level of Effort - Maintenance of Effort, Earmarking Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A210014, S010A220014 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 2022-011. Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. 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 Title I funds to shore up reductions in state and local support for public education. The Indiana Department of Education (IDOE) performs the maintenance of effort calculation utilizing Form 9 information provided by the School Corporation. As such, the amounts submitted to the IDOE 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. INDIANA STATE BOARD OF ACCOUNTS 41 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) In fiscal years 2022-2023 and 2023-2024, 60 transactions were tested each year to ensure the disbursements were posted to the proper account and object code. For 10 of the 60 transactions selected in 2022-2023, as well as 11 of the 60 transactions selected in 2023-2024, appropriate supporting documentation was not provided for audit. As a result, 21 disbursements could not be verified as to whether they were posted to the proper account or object codes. In addition, 60 disbursement line items were sampled from the IDOE Form 9 for both 2022-2023 and 2023-2024 to ensure the amounts agreed to the ledger. A total of 2 of the 60 disbursement line items in 2022-2023 and 6 of the 60 disbursement line items in 2023-2024 could not be traced to the ledger. Therefore, we were unable to determine if the disbursements for 8 disbursement line items were posted to the proper account or object code. Earmarking The School Corporation did not expend the required minimum amount from grant S010A210014 for parent and family engagement. In addition, the Homelessness Reservation for grants S010A210014 and S010A220014 did not expend the required minimum amounts. 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 200.400 states in part: "(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. . . ." 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 . . ." INDIANA STATE BOARD OF ACCOUNTS 42 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 20 USC 6313(c)3 states: "(A) In general A local educational agency shall reserve such funds as are necessary under this part, determined in accordance with subparagraphs (B) and (C), to provide services comparable to those provided to children in schools funded under this part to serve— (i) homeless children and youths, including providing educationally related support services to children in shelters and other locations where children may live; (ii) children in local institutions for neglected children; and (iii) if appropriate, children in local institutions for delinquent children, and neglected or delinquent children in community day programs. (B) Method of determination The share of funds determined under subparagraph (A) shall be determined— (i) based on the total allocation received by the local educational agency; and (ii) prior to any allowable expenditures or transfers by the local educational agency. (C) Homeless children and youths Funds reserved under subparagraph (A)(i) may be— (i) determined based on a needs assessment of homeless children and youths in the local educational agency, taking into consideration the number and needs of homeless children and youths in the local educational agency, and which needs assessment may be the same needs assessment as conducted under section 11433(b)(1) of title 42; and (ii) used to provide homeless children and youths with services not ordinarily provided to other students under this part, including providing— (I) funding for the liaison designated pursuant to section 11432(g)(1)(J)(ii) of title 42; and (II) transportation pursuant to section 11432(g)(1)(J)(iii) of such title." 34 CFR 200.77 states in part: "Before allocating funds in accordance with § 200.78, an LEA must reserve funds as are reasonable and necessary to— (a) Provide services comparable to those provided to children in participating school attendance areas and schools to serve— (1) INDIANA STATE BOARD OF ACCOUNTS 43 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (i) Homeless children and youths, including providing educationally related support services to children in shelters and other locations where homeless children may live. (ii) Funds reserved under paragraph (a)(1)(i) of this section may be— (A) Determined based on a needs assessment of homeless children and youths in the LEA, taking into consideration the number and needs of those children, which may be the same needs assessment as conducted under section 723(b)(1) of the McKinney-Vento Homeless Assistance Act; and (B) Used to provide homeless children and youths with services not ordinarily provided to other students under this subpart, including providing— (1) Funding for the liaison designated under section 722(g)(1)(J)(ii) of the McKinney-Vento Homeless Assistance Act; and (2) Transportation pursuant to section 722(g)(1)(J)(iii) of that Act; (2) Children in local institutions for neglected children; and (2) Children in local institutions for neglected children; and (3) If appropriate (i) Children in local institutions for delinquent children; and (ii) Neglected and delinquent children in community-day school programs; (4) An LEA must determine the amount of funds reserved under paragraphs (a)(1)(i) and (a)(2) and (3) of this section based on the total allocation received by the LEA under subpart 2 of part A of title I of the ESEA prior to any allowable expenditures or transfers by the LEA; . . ." Cause Due to turnover of staffing in 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, 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 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. INDIANA STATE BOARD OF ACCOUNTS 44 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish internal controls to ensure Homelessness Reservation and Parental set-aside expenditures are monitored throughout the period of performance to ensure earmarking compliance requirements are met before expiration of the grant. Supporting documentation for these expenditures should be maintained. In addition, proper recordkeeping should be maintained to ensure compliance and comply with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-015 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 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 2022-018. Condition and Context The School Corporation had not properly implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Vendor Disbursements Per inquiry with the School Corporation, one employee prepares the reimbursement requests, and another employee reviews the requests to ensure all costs are correct and allowable before giving their approval. A total of 60 claims were sampled for audit. Of the 30 vendor claims tested, there were 3 claims, totaling $2,563, that had no supporting documentation provided to determine if they were an allowable cost nor did they provide support of review and approval of the expenditure. Payroll Disbursements The School Corporation had established internal controls that all payroll is approved by the Treasurer and the School Board. However, during the audit, the School Corporation was unable to provide supporting documentation to show where the governing board approved the rate or pay or stipend amount for 2 of the payrolls selected for testing of $341 in order to determine if the costs were allowable. 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 49 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . ." 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. . . ." Cause Due to turnover in staff, supporting documentation could not be located to support for some expenditures paid from the COVID-19 - Education Stabilization Fund during the audit period. Effect The failure to establish an effective system of internal controls could have enabled noncompliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs We identified $2,904 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure supporting documentation is maintained and available for audit to ensure compliance with 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.
FA 2024-002 Strengthen Controls over Journal Entries Compliance Requirements: Activities Allowed or Unallowed Internal Control Impact: Material Weakness Compliance Impact: Material 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 COVID-19 – 10.555 – National School Lunch Program Federal Award Numbers: 245GA32N1199 (Year: 2024), 225GA324N1099 (Year: 2024) Questioned Costs: Unknown Description: The policies and procedures of the School District were insufficient to ensure that journal entries made for the Child Nutrition Cluster were properly documented. 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 $2,692,854.62 were expended and reported on the Monroe 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…” In addition, provisions included in the Uniform Guidance, Section 200.404 – Reasonable Costs state that “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. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.1 state “Improper payment means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. (v) The term ‘‘payment’’ in this definition means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program or activity.” Lastly, provisions included in Title 34 CFR Section 210.14(a) state that “school food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved… FNS, or to construct buildings.” Condition: Auditors performed a review of transfer activity associated with CNC to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that journal entries utilized to transfer cash totaling $6,000,000 from the School Nutrition Fund to the General Fund were not properly supported by adequate documentation. Questioned Costs: Though questioned costs may exist, these amounts are unknown as adequate documentation to support the transfer of $6,000,000 in cash was not maintained. Cause: The School District transferred funds from the School Nutrition Fund to the General Fund in an attempt to reimburse the General Fund for several years’ worth of salary payments made on behalf of the School Food Service program; however, adequate documentation was not maintained due to oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the CNC programs. Failure to ensure that appropriate policies and procedures are followed when managing federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable transfers. Recommendation: The School District should review current internal control procedures related to School Nutrition Fund journal entries. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries, including transfers, are supported by adequate documentation. In addition, the transfer of cash associated with salary reimbursements should be made on a more timely basis and supported by payroll data. Furthermore, the School District should implement a monitoring process to ensure that all journal entry activity is compliant with the School District’s policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2024-003 Strengthen 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 Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program COVID-19 – 10.555 – National School Lunch Program Federal Award Numbers: 245GA32N1199 (Year: 2024), 225GA324N1099 (Year: 2024) Questioned Costs: $2,641.33 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately reviewed, approved, and documented. 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 $2,692,854.62 were expended and reported on the Monroe 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…” Condition: A sample of 60 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. Three voucher packages could not be located by the entity for review. Questioned Costs: Upon testing a sample of $70,823.01 in nonpersonal services expenditures, known questioned costs of $2,641.33 were identified. Using the total population amount of $1,574,361.98, we project the likely questioned costs to be approximately $58,715.52. The following Assistance Listing Numbers were affected by known and likely questioned costs: 10.553 and 10.555. Cause: Due to staffing shortages during the fiscal year under review, documentation was not properly maintained by entity personnel. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the CNC programs. Failure to ensure that appropriate documentation exists to support the allowability of payments from the CNC fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should review current internal control procedures related to CNC expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditure voucher packages are maintained on-file according to the School District’s record retention policy and contain all required components. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.
Criteria: Workforce Innovation and Opportunity Act (WIOA) Adult and Dislocated Worker funds must be used at the local level to pay for career and training services through the AJC system for program participants. Other activities allowed include basic career services, individualized career services, and training services. Activities allowed under Youth Activities include tutoring, alternative secondary school services, paid and unpaid work experiences, occupational skill training, leadership development, adult mentoring, follow-up services, financial literacy education, and entrepreneurial skills training. 2 CFR 200.403 Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (g) Be adequately documented. See §§ 200.300 through 200.309. 2 CFR 200.303 Internal Controls (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control- Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Workforce Innovation and Opportunity Act (WIOA) Funds were expended for costs that are not explicitly allowable under the compliance requirements for activities allowed or unallowed including charges for conferences and travel. • Travel and conference expense reimbursements did not establish a clear business purpose or provide other evidence of attendance. Receipts lacked a detailed breakdown of costs charged to the federal award. • Employee reimbursements did not include itemized breakdowns and were not reported on the entity’s Expense Form. • The entity’s policy does not outline the approval requirements for Executive Director expense reimbursements. Cause: Employee expenditures were not reviewed and approved prior to being charged to the federal award program. • The necessary approvals were not obtained prior to incurring costs charged to the federal award program. • The entity’s policy does not explicitly state approvals required for Executive Director expense reimbursements. • Expense Forms were not utilized for employee reimbursements per the entity’s written policy. Effect: Lack of proper approvals and documentation could result in unallowable costs being charged to the federal award, possibly resulting in the entity having to return funds to the federal agency or pass-through entity. This may also lead to reduction of future federal funding due to noncompliance. This also creates an opportunity for fraud to occur. • Unnecessary or unreasonable costs charged to the federal award program. • Possible reduction of future funding or requirement to return funding used for unallowable costs to awarding agency. Questioned Costs: $14,548 Repeat Finding: No Recommendation: We recommend that management review policies over employee travel expenses, conferences, and reimbursements to ensure they align with federal award requirements, are communicated to all employees, and provide necessary training. In addition, we recommend the WIB ensure that all employee reimbursement expenses are reviewed and approved prior to being incurred, approvals are obtained by an appropriate level of management or those charged with governance and are sufficiently documented.
Reference Number: 2024-011 Prior Year Finding: No Federal Agency: U.S. Department of Defense State Agency: Military Department Federal Program: National Guard Military Operations and Maintenance (O&M) Projects Assistance Listing Number: 12.401 Award Number and Year: W912K6-24-2 (10/1/2023 – 9/30/2024) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Compliance: 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. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Military Department (Department) charged costs to the federal grant prior to the allowable start of the period of performance. The expenditures were incurred from six to twenty-three days prior to the start of the award period. Context: Two of forty transactions selected for testing were incurred prior to the allowable start of the period of performance. Cause: The Department’s procedures were not operating sufficiently to ensure that expenditures charged to the program were incurred within the awards’ period of performance. Internal controls did not prevent or detect the errors. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: $ 4,699, which represents the total of the expenditures incurred prior to the awards’ period of performance. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: Management agrees with the finding.
Reference Number: 2024-020 Prior Year Finding: 2023-012 Federal Agency: U.S. Department of Education State Agency Name: Bowie State University (BSU) Federal Program: Higher Education Institutional Aid Assistance Listing Number: 84.031B, 84.031E, 84.031K Award Number and Year: P031B220039(10/1/2022-9/30/2024), P031E200007 (10/1/2022-9/30/2024), P031K190021 (10/1/2022-9/30/2024) Compliance Requirement: Allowable Activities/Costs Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: Per 2 CFR § 200.403, except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award to be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award regarding 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. (d) Be accorded consistent treatment. A cost may 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. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also §200.306 Cost sharing or matching paragraph (b). (g) Be adequately documented. See also §200.300 Statutory and national policy requirements through 200.309 Period of performance of this part. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Time and Effort documentation was not documented and reviewed timely. Questioned costs: None. Context: For all seventeen samples selected for testing, Time and Effort was not documented in a timely manner or reviewed appropriately. Cause: The Institution’s internal controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner in accordance with federal requirements. Effect: Expenditures may be incorrectly charged to the program. Recommendation: We recommend that the Institution strengthen its internal controls to ensure that Time and Effort is documented, and expenditures are reviewed and adjusted for, if necessary, in a timely manner. Views of responsible officials: There is no disagreement with the audit finding.
Reference Number: 2024-021 Prior Year Finding: 2023-013 Federal Agency: U.S. Department of Education State Agency Name: Coppin State University (CSU) Federal Program: Higher Education Institutional Aid Assistance Listing Number: 84.031B, 84.031E Award Number and Year: P031B170054(10/1/2021-9/30/2024), P031B220065(10/1/2022-9/30/2024), P031E200078 (10/1/2022-9/30/2024) Compliance Requirement: Allowable Activities/Costs Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: Per 2 CFR § 200.403, except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award to be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award regarding 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. (d) Be accorded consistent treatment. A cost may 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. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. See also §200.306 Cost sharing or matching paragraph (b). (g) Be adequately documented. See also §§200.300 Statutory and national policy requirements through 200.309 Period of performance of this part. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Coppin State University (Institution) did not adjust the employee’s payroll costs to reflect the reported effort. We noted that the actual time and effort charged to the grant did not agree to the time and effort report. Questioned costs: $45 Context: For one out of ten samples selected for testing, the payroll calculation did not agree to the employee's time and effort report. Cause: The Institution’s internal controls were not operating effectively to ensure that time and effort reporting was accurate and agreed with supporting documentation. Effect: Expenditures may be incorrectly charged to the program. Recommendation: We recommend that the Institution strengthen its internal controls to ensure that Time and Effort is documented, expenditures are reviewed and adjusted for, if necessary, in a timely manner. Views of responsible officials: There is no disagreement with the audit finding.
Reference Number: 2024-023 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Department of Education Federal Program: Special Education Cluster (IDEA) Assistance Listing Number: 84.027, 84.173 Award Number and Year: H027A230035 (7/1/2023 – 9/30/2024) H173A230089 (7/1/2023 – 9/30/2024) Compliance Requirement: Period of Performance Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: 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. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Education (Department) charged costs to the federal grant prior to the allowable start of the period of performance. We noted that five of the seven exceptions were incurred from 213 to 92 days prior to the beginning of the period of performance. Context: Seven of eleven transactions selected for testing were incurred prior to the allowable start of the period of performance. Cause: The Department’s procedures were not operating sufficiently to ensure that expenditures charged to the program were incurred within the awards’ period of performance. Internal controls did not prevent or detect the errors. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: $4,411, which represents the total of the expenditures incurred prior to the awards’ period of performance. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: Management agrees with the finding.
Reference Number: 2024-025 Prior Year Finding: No Federal Agency: Department of Health and Human Services State Agency: Department of Human Services Federal Program: Low-Income Home Energy Assistance Program Assistance Listing Number: 93.568 Award Number and Year: 2401MDLIEA (10/1/2023-9/30/2025) Compliance Requirement: Period of Performance Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: 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. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Human Services (Department) charged costs to the federal grant prior to the allowable start of the period of performance. The expenditures were incurred from one to twenty-six days prior to the start of the award period. Context: Seventeen of forty transactions selected for testing were incurred prior to the allowable start of the period of performance. Cause: The Department’s procedures were not operating sufficiently to ensure that expenditures charged to the program were incurred within the awards’ period of performance. Internal controls did not prevent or detect the errors. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: $778,473, which represents the total of the expenditures incurred prior to the awards’ period of performance. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: Management agrees with the finding.
2024-001 Supporting Documentation and Approval of Disbursements Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Federal Award Number - SLFRP0136 Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.403 and § 200.302) Repeat Finding - This is a repeat finding of 2023-001. Corrective action was not completed prior to or during the audit period due to the timing of audit completion and recommendations to management. Criteria - Per 2 CFR § 200.403(g), to be allowable under a federal award, costs must be adequately documented. Additionally, 2 CFR § 200.302 requires the non-Federal entity to establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. Condition - During our testing of expense and disbursement transactions charged to the federal program, we identified instances where payments were made without adequate supporting documentation or evidence of appropriate review and approval. While the costs appear consistent with the purpose of the program and are considered allowable in nature, the absence of documentation limits the ability to verify the appropriateness and accuracy of the expenditures. A majority of these transactions were related to temporary housing assistance, including payments to hotels. Cause - The organization does not currently have or did not follow a formal process to ensure that all disbursements are properly documented and reviewed. Effect - Failure to maintain adequate documentation impairs the organization’s ability to demonstrate compliance with federal requirements and increases the risk of errors or inappropriate expenditures going undetected. Questioned Costs - $0. No costs are questioned at this time, as the disbursements appear consistent with program objectives. Recommendation - We recommend that the organization strengthen internal controls over the disbursement process by implementing procedures requiring all expenses to be supported by documentation such as invoices or receipts and be reviewed and approved by appropriate personnel prior to payment. Views of Responsible Officials - we agree with the finding and determined it was due to an oversight by the organization on establishing proper procedures for a new program. Verbal communications were not recorded appropriately and approvals were not signed by management.
FA 2024-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Reporting 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 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 Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $819,799.49 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. 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 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 (ARP) 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 $3,951,662.00 were expended and reported on the Hancock 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…” In addition, 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. 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...” 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…” Lastly, provisions included in the Uniform Guidance, Section 200.302(a) state in part that “the non- Federal entity’s financial management systems must… be sufficient to permit the preparation of reports required by general and program-specific terms and conditions.” In addition, provisions included in the Uniform Guidance, Section 200.302(b)(2) state in part that the non-federal entity’s financial management system must provide for “accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements.” Condition: A review of the School District’s accounting records and approved expenditures reflected within the ESSER program Consolidated Application reviewed the following deficiencies: • A sample of 13 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 $505,229.40 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A sample of 37 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for 29 expenditures totaling $181,761.00 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A review of indirect cost amounts charged to the ESSER program revealed that the total indirect cost amount budgeted by the School District, which totaled $600,000.00, was recorded as indirect cost expenditures during the period under review. However, the School District should have applied the indirect cost rate approved by the GaDOE to actual expenditures incurred during the fiscal year to calculate a maximum indirect cost amount of $467,190.96. Therefore, unallowable indirect costs totaling $132,809.04 were recorded within the ESSER fund. • Expenditures reported on the ARP ESSER completion report for the period July 1, 2023 through September 30, 2024 were not supported by the general ledger for several functions and objects reflected in the amended consolidated application. Questioned Costs: Upon testing a sample of $690,319.93 in nonpersonal services expenditures, known questioned costs of $505,229.40 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $2,507,902.88, we project the likely questioned costs to be approximately $1,835,476.87 In addition, upon testing a sample of $418,831.17 in personal services expenditures, known questioned costs of $181,761.05 were identified for expenditures not approved in the consolidated application. Using the total personal services expenditures population of $1,303,995.07 (excluding benefits payments), we project the likely questioned costs to be approximately $565,897.50. Furthermore, known questioned costs $132,809.04 were identified for unallowable indirect costs charged to the ESSER program. Therefore, the known and likely questioned costs identified for all unallowable payments totaled $819,799.49 and $2,534,183.41, respectively. The following Assistance Listing Numbers were affected by known and likely questioned costs: 84.425D & 84.425U. Cause: In discussing this deficiency with the School District, they stated that they did not consider the expenditure purchases unallowable and recorded them in the wrong account number due to oversight. Indirect costs were charged according to the budget without regard of the appropriate indirect cost rate. 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 evaluate 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 potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Procurement and Suspension and Debarment 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: 84.371C – Comprehensive Literacy Development Federal Award Number: S371C190016-19A (Years: 2017-21) Questioned Costs: $12,921.61 Repeat of Prior Year Findings: FA 2022-002, FA 2023-001 Description: A review of expenditures and journal entries charged to the Comprehensive Literacy Development program revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred and the School District’s procurement procedures were followed. Background Information: The Comprehensive Literacy Development Program (CLD) was authorized under Sections 2222-2225 of the Elementary and Secondary Education Act of 1965 to create a comprehensive literacy program to advance literacy skills, including pre-literacy skills, reading, and writing, for children from birth to grade 12, with an emphasis on disadvantaged children, including children living in poverty, English learners, and children with disabilities. CLD 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 local educational agencies (LEAs) and overseeing the expenditure of funds by LEAs. CLD funds totaling $454,278.20 were expended and reported on the Burke 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, (h) Cost must be incurred during the approved budget period…” Lastly, 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: Auditors performed a review of various expenditure activity associated with the CLD program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were identified: • A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. Evidence of review and approval was not reflected for 17 expenditures, and adequate evidence of receipt was not maintained for 20 expenditures. • A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for either journal entry tested. • A sample of 45 procurement transactions was randomly selected for testing using a non-statistical sampling approach. Four procurement transactions did not reflect evidence of supervisory review and approval, and the School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for 13 small purchase procurements reviewed. Questioned Costs: Upon testing a sample of $45,625.42 in procurement transactions, known questioned costs of $12,921.61 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $327,567.83 in procurement transactions, we project the likely questioned costs to be approximately $92,770.73. Cause: The School District did not maintain evidence of review and approval of expenditures, journal entries, and procurement transactions as a result of oversight. Small purchase procurement transactions did not follow the School District’s procurement policy because the Federal Programs Director was unaware that it was necessary to follow these procedures for the purchase of instructional materials. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability and journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, failure to appropriately follow applicable procurement procedures exposes the School District to unnecessary risk of error and misuse of federal funds. Lastly, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the CLD program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures, journal entries, and procurement transactions reflect evidence of review for associated compliance requirements. In addition, expenditure voucher packages should contain all required components. Furthermore, the School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly identified, safeguarded, and retained. Management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review and approval was not reflected for 17 expenditures. While 3 invoices were not approved, 14 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Additionally, all expenditures charged to the grant were submitted to the Georgia Department of Education for review and approval for reimbursement of expenditures. All expenditures were approved and reimbursed. The finding states adequate evidence of receipt was not maintained for 20 expenditures; however, 10 of the expenditures were not for tangible items. Instead, the expenditures were for dues and fees and travel. Dues and fees and travel expenditures do not have packing slips due to the nature of the activity. Of the remaining 10, all but 1 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Approval for payment isn’t granted unless items are received. The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. Both of the journal entries were usual in nature and occurred in the normal course of business including a journal entry to reverse accounts receivable from the prior year and a journal entry to record accounts receivable in the current year. Both journal entries are annual, standard journal entries that are required under Generally Accepted Accounting Principles. While not approved by the Director in charge of the grant, the journal entry was appropriate, allowable, and necessary to ensure revenues were accurately recorded in the proper accounting period. The finding states 4 procurement transactions did not reflect evidence of supervisory review and approval. While 4 transactions included invoices that were not approved by the Director in charge of the grant, 2 invoices were approved by the building level Principal and the Superintendent, and 1 was approved by the Superintendent. Three of the transactions included purchase orders that were properly approved by the Director in charge of the grant. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Procurement and Suspension and Debarment compliance requirements, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the transactions identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.
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 Federal Award Numbers: S425D200012 (Year: 2021), S425U2100012 (Year: 2021) Questioned Costs: $328.00 Description: A review of expenditures related to the Elementary and Secondary School Emergency Relief program revealed that the School District’s internal control procedures were not operating appropriately to ensure that appropriate reviews and approvals occurred. 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 $4,167,690.48 were expended and reported on the Burke 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, 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 programs 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 60 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. The following deficiencies were noted: • For four expenditures, evidence of review and approval was not reflected within the voucher package. • Prior approval was not appropriately obtained from GaDOE for one expenditure totaling $328.00 as this expenditure was not reflected in the approved budget or subsequent amendment within the Consolidated Application system, as required. Questioned Costs: Upon testing a sample of $552,789.52 in nonpersonal expenditures, known questioned costs of $328.00 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $3,601,591.01, we project the likely questioned costs to be approximately $2,137.02. Cause: The School District did not maintain evidence of review and approval of expenditures as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability exposes the School District to unnecessary risk of error and misuse of federal funds. 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 expenditures reflect evidence of review for associated compliance requirements and potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. Management should develop a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
Compliance Requirement: Period of Performance Internal Control Impact: Material Weakness Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States COVID-19 – 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants Federal Award Numbers: H027A220073 (Year: 2023), H027230073 (Year: 2024) H027X210073 (Year: 2022), H027A230081 (Year: 2024) Questioned Costs: None Identified Repeat of Prior Year Finding: FA 2023-003 Description: A review of journal entries charged to the Special Education Cluster revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred, as required. Background Information: The Special Education Cluster (SEC), which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was authorized under the Individuals with Disabilities Education Act (IDEA). Special Education Cluster funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. SEC 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. SEC funds totaling $1,323,542.89 were expended and reported on the Burke 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, (h) Cost must be incurred during the approved budget period…” Condition: A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach to determine if appropriate internal controls were implemented and applicable compliance requirements were met. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for those journal entries. Cause: The School District did not maintain evidence of review and approval of journal entries as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Special Education Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries reflect evidence of review for associated compliance requirements. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. While not approved by the Director in charge of the grant, both journal entries were reclassifications of expenditures that were allowable and occurred during the period of performance. Both of the journal entries were usual in nature and occurred in the normal course of business. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Period of Performance compliance requirement, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the journal entries identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.
2024-001 – Allowable Costs – Internal Control over Payroll and Non-Payroll Costs Federal Agency: U.S. Department of Veterans Affairs Federal Programs: Veteran Affairs Homeless Providers Grant and Per Diem Program (GPD) – Assistance Listing No. 64.024, Grant Period – October 1, 2023 through September 30, 2025.Staff Sergeant Parker Gordon Fox Suicide Prevention Grant Program (SSPG) – Assistance Listing No. 64.055, Grant Period – September 30, 2023 through September 30, 2024. Condition:Montachusett Veterans Outreach Center, Inc. (MVOC) did not follow its internal control policies and procedures for payroll and non-payroll costs charged to the federal awards. The allocation methodology used to charge payroll and non-payroll transactions to the Federal Award programs was not properly supported for multiple sampled transactions. Criteria: In accordance with Department of Veteran Affairs program guides for each program (the Guide), allowable expenses must meet all the requirements in 2 C.F.R. § 200 which requires expenses charged to the grants to be allocated consistently with a sound methodology and be clearly documented. Additionally, the Guide indicates allowable expenses must meet all the requirements in 2 C.F.R. § 200.403 part (d) and (g), except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (d) be accorded consistent treatment and (g) be adequately documented when charged to a federal award. Cause: A formal cost allocation plan was not followed for expensed transactions. Additionally, multiple employee’s bi-weekly timesheets were not properly signed or approved. Effect: Costs charged to the grants may not be allowable for reimbursement by MVOC’s federal funding sources Context: Twelve out of twenty three non-payroll charges lacked supporting documentation for the amount allocated to the grant. Twenty seven out of fifty seven payroll transactions sampled lacked supporting documentation for the amount allocated to the grant. Additionally, those transactions lacked evidence of review by employee or supervisor. Our sample was not a statistically valid sample. Questioned Costs: GPD - $18,440 SSPG - $30,121 Recommendation: We recommend that MVOC, update its policies and procedures to help ensure effective internal controls are in place and implemented to adequately support allocations, and amounts charged to the Federal Awards. Management Response: Management agrees with the finding. See management’s attached corrective action plan.
Finding Number: 2024-004 Internal control weakness over activities allowed/allowable costs Federal Program: 84.027 & 84.173 Special Education Cluster (IDEA) Federal Program: 84.425D/84.425U Education Stabilization Fund Criteria: 2 CFR §200.302(b)(7) requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR §200.403 requires that costs charged to a federal award be allowable, reasonable, and allocable to the federal program. 2 CFR §§200.302(b)(3) and 200.302(b)(4) require financial management systems to maintain records that adequately identify the source and application of funds for federally funded activities and support the allowability of costs charged to federal programs. Condition: The District did not maintain adequate internal controls to ensure that expenditures charged to Education Stabilization Fund grants were for activities allowed and allowable under Uniform Guidance. Specifically, the District lacked documented procedures and control activities to review and approve expenditures for allowability prior to charging costs to the federal program. Cause: The deficiencies resulted from the absence of formally documented procedures and internal control activities addressing the review and approval of expenditures for allowability under Uniform Guidance. As a result, management did not establish controls to ensure that costs charged to Education Stabilization Fund grants were evaluated for allowability in accordance with federal requirements. Effect: This condition increases the risk that unallowable or improperly supported costs could be charged to Education Stabilization Fund grants and not be identified or corrected in a timely manner, resulting in noncompliance with Uniform Guidance requirements. Identification of Questioned Costs: None identified. Context: The absence of documented internal control procedures over activities allowed and allowable costs limited the District’s ability to readily demonstrate compliance with Uniform Guidance. Repeat Finding: This is a repeat finding of 2023-04. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the entity.
Criteria: In accordance with 2 CFR Part 200.403 of the Uniform Guidance, charges to Federal awards must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Condition: For the year ended June 30, 2024, the Agency did not maintain individual support for the allocation of allocable salaries. These were charged based on a flat rate. Furthermore, there are instances where an independent approved pay rate was not maintained by the human resources department. Cause: The allocable salaries and wages are not charged based on actual work performed. The approved pay rate was not properly documented by the human resources department. Effect: The Agency is not in compliance with 2 CFR Part 200.403 of the Uniform Guidance. Questioned Costs: None reported. Context: A random sampling of the federal expenditures. Repeat Finding: Not applicable. Recommendation: We recommend that the Agency establish a system to determine and document the time spent and amount charged to their programs. We also recommend the Agency ensure the staff’s approved salary is properly documented. View of Responsible Officials: See management’s corrective action plan.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Pass-through Agency: Pennsylvania Department of Community and Economic Development Pass-Through Number: Contract #C000082084 Award Period: January 1, 2022 – December 31, 2027 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/23/23 - 1/5/24, which the first nine days were prior to the start of the period of performance. Questioned Costs: There were known questioned costs identified in the amount of $6,868. Context: During our testing of community service block grant costs recorded during the beginning of the approved period of performance (January 2024), we noted there were thirty five transactions tested charged to the federal program in January 2024 for salary and related payroll taxes which are portion was incurred prior to the start of the contract period. Based on the review of the supporting documentation, it was noted that the payroll period was 12/23/23 - 1/5/24, which the first nine days were prior to the start of the period of performance. The total amount of the transactions was $6,868. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. Effect: If the organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023- 006. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and Subsidiaries’ Corrective Action Plan.
U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Activities Allowed/Unallowed and Allowable Costs/Cost Principles Material Non-compliance Material Weakness in Internal Control Criteria: Per 2 CFR §200.303, non-federal entities must establish and maintain effective internal control over federal awards to provide reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Per 2 CFR §200.403, costs must be adequately documented to be allowable under federal awards Condition: During our testing of allowable costs under Uniform Guidance, we noted that the client did not provide evidence of internal controls over the review and approval of costs charged to the federal program. Additionally, for 3 out of 4 sampled transactions, the client was unable to provide supporting documentation (invoices) for the expenditures tested. Cause: The client has not implemented sufficient procedures to ensure documentation is retained and controls are evidenced for allowable costs. Effect: Without evidence of internal controls and supporting documentation, there is an increased risk of noncompliance with Uniform Guidance requirements and potential questioned costs. Questioned Costs: $1,124,156 Context/Sampling: A nonstatistical sample of four invoices were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the client implement and document internal control procedures over allowable costs, including maintaining invoice support for all expenditures charged to federal programs. Controls should include documented review and approval processes to ensure compliance with Uniform Guidance. Views of Responsible Officials: Agree.
Retain Supporting Documentation for Journal Entries (Material Weakness, Compliance Finding) Federal Agency: Department of Agriculture/Department of Education Cluster/Program: Child Nutrition Cluster/Education Stabilization Fund Assistance Listing Number(s): 10.553/10.555/10.559/84.425D Award Year: 2024 Compliance Requirement: Allowable Costs/Cost Principles Criteria Per 2 CFR 200.302 (Financial Management) and 2 CFR 200.403 (Factors Affecting Allowability of Costs) of the Uniform Guidance, recipients of federal awards must maintain records that identify adequately the source and application of funds. All accounting records, including journal entries affecting federal programs, must be supported by sufficient documentation to ensure costs are allowable, allocable, and properly authorized. Condition During our audit of federal grant programs, we identified several journal entries affecting federal grant expenditures that lacked adequate supporting documentation. Specifically, these entries did not include invoices, detailed calculations, approval signatures, or written explanations substantiating the nature and purpose of the transactions. Cause The District does not have a formalized policy or consistent procedure requiring that all journal entries be accompanied by adequate supporting documentation and maintained for audit and review purposes. Effect Without adequate supporting documentation, there is an increased risk that unallowable, inaccurate, or unauthorized costs could be charged to federal programs. This deficiency also impedes the ability to demonstrate compliance with federal requirements. Context Supporting documentation for journal entries was not maintained in fiscal year 2024. This was a recurring issue throughout the year. This issue was not present in previous fiscal years. Questioned Costs As a result of this finding, we have identified $54,856 in Child Nutrition Cluster federal expenditures and $523,315 in Education Stabilization Fund federal grant expenditures as questioned costs. These costs represent journal entries for which sufficient supporting documentation was not provided to substantiate allowability and compliance with federal requirements. Recommendation To rectify this material weakness, we recommend the District implement and enforce policies requiring that all journal entries be accompanied by appropriate supporting documentation and reviewed and approved by supervisory personnel prior to posting. View of Responsible Officials and Planned Corrective Actions The District’s corrective action plan is included at the end of this report.
State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families ALN and Program Expenditures: 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $78,162 Compliance Requirement: Eligibility Finding 2024-010: Improper TANF Beneficiary Payments Condition Found: IDHS made improper payments to beneficiaries of the Temporary Assistance for Needy Families (TANF) program. During our testing of 50 TANF program beneficiary payments (with total payments sampled of $19,049), we noted one beneficiary (with a sampled payment of $262) received supplemental payments that were improperly calculated using amounts inconsistent with information contained in the beneficiary’s case file. As a result of the calculation error, the beneficiary was not eligible to receive the monthly supplemental payment. Total supplemental payments made to this beneficiary under the TANF program totaled $2,358 during the year ended June 30, 2024. We also noted two TANF beneficiary payments sampled (totaling $581) that were improperly calculated due to a diverted income system error. Diverted income occurs in dependent eligible only TANF cases where an ineligible working adult in the household has income which is allocated to the eligible members of the household to determine the overall TANF program benefit payment. The State’s benefit system was erroneously excluding the ineligible working adult in the diverted income calculation potentially resulting in an overpayment of TANF benefits on cases with diverted income. As a result of this error, the monthly payments made to these two beneficiaries were overstated by $244. Total payments made to these two beneficiaries under the TANF program were $5,130 for the year ended June 30, 2024. In response to the error identified in our testing, IDHS identified benefit payments paid during the year ended June 30, 2024 for 1,956 beneficiaries (totaling $7,238,104) were calculated using diverted income. The system calculation error related to these benefit payments resulted in total TANF overpayments of $75,804 during the year ended June 30, 2024. The payment errors identified above had not been corrected by IDHS or refunded to USDHHS (if required) as of the date we communicated our findings to IDHS (December 22, 2025). We further noted IDHS did not establish control procedures at an adequate level of precision to ensure TANF program benefits were accurately calculated based on the beneficiary’s case file supporting documentation. Payments made to beneficiaries of the TANF cash assistance program totaled $45,021,831 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation.In accordance with the OMB Compliance Supplement, dated May 2024, IDHS is required to determine eligibility in accordance with eligibility requirements defined in the approved State Plan. The current State Plan requires payments to be made to eligible beneficiaries in accordance with payment levels established within the State Plan. Further, the State Plan requires an excluded or ineligible individual’s income to be considered in the calculation of the payment level of the TANF unit. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include establishing internal control at an appropriate level of precision to identify benefit payment errors in a timely manner. Cause: In discussing these conditions with IDHS officials, management stated the exceptions noted were due to an oversight to secure or upload supporting documentation adequately and case actions not being thoroughly reviewed. Possible Asserted Effect: Failure to properly calculate benefit payments may result in unallowable costs being charged to the TANF program. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-016. (Finding Code 2024-010, 2023-016) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its current process for calculating beneficiary payments and consider changes necessary to ensure payments are properly calculated and paid. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review its current process for calculating beneficiary payments and make changes to ensure payments are properly calculated and paid.
State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $1,317 (TANF Federal), $1,527 (TANF MOE), $1,174 (CCDF Federal), $372 (CCDF MOE) Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost Principles Finding 2024-011: Unallowable Costs Charged to the TANF and CCDF Cluster Programs Condition Found: IDHS could not provide documentation to support payments made on behalf of beneficiaries of the Temporary Assistance for Needy Families (TANF) and Child Care and Development Fund (CCDF) Cluster programs. The State of Illinois operates the Child Care Assistance Program (CCAP) which provides eligible families child care services at approved, licensed providers. Payments are made by IDHS directly to the child care provider on behalf of an eligible family. Providers submit billings to IDHS detailing the name of the recipient of the services and the number of days for which services were received. IDHS performs monitoring reviews of childcare providers on a rotational basis. During these monitoring reviews, IDHS reviews provider records to ensure services billed are adequately documented. During our testing of CCAP beneficiary payments claimed under the TANF program (40 payments totaling $8,555 in federal claim and $34,968 in MOE claim) and CCDF (40 payments totaling $108,666 in federal claim and $3,882 in MOE claim), we noted four TANF payments and three CCDF payments for which IDHS could not provide documentation supporting the services provided to eligible beneficiaries which are unallowable costs. These unallowable expenditures were reported and claimed to federal programs as follows: "See Table in the Audit Report" Additionally, we noted IDHS has not performed a monitoring review in 2024 or either of the previous two fiscal years to ensure billing information provided by the child care providers is accurate for 50 of the 62 unique providers sampled. As a result, IDHS does not have adequate controls in place to ensure information provided by providers is accurate and the related child care payments made were appropriate. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation. Additionally, 45 CFR 98.67 requires lead agencies to expend and account for CCDF funds in accordance with their own laws and procedures, and for fiscal control and accounting procedures to be sufficient to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of those laws and procedures. IDHS CCAP Policy Memo 07.10.01 requires the agency to perform monitoring reviews over all Child Care Resource and Referrals (CCR&Rs), site administered, and non-contracted child care providers who participate in the IDHS Child Care Assistance Program. These reviews are conducted to ensure that services billed to the Department are adequately documented and contractual obligations are fulfilled. 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should be designed to ensure that supporting documentation for CCAP payments is obtained and maintained. Additionally, effective internal controls should be designed to ensure that billing information provided by providers is complete and accurate. Cause: In discussing these conditions with IDHS officials, management stated that submission of billing certificates to IDHS or its contracted agencies is not a condition of payment. Additionally, CCAP payments cited were entered by the providers through the IDHS Child Care Telephone Billing System - Integrated Voice Response (IVR) and IDHS did not have established procedures for monitoring these recipients. Possible Asserted Effect: Failure to maintain documentation that supports payments to TANF and CCDF beneficiaries of the Child Care Assistance Program and adequately monitor these beneficiaries results in noncompliance and unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-014. (Finding Code 2024-011, 2023-014) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review the process and procedures in place for collecting and maintaining documentation to support amounts paid to beneficiaries of the CCAP. Further, we recommend IDHS ensure monitoring reviews are performed for CCAP beneficiaries under the CCDF and TANF programs in accordance with established policies and procedures. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review the processes and develop procedures for collecting and maintaining documentation supporting payments to CCAP beneficiaries. Additionally, IDHS will establish, review, and revise policies and procedures to ensure monitoring reviews are conducted with appropriate management oversight.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E ALN and Program Expenditures: 93.658 ($157,279,978) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-022: Inadequate Process for Foster Care Daycare Maintenance Assistance Payments Condition Found: DCFS does not have an adequate process in place to ensure Foster Care daycare maintenance assistance payments are accurately paid based on its approved rate schedule. The foster care program provides funds to States for maintenance assistance payments to deliver substitute care for children who are under the jurisdiction of a Title IV-E agency and who need temporary placement or care outside their homes. Maintenance payments are made on behalf of eligible Title IV-E beneficiaries to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies in accordance with the Title IV-E agency’s maintenance rate schedule. During our testing of foster care maintenance assistance payments, we reviewed 50 case files and related beneficiary payments (totaling $55,816) charged to the Foster Care program during the year ended June 30, 2024 for compliance with eligibility requirements and allowability of related benefits. We noted in our testing DCFS has not established adequate internal controls to ensure the daycare rates paid for Foster Care maintenance payments are consistent with the approved rate schedule. Specifically, we identified two day care maintenance assistance payments sampled (totaling $1,668) were not calculated using rates consistent with the approved DCFS day care rate schedule. The daily provider rates used to calculate the sampled payments were $40 and $44 respectively; whereas the rate that should have been used for both of these payments according to the approved DCFS day care rate schedule was $46. Accordingly, the payments calculated by DCFS were $172 less than what the payments should have been using the approved rate schedule. In response to the errors identified in our testing, we requested DCFS evaluate the population of daycare maintenance assistance payments made during the year ended June 30, 2024 to determine the cause of the errors in the payment rates used. Rather than evaluating the full population of daycare maintenance assistance payments, DCFS sampled 59 payments and identified 10 additional payments which were paid rates inconsistent with the approved rate schedule, but were not able to determine the extent of errors in the population. Accordingly, we were not able to quantify the magnitude of any noncompliance in the population to determine if material noncompliance occurred during the year ended June 30, 2024. Daycare maintenance assistance payments made on behalf of Foster Care beneficiaries totaled $2,055,171 during the year ended June 30, 2024. Payments made on behalf of beneficiaries of the Foster Care program totaled $33,332,268 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 42 USC 671(a)(11), which is implemented by 45 CFR 1356.21, the amount of payments made as foster care maintenance payments must be periodically reviewed to assure their appropriateness. Funds may be expended for foster care maintenance payments on behalf of eligible children, in accordance with the Title IV-E agency’s foster care maintenance payment rate schedule and in accordance with 45 CFR section 1356.21, to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies. Such payments may include the cost of (and the cost of providing, including certain associated administrative and operating costs of a child care institution) food, clothing, shelter, daily supervision, school supplies, personal incidentals, liability insurance with respect to a child, and reasonable travel to the child’s home for visitation, as well as reasonable travel for the child to remain in the same school he or she was attending before placement in foster care (42 USC 672(b)(1) and (2), (c)(2), and 675(4)). In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure payments are made at the approved rates. Cause: In discussing these conditions with DCFS officials, they stated the issue was due to the certification rate forms that were filled out by childcare providers. Providers would sometimes fill out the forms using lower rates than they were entitled to charge. Possible Asserted Effect: Failure to ensure payment calculations are properly performed and approved provider rates are accurately entered in the system may result in unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-022) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS implement procedures to ensure foster care maintenance payments are properly calculated and consistent with the approved DCFS payment rate schedules. Views of DCFS Officials: The Department agrees and has implemented corrective action. In July 2025, the daycare eligibility program discontinued the use of certification rate forms. As a result, all childcare providers now receive the State established reimbursement rate, regardless of the rate they charge private-paying families. This change ensures that all childcare providers receive the funding that they are entitled to.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E Adoption Assistance, Temporary Assistance for Needy Families ALN and Program Expenditures: 93.658 ($157,279,978) 93.659 ($103,674,138), 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-023: Failure to Provide Supporting Documentation for Payroll and Related Costs Condition Found: DCFS could not provide adequate supporting documentation to substantiate payroll and related costs claimed for federal reimbursement under the Foster Care – Title IV-E (Foster Care), Adoption Assistance, and Temporary Assistance for Needy Families (TANF) programs. On a weekly basis, DCFS employees complete and sign timesheets to report and certify their time. These timesheets are then reviewed and approved by the employee’s immediate supervisor. The supervisor approves the timesheets based on their knowledge of the employee’s hours worked during the pay period. Timesheets are scanned for archiving once a month by the payroll department. Timesheets are manually entered into the time reporting system (Employee Monthly Time Report) which is used to accumulate the costs related to each cost center. Cost pool data from the time reporting system is used to identify personal service expenditures attributable to DCFS’s State and federal programs and to calculate and allocate the related fringe benefit charges and indirect costs. During our testing of 25 direct payroll expenditures charged to the cost pools allocated to the Foster Care, Adoption Assistance, and TANF programs (totaling $127,344) during the year ended June 30, 2024, we noted the following: • The timesheet for one employee (supporting cost pool payroll expenditures sampled of $3,735) could not be provided for testing. DCFS personnel stated they were unable to locate the timesheet for this employee for the sampled period. Upon further review, DCFS personnel noted timesheets were unable to be located for this employee and all employees within the same department (totaling four additional employees) for the entire fiscal year, resulting in approximately 120 missing timesheets (related to payroll, fringe benefits, and indirect costs included in the cost pool totaling $497,277, $399,834, and $194,253, respectively). As a result, the personal service (payroll and fringe benefit) expenditures, as well as related indirect costs, were not appropriately supported in accordance with the requirements of the applicable cost principles. Accordingly, the personal service expenditures and indirect costs were not allowable. • The hours reported for three employees (with sampled personal services expenditures from the cost pool of $15,727) in the timekeeping system used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by the agency exceeded the hours reported on manual timesheets prepared by the employees and approved by supervisors. The unsupported hours reported in the timekeeping system ranged from half an hour to 13.2 hours resulting in unsupported personal service expenditures from the cost pool of $783. Additionally, we noted the controls to ensure required documentation is obtained to support payroll and related costs and maintained to evidence management approval of payroll information were not operating effectively. We also noted adequate internal controls have not been established to ensure the data included in the timekeeping system and used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by DCFS is consistent with the hours reported on manual timesheets prepared by the employees and approved by supervisor. Personal service (payroll and fringe benefit) expenditures and related indirect costs charged to the Foster Care, Adoption Assistance, and TANF programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be, among other things, supported by a system of internal control, comply with the established accounting policies and practices of the non-Federal entity, and support the distribution of the employee’s salary or wages amount across specific activities or cost objectives if the employee works on more than one federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure required documentation is obtained to support payroll and related costs and to maintain documentation evidencing management approval of payroll information. Cause: In discussing these conditions with DCFS officials, they stated these exceptions were due to human error and the limitations of keeping a complete file record for the paper-based overtime approval and timesheet process. Possible Asserted Effect: Failure to accurately document and maintain required timesheets results in noncompliance with federal regulations and unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-023) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS review its current procedures and consider any changes necessary to ensure supporting documentation for payroll and related costs is maintained and accurately reflects work performed in accordance with the applicable federal regulations. Views of DCFS Officials: The Department has improved communication with and the training of its timekeepers to ensure accurate and consistent timekeeping standards. The Department has also instituted new quality control procedures to identify and correct errors. All timesheets are digitally archived to ensure proper record retention. The Department is also actively pursuing modernization efforts for both payroll and timekeeping, whether it is e-Time and CMS Payroll or the statewide ERP solutions.
The Department of Economic Security made unallowable benefits payments totaling $64,131, increasing the risk that the program applicants received utility and rental payments for which they were not entitled Assistance Listings number(s) and name(s): 21.023 COVID-19 – Emergency Rental Assistance Program Award number(s) and year(s): ERA2-0165 May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $37,901 Assistance Listings number(s) and name(s): 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles Questioned costs: $26,230 Total questioned costs: $64,131 Condition Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Child and Community Services Division (Division) made unallowable benefits payments totaling $64,131 during fiscal year 2024 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 1 The Arizona Department of Economic Security’s ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). Specifically, for 14 of 60 ERAP and 7 of 60 CSLFRF benefit payments tested, we found that the Division made unallowable benefits payments of $37,901 for ERAP and $26,230 for CSLFRF to or on behalf of ineligible program applicants or those who lacked required eligibility documentation and for other inappropriate costs, as follows: X The Division inappropriately paid $43,607 of benefit payments to or on behalf of 9 ineligible program applicants, including: y $36,622 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($29,647 for 6 ERAP program applicants and $6,975 for 1 CSLFRF applicant). y $6,300 paid to or on behalf of 1 CSLFRF applicant who previously received ERAP payments and was thus ineligible. y $685 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. X The Division inappropriately paid $14,815 of benefit payments to or on behalf of 10 program applicants, including: y $8,640 paid to or on behalf of 1 CSLFRF applicant for a lease buyout, which is an unallowed activity under Division policies. y $3,959 paid to or on behalf of 5 program applicants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable 1-time, lump sum payments ($3,121 for 3 ERAP applicants and $838 for 2 CSLFRF applicants). y $2,216 paid to or on behalf of 4 program applicants for rental assistance exceeding the amount documented on the lease ($2,210 for 3 ERAP applicants and $6 for 1 CSLFRF applicant). X The Division inappropriately paid $5,709 of benefit payments to or on behalf of 2 program applicants without obtaining required documentation to support they were eligible to receive them, including: y $5,709 paid to or on behalf of 2 program applicants without required proof of income, a lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills ($2,238 for 1 ERAP program applicant and $3,471 for 1 CSLFRF applicant). Effect The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not receive all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2024, the Division paid $44.2 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in Table 1 below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Cause Division management reported that personnel responsible for evaluating program applications and determining program applicants’ eligibility and allowability of related costs fell behind on reviewing applications and did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications and staffing shortages due to employee turnover. Further, Division management reported that it did not detect and correct inaccurate eligibility determinations because its policies and procedures did not require 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). adjudicators to perform a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographical location aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained, including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit benefit payments for lease buy-offs and prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Finally, the Division also must establish and maintain effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Update existing policies and procedures to include a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographic location aligned with the Division’s written policies and procedures and were supported by required documentation. The Division should correct any inaccurate eligibility determinations identified during the postreview. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2025 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past due amounts (a 1-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80% AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il. html#year2024. Further, applicants who live in Maricopa County must reside in Phoenix or Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts, and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]). 4. Work with the federal agencies to resolve the $64,131 of program monies that were spent in violation of federal regulations and its policies and procedures and that may need to be returned to the federal agencies. This finding is similar to prior-year finding 2023-105 and was initially reported in fiscal year 2023. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Federal Agency: U.S. Department of Justice Program Name: Office for Victims of Crime Federal Program: Crime Victim Assistance Program (ALN 16.575) Non-Material Non-Compliance – Allowable Cost and Activities Finding 2024-001 Criteria or Specific Requirement: 2 CFR §200.302(b)(3) and §200.403(g) require that recipients maintain records sufficient to substantiate expenditures of federal awards and ensure that costs are adequately documented. Condition: During testing of expenditures for the Crime Victim Assistance Program, we noted that supporting documentation (e.g., invoices or payroll detail) for a number of transactions was incomplete or unavailable. Context: We tested a sample of 24 expenses out of 228 expenses during the year. Questioned Costs: No known or likely questioned costs exceed $25,000 Effect: Although alternative audit procedures were performed to verify the reasonableness and allowability of the costs, incomplete documentation indicates a weakness in recordkeeping controls. However, the number and dollar value of affected transactions were not material to the Crime Victim Assistance Program as a whole, and no questioned costs were identified. Cause: The organization experienced turnover in financial management positions and converted accounting systems multiple times during the audit period. During these transitions, some historical documentation was not migrated to the current system or retained in accessible form. Recommendation: We recommend that Safe Harbor Crisis Center strengthen its document retention policies and ensure that all grant-related supporting documentation is archived in a centralized electronic system accessible to both management and auditors, particularly during staff transitions or system conversions. Views of Responsible Officials: Management agrees with the finding and is implementing procedures to correct his which is further discussed in the corrective action plan.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Material Weakness in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.403 Factors Affecting Allowability of Costs states that: Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must 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. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost of used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. (g) Be adequately documented. (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approval to carry forward unobligated balances to subsequent budget periods. 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 the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that authorized signers reviewed and approved expenditures related to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for review and approval of expenditures charged to the federal program. Questioned costs: Undetermined Cause: Authorized signers pre-signed checks and did not review and approve support for cash disbursements. Effect: There is an increased risk of charging unallowed costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. require both check signers to evidence review and approval of supporting documentation for each federal program cash disbursement prior to signing the check. Documentation of that review and approval should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, all checks presented for signatures have supporting documentation attached. Authorized check signers are instructed to review all documentation for appropriate authorization, payee name, and amounts prior to signing checks. No checks are to be signed without supporting documentation. The agency will require check signers to initial the check request page or other supporting documentation when signing checks for expenditures. The Neighborhood Service Center, Inc. is implementing a procedure to provide the Finance Committee of the Board with a listing of all checks issued between Board meetings for their review/reference. The Finance Director keeps all check stock locked in their office to avoid any potential misuse of the check stock.
Finding 2024-014 – Noncompliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Over Major Federal Program – Coronavirus State and Local Fiscal Recovery Funds PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles QUESTIONED COSTS: $46,935 Condition: During the test of 100% of expenditures for the Coronavirus State and Local Fiscal Recovery Funds, totaling $1,152,068, two expenditures totaling $46,935 reflected the following: The County used funds to pay the subrecipients that were dedicated for another project/purpose for Highway District's 1 and 2. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: 2 CFR § 200.403 - Factors affecting allowability costs states in relevant part, Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (f) not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. (g) Be adequately documented.
Finding Number: 2024-008 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2024 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2023-006 Noncompliance and Material Weakness- Schedule of Expenditures of Federal Awards 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. Section 2001 of the American Rescue Plan (ARP) Act, includes additional allowable uses of funds under ARP ESSER. The District was awarded $3,254,550 of COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) grant funding (AL #84.425U) in 2022 through 2024 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $798,317 pertaining to ARP ESSER and $78,861 pertaining to Esser II. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General Fund as reported in Finding 2024-007. See Finding 2024-007 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2024-010 below.
Criteria: Uniform Guidance (2 CFR 200.403) requires that costs charged to federal awards be allowable and consistent with the terms and conditions of the award, including any prior approval requirements for capital expenditures or significant property improvements. Condition: Testing identified that the Organization charged $4,074 to the federal program for an HVAC replacement that was not approved by the granting agency per the grant and did not appear to meet allowability requirements. Cause: The condition appears to result from inadequate controls over reviewing expenditures for compliance with grant terms and federal allowability requirements prior to charging costs to the program. Effect: As a result, the Organization charged an unallowable cost to the federal program, resulting in noncompliance with Uniform Guidance and grant requirements. Recommendation: We recommend that the Organization implement procedures to review all non-routine or capital-related expenditures for allowability and compliance with grant terms prior to charging such costs to federal awards, including obtaining required approvals where applicable. Management’s Response: Management agrees with the finding and indicates that it will implement additional review procedures to ensure that all expenditures charged to federal programs are evaluated for allowability and properly approved prior to being incurred.
Criteria: Uniform Guidance (2 CFR 200.403 and 2 CFR 200.430) requires that costs charged to federal awards be properly classified, allowable, and reflect the nature of the expenditure. Compensation for personal services must be accurately categorized and charged to appropriate cost objectives. Condition: During testing, it was identified that the Organization recorded $2,143 of employee compensation, paid through its payroll process as a bonus or stipend, to a travel and development line item rather than classifying the cost as payroll-related expense. Cause: This condition appears to result from inadequate controls over the classification and coding of expenditures, as well as a lack of review procedures to ensure payroll-related costs are recorded in the appropriate accounts. Effect: As a result, $2,143 compensation costs were misclassified in the accounting records and improperly charged to the federal program under an incorrect cost category. This increases the risk that financial reports submitted for federal awards may be inaccurate and that costs may not be evaluated appropriately for allowability. Recommendation: We recommend that the Organization implement procedures to ensure that all payroll-related costs, including bonuses and stipends, are properly classified within the accounting system. Management should also establish review controls over coding of expenditures to ensure consistency with Uniform Guidance and grant reporting requirements. Management’s Response: Management agrees with the finding and indicates that it will strengthen review procedures over expense classification and ensure that compensation costs are properly recorded within payroll-related accounts going forward.
FINDING REFERENCE NUMBER 2024-020 (See Finding Reference Number 2024-001) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must 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. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our payroll audit procedures for TANF, we selected a sample of twenty-five (25) employees to evaluate internal controls and compliance with payroll transactions. ADSEF was unable to identify the personnel files of one (1) employee. This employee was certified by ADSEF as not being assigned to ADSEF. The employee was included in GL200 (payroll register). Additionally, we found discrepancies between the change report and the information from the last payroll of June 2024 for one (1) employee. QUESTIONED COSTS The salary paid to the employee during the fiscal year that were charged to the TANF program totalized $77,517.29. PERSPECTIVE INFORMATION This deficiency is systemic. The failure to maintain copies of employee files violates state and Federal regulations and prevents the validation of wages paid with Federal funds. The sampling was a statistically valid sample. STATEMENT OF CAUSE ADSEF does not maintain appropriate internal controls over employee records, as required by state and Federal regulations. If an employee was transferred to another agency, a copy of their personnel file must be retained for audit purposes and other requests from either the Federal or state government. POSSIBLE ASSERTED EFFECT Because we cannot review employee records, we cannot verify that the employee actually worked for the program for which their salary was assigned. This results in questionable costs. Deficiencies in employee record control prevent effective monitoring of salaries charged to Federal programs and compliance with state and Federal regulations. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF investigate why one employees were assigned to the Agency through RUM without a corresponding personnel file to support their payroll. Regarding the deceased employee, they should identify and locate their file. Additionally, we recommend establishing internal control processes that require verifying each payroll against the updated employee roster and monitoring employee files against payroll and employee rosters.