FA 2022-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of 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: 2020), S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $358,390 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 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 $14,705,523 were expended and reported on the Barrow County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. 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 200.318 ? General Procurement Standards state that ?the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations? for the acquisition of property or services required under a Federal award or subaward?? Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that ?retention? bonuses were paid to individuals who were not employees of the School District. These individuals were hired to perform specific functions as detailed within the associated contracts and were paid amounts in excess of the stated rate noted within these contracts. Additionally, the School District does not have the authority or ability to retain these individuals as they were not employees of the School District and contract provisions requiring the individuals to remain in the service of the School District for a stated period of time was not reflected within the associated contract. Furthermore, auditors contacted ED?s ESSER program management to discuss the allowability of these bonus payments as ED is the grantor of the funds and the cognizant agency charged with administering the ESSER program. Officials at ED advised auditors that bonuses may be allowable if such bonuses are reflected within the contract; however, as noted previously, no such contract provisions were present. Moreover, ED emphasized that published guidance associated with the issuance of bonuses or premium pay from ESSER funds pertained to school personnel, not contractors. Therefore, based upon this information, auditors determined that expenditures totaling $358,390 were not reasonable and necessary for the performance of the ESSER program and deemed these expenditures to be unallowable. Questioned Costs: Known questioned costs of $358,390 were identified for expenditures that were not incurred for a necessary and reasonable purpose and did not follow the School District?s policies and procedures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per discussion with management, the School District believed that the expenditures were allowable as the expenditures were approved by GaDOE through the Consolidated Application process; however, they were not aware that contract amendments should be initiated prior to the expenditure of funds in this manner. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending 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 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 expenditures are in line with provisions reflected within the associated contract and/or contract amendments. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District?s purchasing policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2022-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of 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: 2020), S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $358,390 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 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 $14,705,523 were expended and reported on the Barrow County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. 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 200.318 ? General Procurement Standards state that ?the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations? for the acquisition of property or services required under a Federal award or subaward?? Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that ?retention? bonuses were paid to individuals who were not employees of the School District. These individuals were hired to perform specific functions as detailed within the associated contracts and were paid amounts in excess of the stated rate noted within these contracts. Additionally, the School District does not have the authority or ability to retain these individuals as they were not employees of the School District and contract provisions requiring the individuals to remain in the service of the School District for a stated period of time was not reflected within the associated contract. Furthermore, auditors contacted ED?s ESSER program management to discuss the allowability of these bonus payments as ED is the grantor of the funds and the cognizant agency charged with administering the ESSER program. Officials at ED advised auditors that bonuses may be allowable if such bonuses are reflected within the contract; however, as noted previously, no such contract provisions were present. Moreover, ED emphasized that published guidance associated with the issuance of bonuses or premium pay from ESSER funds pertained to school personnel, not contractors. Therefore, based upon this information, auditors determined that expenditures totaling $358,390 were not reasonable and necessary for the performance of the ESSER program and deemed these expenditures to be unallowable. Questioned Costs: Known questioned costs of $358,390 were identified for expenditures that were not incurred for a necessary and reasonable purpose and did not follow the School District?s policies and procedures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per discussion with management, the School District believed that the expenditures were allowable as the expenditures were approved by GaDOE through the Consolidated Application process; however, they were not aware that contract amendments should be initiated prior to the expenditure of funds in this manner. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending 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 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 expenditures are in line with provisions reflected within the associated contract and/or contract amendments. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District?s purchasing policies and procedures. Views of Responsible Officials: We concur with this finding.
Finding: The District improperly awarded a retention bonus to an ineligible employee. Criteria: When the U.S. Department of Education (ED) awarded ESSER I, II and III funds to states it noted the funds ?generally will not be used for bonuses, merit pay, or similar expenditures, unless related to disruptions or closures resulting from COVID-19.? This does not mean all bonuses, merit pay, or similar expenditures are unallowable, only those unrelated to COVID-related disruptions or closures. For example, a local educational agency (LEA) might use local ESSER funds to provide employees with additional pay to: ? Address recruitment or retention challenges in light of the pandemic, ? Provide additional compensation to teachers and other staff that work inperson, ? Provide additional compensation to teachers and other staff that have assumed new duties because of COVID, ? Incentivize effective teachers to move to schools with vulnerable students ? that have been disproportionately impacted by the pandemic, or ? Provide additional pay to substitute teachers where there is a shortage. Districts will also need to be able to document that use of ESSER I/II/III funds for this purpose is necessary and the amount provided is reasonable (2 CFR ? 200.404). The District policy for awarding retention bonuses required the employee to be employed by the District as of February 14, 2022. Condition: The District used Education Stabilization Fund ESSER II to fund retention bonuses. The District awarded a retention bonus to an employee hired after the February 14, 2022 eligibility date. Context: The District awarded $1,300 to an employee hired after the eligibility date. Effect: Education Stabilization Funds could be expended for ineligible purposes. Questioned Costs: $1,300. Identification as a repeat finding: This is not a repeat finding. Cause: The District did not review the bonus listing and hire dates to ensure only eligible employees received the retention bonus. Recommendation: We recommend the District implement policies and procedures to ensure that retention bonuses are only paid to eligible employees.
Finding: The District improperly awarded a retention bonus to an ineligible employee. Criteria: When the U.S. Department of Education (ED) awarded ESSER I, II and III funds to states it noted the funds ?generally will not be used for bonuses, merit pay, or similar expenditures, unless related to disruptions or closures resulting from COVID-19.? This does not mean all bonuses, merit pay, or similar expenditures are unallowable, only those unrelated to COVID-related disruptions or closures. For example, a local educational agency (LEA) might use local ESSER funds to provide employees with additional pay to: ? Address recruitment or retention challenges in light of the pandemic, ? Provide additional compensation to teachers and other staff that work inperson, ? Provide additional compensation to teachers and other staff that have assumed new duties because of COVID, ? Incentivize effective teachers to move to schools with vulnerable students ? that have been disproportionately impacted by the pandemic, or ? Provide additional pay to substitute teachers where there is a shortage. Districts will also need to be able to document that use of ESSER I/II/III funds for this purpose is necessary and the amount provided is reasonable (2 CFR ? 200.404). The District policy for awarding retention bonuses required the employee to be employed by the District as of February 14, 2022. Condition: The District used Education Stabilization Fund ESSER II to fund retention bonuses. The District awarded a retention bonus to an employee hired after the February 14, 2022 eligibility date. Context: The District awarded $1,300 to an employee hired after the eligibility date. Effect: Education Stabilization Funds could be expended for ineligible purposes. Questioned Costs: $1,300. Identification as a repeat finding: This is not a repeat finding. Cause: The District did not review the bonus listing and hire dates to ensure only eligible employees received the retention bonus. Recommendation: We recommend the District implement policies and procedures to ensure that retention bonuses are only paid to eligible employees.
Finding: The District improperly awarded a retention bonus to an ineligible employee. Criteria: When the U.S. Department of Education (ED) awarded ESSER I, II and III funds to states it noted the funds ?generally will not be used for bonuses, merit pay, or similar expenditures, unless related to disruptions or closures resulting from COVID-19.? This does not mean all bonuses, merit pay, or similar expenditures are unallowable, only those unrelated to COVID-related disruptions or closures. For example, a local educational agency (LEA) might use local ESSER funds to provide employees with additional pay to: ? Address recruitment or retention challenges in light of the pandemic, ? Provide additional compensation to teachers and other staff that work inperson, ? Provide additional compensation to teachers and other staff that have assumed new duties because of COVID, ? Incentivize effective teachers to move to schools with vulnerable students ? that have been disproportionately impacted by the pandemic, or ? Provide additional pay to substitute teachers where there is a shortage. Districts will also need to be able to document that use of ESSER I/II/III funds for this purpose is necessary and the amount provided is reasonable (2 CFR ? 200.404). The District policy for awarding retention bonuses required the employee to be employed by the District as of February 14, 2022. Condition: The District used Education Stabilization Fund ESSER II to fund retention bonuses. The District awarded a retention bonus to an employee hired after the February 14, 2022 eligibility date. Context: The District awarded $1,300 to an employee hired after the eligibility date. Effect: Education Stabilization Funds could be expended for ineligible purposes. Questioned Costs: $1,300. Identification as a repeat finding: This is not a repeat finding. Cause: The District did not review the bonus listing and hire dates to ensure only eligible employees received the retention bonus. Recommendation: We recommend the District implement policies and procedures to ensure that retention bonuses are only paid to eligible employees.
Program: AL 21.023 ? COVID-19 Emergency Rental Assistance ? Allowability & Earmarking Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of the Treasury Criteria: Per 2 CFR ? 1000.10 (January 1, 2022), the U.S. Department of the Treasury adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR part 200. 2 CFR ? 200.403 (January 1, 2022) states, in relevant part, the following: 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. 2 CFR ? 200.404 (January 1, 2022) states the following: 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. (c) Market prices for comparable goods or services for the geographic area. (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. 2 CFR ? 200.459 (January 1, 2022) states, in relevant part, the following: (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. . . . (b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1) The nature and scope of the service rendered in relation to the service required. * * * * (6) Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities. (8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions). Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(2)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households . . . . Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(3) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of funds received by an eligible grantee from a payment made under this section may be used to provide eligible households with case management and other services related to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary, intended to help keep households stably housed. Division N ? Additional Coronavirus Response and Relief, Title V ? Banking, Section 501(c)(5)(A) of the Consolidated Appropriations Act, 2021, states, in relevant part: Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. Per the amended Emergency Rental Assistance terms, dated March 26, 2021, ?The total of all administrative costs, whether direct or indirect costs, may not exceed 10 percent of the total amount of the total award.? The Reallocation Guidance from the U.S. Department of the Treasury (Treasury), dated March 30, 2022, states the following: A Grantee may spend up to 10% of its initial ERA1 allocation for administrative expenses only if the Grantee obligates at least 30% of its initial allocation for the provision of financial assistance and housing stability services on behalf of eligible households by September 30, 2022. If a Grantee has obligated less than 30% of its initial allocation providing financial assistance and housing stability services as of September 30, 2022, Treasury will presume that the Grantee?s administrative expenses were not attributable to such services ? and therefore were not permissible uses of ERA1 funds ? to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds, unless the Grantee can demonstrate that those costs are related to the delivery of the program. Condition: The contractual agreement to receive and evaluate applications for Emergency Rental Assistance (ERA) did not have adequate limitations or provisions to ensure costs were reasonable. A similar finding was noted in the prior audit. Repeat Finding: 2021-063 Questioned Costs: $3,580,007 known Statistical Sample: No Context: The State of Nebraska was initially awarded $158,572,581 for ERA to assist eligible households that have difficulty making timely payments of rent and utilities due to the COVID-19 pandemic. At least 90% of funds are to be earmarked for financial aid to eligible households. Not more than 10% of funds may be used for administrative costs. The Agency entered into a contract with Deloitte & Touche LLP (Deloitte) to provide program administration and case management. Eligibility determinations were made by Deloitte and then sent to the State for review and to process the aid payments to eligible recipients. Deloitte was paid $8,672,561 during the fiscal year ended June 30, 2022. We tested one payment for $531,314 and noted the following: ? Adequate support was not on file to allow for a determination as to whether the contracted amount was reasonable. There were no maximums or limitations other than the $14,627,160 cap specified in the contract. The contract was paid on an hourly rate and did not have any stipulations regarding the number of hours paid per application or performance measures to be achieved. ? Per guidance from Treasury, if the State obligates less than 30% of its initial allocation providing financial aid by September 30, 2022, Treasury will presume that the State?s administrative expenses were not attributable to the program, at least to the extent that the administrative expenses exceed 10% of the Grantee?s allocation after deducting amounts recaptured or reallocated as excess funds. The State voluntarily reallocated $84,700,000 to local governments and was required to return an additional $11,716,548 for reallocation. Therefore, State administrative expenses would be limited to $6,215,603 (10% of awarded amount less reallocations). Administrative expenses in fiscal year 2021 and 2022 totaled $9,795,610. As a result, we question costs of $3,580,007 for administrative costs exceeding 10%. As of January 17, 2023, the Agency has spent $26,399,517 on financial aid, and $13,080,572 for administrative expenses, of which $12,563,227 was paid to Deloitte. This is 33.13% of the total amount paid as of January 17, 2023. Without spending 30% of its award on financial aid, the Agency will not meet the earmarking requirements per the guidance released from Treasury. Based on the amount of financial aid spent, the administrative costs appear unreasonable. Cause: The contract was not competitively bid, and contract provisions were not specific enough to ensure that amounts paid were reasonable. The Agency lacked adequate procedures to ensure adherence to earmarking requirements. Effect: Without such adequate procedures, there is an increased risk for misuse of Federal funds. The Agency did not meet earmarking requirements. Recommendation: We recommend the Agency improve its procedures for ensuring the reasonableness of contractual service payments. Management Response: The Military Department does not agree with this finding. Vendor Contract: The State performed procurement procedures soliciting Requests for Information from vendors in 2020 to support COVID-19 related tasks. A contractual agreement was completed with the vendor once the State determined the program costs, estimated level-of-effort, and key assumptions were reasonable based on the scope of services the State requested. In addition, the state complied with the procurement standards set forth in 2 CFR 200.317-200.327, including expected contract provisions, key program assumptions, and not-to-exceed thresholds. The contractual agreement was completed to enable the State to proactively monitor vendor performance and analyze detailed information on associated cost. Vendor performance was monitored through twice-weekly status meetings, bi-weekly executive status briefings with executives across multiple agencies, bi-weekly Executive Steering Committee meetings, and review of detailed invoices. The State as the Grantee is able to demonstrate that the administrative costs are related to the delivery of the program in a timely fashion and is aligned with US Treasury Guidance. APA Response: As of January 17, 2023, the Agency has spent $1 in administration costs for every $2 spent for aid. This does not appear reasonable and is not in accordance with earmarking requirements. Thus, in addition to the questioned administrative costs identified for 2022, the agency appears to be on track for incurring millions of dollars more in such questioned costs for 2023.
FA 2022-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of 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: $59,000 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 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 $15,607,079 were expended and reported on the Newton County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. 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 200.318 ? General Procurement Standards state that ?the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations? for the acquisition of property or services required under a Federal award or subaward?? Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that payments were made to the private staffing companies utilized by the School District to provide ?retention? bonuses to contractors who were not employees of the School District. These individuals were assigned to work within the School District by the private staffing companies. Per review of the contracts in place during the fiscal year under review, it was noted that these bonuses represented amounts in excess of the agreed upon prices. Furthermore, the School District does not have the authority or ability to retain these individuals as they were not employees of the School District and contract provisions requiring the individuals to remain employed by the private staffing companies and in the service of the School District for a stated period of time was not reflected within the associated contracts. Therefore, expenditures totaling $59,000 were not considered to be reasonable and necessary for the performance of the ESSER program and deemed unallowable. Questioned Costs: Known questioned costs of $59,000 were identified for expenditures that were not incurred for a necessary and reasonable purpose and did not follow the School District?s policies and procedures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per discussion with management, the School District believed that the expenditures were allowable as the expenditures were approved by GaDOE through the Consolidated Application process; however, they were not aware that contract amendments should be initiated prior to the expenditure of funds in this manner. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending 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 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 expenditures are in line with provisions reflected within the associated contract and/or contract amendments. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District?s purchasing policies and procedures. Views of Responsible Officials: We do not concur with this finding. The School District relied upon guidance provided by the Georgia Department of Education related to the ESSER program to ensure appropriate use of funds. The expenditure was clearly delineated within the ESSER budget. The expenditure was initially approved by the Georgia Department of Education on June 6, 2021. Subsequent budget amendments were also submitted and approved by the Georgia Department of Education, indicating to the School District that the expenditure was for an allowable use of funds. Auditor?s Concluding Remarks: The School District states that it relied upon guidance provided by the Georgia Department of Education related to the ESSER program to ensure appropriate use of funds. However, the School District is responsible for ensuring that it complies with requirements of its federal programs, including ensuring that it establishes and maintains effective internal control over federal awards pursuant to the Uniform Guidance and ensuring that the board-approved procurement policy is followed. Additionally, auditors contacted ED?s ESSER program management to discuss the allowability of these bonus payments as ED is the grantor of the funds and the cognizant agency charged with administering the ESSER program. Officials at ED advised auditors that bonuses may be allowable if such bonuses are reflected within the contract; however, as noted previously, no such contract provisions were present and amounts were paid in excess of the rates reflected within the associated contracts. Moreover, ED emphasized that published guidance associated with the issuance of bonuses or premium pay from ESSER funds pertained to school personnel, not contractors. The Georgia Department of Audits and Accounts (DOAA) acknowledges the overwhelming burden placed on the School District due to the effects of the COVID-19 pandemic and the additional care needed to ensure student and staff safety. However, given the information reflected above, we reaffirm our finding and will review the status of the finding during our next audit.
FA 2022-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of 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: $59,000 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 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 $15,607,079 were expended and reported on the Newton County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. 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 200.318 ? General Procurement Standards state that ?the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations? for the acquisition of property or services required under a Federal award or subaward?? Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that payments were made to the private staffing companies utilized by the School District to provide ?retention? bonuses to contractors who were not employees of the School District. These individuals were assigned to work within the School District by the private staffing companies. Per review of the contracts in place during the fiscal year under review, it was noted that these bonuses represented amounts in excess of the agreed upon prices. Furthermore, the School District does not have the authority or ability to retain these individuals as they were not employees of the School District and contract provisions requiring the individuals to remain employed by the private staffing companies and in the service of the School District for a stated period of time was not reflected within the associated contracts. Therefore, expenditures totaling $59,000 were not considered to be reasonable and necessary for the performance of the ESSER program and deemed unallowable. Questioned Costs: Known questioned costs of $59,000 were identified for expenditures that were not incurred for a necessary and reasonable purpose and did not follow the School District?s policies and procedures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per discussion with management, the School District believed that the expenditures were allowable as the expenditures were approved by GaDOE through the Consolidated Application process; however, they were not aware that contract amendments should be initiated prior to the expenditure of funds in this manner. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending 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 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 expenditures are in line with provisions reflected within the associated contract and/or contract amendments. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District?s purchasing policies and procedures. Views of Responsible Officials: We do not concur with this finding. The School District relied upon guidance provided by the Georgia Department of Education related to the ESSER program to ensure appropriate use of funds. The expenditure was clearly delineated within the ESSER budget. The expenditure was initially approved by the Georgia Department of Education on June 6, 2021. Subsequent budget amendments were also submitted and approved by the Georgia Department of Education, indicating to the School District that the expenditure was for an allowable use of funds. Auditor?s Concluding Remarks: The School District states that it relied upon guidance provided by the Georgia Department of Education related to the ESSER program to ensure appropriate use of funds. However, the School District is responsible for ensuring that it complies with requirements of its federal programs, including ensuring that it establishes and maintains effective internal control over federal awards pursuant to the Uniform Guidance and ensuring that the board-approved procurement policy is followed. Additionally, auditors contacted ED?s ESSER program management to discuss the allowability of these bonus payments as ED is the grantor of the funds and the cognizant agency charged with administering the ESSER program. Officials at ED advised auditors that bonuses may be allowable if such bonuses are reflected within the contract; however, as noted previously, no such contract provisions were present and amounts were paid in excess of the rates reflected within the associated contracts. Moreover, ED emphasized that published guidance associated with the issuance of bonuses or premium pay from ESSER funds pertained to school personnel, not contractors. The Georgia Department of Audits and Accounts (DOAA) acknowledges the overwhelming burden placed on the School District due to the effects of the COVID-19 pandemic and the additional care needed to ensure student and staff safety. However, given the information reflected above, we reaffirm our finding and will review the status of the finding during our next audit.
FINDING 2022-013 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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 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 47 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not designed nor implemented at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act was for the purpose of preventing, preparing for, or responding to the Novel Coronavirus. Of 12 transfers from education stabilization funds, 6 did not have supporting documentation to provide sufficient explanation for how the use of funds prevented, prepared for, or responded to COVID-19. The total of unsupported transfers was $2,168,761. This amount was 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). . . ." 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "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. . . ." INDIANA STATE BOARD OF ACCOUNTS 48 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Public Law 116-136, Section 18003(d) states: "Uses of Funds - A local educational agency that receives funds under this title may use funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for and coordinating during long-term closures, including for how to provide meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the Individuals with Disabilities Education Act (20 U.S.C. 1401 et seq.) and how to ensure other educational services can continue to be provided consistent with all Federal, State, and local requirements. (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. INDIANA STATE BOARD OF ACCOUNTS 49 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Consolidated Appropriations Act, 2021, P.L. 116-260, section 313(d) states: "USES OF FUNDS.?A local educational agency that receives funds under this section may use the funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the IDEA and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. INDIANA STATE BOARD OF ACCOUNTS 50 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (A) Administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction. (B) Implementing evidence-based activities to meet the comprehensive needs of students. (C) Providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment. (D) Tracking student attendance and improving student engagement in distance education. (13) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (14) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (15) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." American Rescue Plan Act of 2021, H.R. 1319, section 2001(e)states: "USES OF FUNDS.?A local educational agency that receives funds under this section? INDIANA STATE BOARD OF ACCOUNTS 51 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups described in section 1111(b)(2)(B)(xi) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)(B)(xi)), students experiencing homelessness, and children and youth in foster care; and (2) shall use the remaining funds for any of the following: (A) Any activity authorized by the Elementary and Secondary Education Act of 1965. (B) Any activity authorized by the Individuals with Disabilities Education Act. (C) Any activity authorized by the Adult Education and Family Literacy Act. (D) Any activity authorized by the Carl D. Perkins Career and Technical Education Act of 2006. (E) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (F) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (H) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (I) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (J) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the Individuals with Disabilities Education Act and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. (K) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (L) Providing mental health services and supports, including through the implementation of evidence-based full-service community schools. INDIANA STATE BOARD OF ACCOUNTS 52 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (M) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (N) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (i) administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction; (ii) implementing evidence-based activities to meet the comprehensive needs of students; (iii) providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment; and (iv) tracking student attendance and improving student engagement in distance education. (O) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (P) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (Q) Developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Centers for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff. (R) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Cause Management had not designed nor implemented a system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and available for audit related to the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 53 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs Questioned costs of $2,168,761 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and available for audit and comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles 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 2022-013 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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 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 47 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not designed nor implemented at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act was for the purpose of preventing, preparing for, or responding to the Novel Coronavirus. Of 12 transfers from education stabilization funds, 6 did not have supporting documentation to provide sufficient explanation for how the use of funds prevented, prepared for, or responded to COVID-19. The total of unsupported transfers was $2,168,761. This amount was 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). . . ." 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "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. . . ." INDIANA STATE BOARD OF ACCOUNTS 48 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Public Law 116-136, Section 18003(d) states: "Uses of Funds - A local educational agency that receives funds under this title may use funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for and coordinating during long-term closures, including for how to provide meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the Individuals with Disabilities Education Act (20 U.S.C. 1401 et seq.) and how to ensure other educational services can continue to be provided consistent with all Federal, State, and local requirements. (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. INDIANA STATE BOARD OF ACCOUNTS 49 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Consolidated Appropriations Act, 2021, P.L. 116-260, section 313(d) states: "USES OF FUNDS.?A local educational agency that receives funds under this section may use the funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the IDEA and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. INDIANA STATE BOARD OF ACCOUNTS 50 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (A) Administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction. (B) Implementing evidence-based activities to meet the comprehensive needs of students. (C) Providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment. (D) Tracking student attendance and improving student engagement in distance education. (13) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (14) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (15) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." American Rescue Plan Act of 2021, H.R. 1319, section 2001(e)states: "USES OF FUNDS.?A local educational agency that receives funds under this section? INDIANA STATE BOARD OF ACCOUNTS 51 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups described in section 1111(b)(2)(B)(xi) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)(B)(xi)), students experiencing homelessness, and children and youth in foster care; and (2) shall use the remaining funds for any of the following: (A) Any activity authorized by the Elementary and Secondary Education Act of 1965. (B) Any activity authorized by the Individuals with Disabilities Education Act. (C) Any activity authorized by the Adult Education and Family Literacy Act. (D) Any activity authorized by the Carl D. Perkins Career and Technical Education Act of 2006. (E) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (F) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (H) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (I) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (J) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the Individuals with Disabilities Education Act and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. (K) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (L) Providing mental health services and supports, including through the implementation of evidence-based full-service community schools. INDIANA STATE BOARD OF ACCOUNTS 52 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (M) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (N) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (i) administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction; (ii) implementing evidence-based activities to meet the comprehensive needs of students; (iii) providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment; and (iv) tracking student attendance and improving student engagement in distance education. (O) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (P) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (Q) Developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Centers for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff. (R) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Cause Management had not designed nor implemented a system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and available for audit related to the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 53 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs Questioned costs of $2,168,761 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and available for audit and comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles 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 2022-013 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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 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 47 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not designed nor implemented at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act was for the purpose of preventing, preparing for, or responding to the Novel Coronavirus. Of 12 transfers from education stabilization funds, 6 did not have supporting documentation to provide sufficient explanation for how the use of funds prevented, prepared for, or responded to COVID-19. The total of unsupported transfers was $2,168,761. This amount was 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). . . ." 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "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. . . ." INDIANA STATE BOARD OF ACCOUNTS 48 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Public Law 116-136, Section 18003(d) states: "Uses of Funds - A local educational agency that receives funds under this title may use funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for and coordinating during long-term closures, including for how to provide meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the Individuals with Disabilities Education Act (20 U.S.C. 1401 et seq.) and how to ensure other educational services can continue to be provided consistent with all Federal, State, and local requirements. (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. INDIANA STATE BOARD OF ACCOUNTS 49 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Consolidated Appropriations Act, 2021, P.L. 116-260, section 313(d) states: "USES OF FUNDS.?A local educational agency that receives funds under this section may use the funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the IDEA and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. INDIANA STATE BOARD OF ACCOUNTS 50 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (A) Administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction. (B) Implementing evidence-based activities to meet the comprehensive needs of students. (C) Providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment. (D) Tracking student attendance and improving student engagement in distance education. (13) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (14) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (15) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." American Rescue Plan Act of 2021, H.R. 1319, section 2001(e)states: "USES OF FUNDS.?A local educational agency that receives funds under this section? INDIANA STATE BOARD OF ACCOUNTS 51 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups described in section 1111(b)(2)(B)(xi) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)(B)(xi)), students experiencing homelessness, and children and youth in foster care; and (2) shall use the remaining funds for any of the following: (A) Any activity authorized by the Elementary and Secondary Education Act of 1965. (B) Any activity authorized by the Individuals with Disabilities Education Act. (C) Any activity authorized by the Adult Education and Family Literacy Act. (D) Any activity authorized by the Carl D. Perkins Career and Technical Education Act of 2006. (E) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (F) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (H) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (I) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (J) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the Individuals with Disabilities Education Act and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. (K) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (L) Providing mental health services and supports, including through the implementation of evidence-based full-service community schools. INDIANA STATE BOARD OF ACCOUNTS 52 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (M) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (N) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (i) administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction; (ii) implementing evidence-based activities to meet the comprehensive needs of students; (iii) providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment; and (iv) tracking student attendance and improving student engagement in distance education. (O) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (P) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (Q) Developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Centers for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff. (R) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Cause Management had not designed nor implemented a system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and available for audit related to the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 53 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs Questioned costs of $2,168,761 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and available for audit and comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles 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 2022-013 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 Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 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 47 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context An effective internal control system was not designed nor implemented at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. The Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act (CRSSA) and the American Rescue Plan (ARP) Act was for the purpose of preventing, preparing for, or responding to the Novel Coronavirus. Of 12 transfers from education stabilization funds, 6 did not have supporting documentation to provide sufficient explanation for how the use of funds prevented, prepared for, or responded to COVID-19. The total of unsupported transfers was $2,168,761. This amount was 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). . . ." 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. . . . (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "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. . . ." INDIANA STATE BOARD OF ACCOUNTS 48 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Public Law 116-136, Section 18003(d) states: "Uses of Funds - A local educational agency that receives funds under this title may use funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for and coordinating during long-term closures, including for how to provide meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the Individuals with Disabilities Education Act (20 U.S.C. 1401 et seq.) and how to ensure other educational services can continue to be provided consistent with all Federal, State, and local requirements. (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. INDIANA STATE BOARD OF ACCOUNTS 49 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Consolidated Appropriations Act, 2021, P.L. 116-260, section 313(d) states: "USES OF FUNDS.?A local educational agency that receives funds under this section may use the funds for any of the following: (1) Any activity authorized by the ESEA of 1965, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act (20 U.S.C. 6301 et seq.), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ('IDEA'), the Adult Education and Family Literacy Act (20 U.S.C. 1400 et seq.), the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.) ('the Perkins Act'), or subtitle B of title VII of the McKinney-Vento Homeless Assistance Act (42 U.S.C. 11431 et seq.). (2) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (3) Providing principals and others school leaders with the resources necessary to address the needs of their individual schools. (4) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (5) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (6) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (7) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (8) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the IDEA and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. INDIANA STATE BOARD OF ACCOUNTS 50 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (9) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (10) Providing mental health services and supports. (11) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (12) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (A) Administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction. (B) Implementing evidence-based activities to meet the comprehensive needs of students. (C) Providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment. (D) Tracking student attendance and improving student engagement in distance education. (13) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (14) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (15) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." American Rescue Plan Act of 2021, H.R. 1319, section 2001(e)states: "USES OF FUNDS.?A local educational agency that receives funds under this section? INDIANA STATE BOARD OF ACCOUNTS 51 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) shall reserve not less than 20 percent of such funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day, comprehensive afterschool programs, or extended school year programs, and ensure that such interventions respond to students' academic, social, and emotional needs and address the disproportionate impact of the coronavirus on the student subgroups described in section 1111(b)(2)(B)(xi) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)(B)(xi)), students experiencing homelessness, and children and youth in foster care; and (2) shall use the remaining funds for any of the following: (A) Any activity authorized by the Elementary and Secondary Education Act of 1965. (B) Any activity authorized by the Individuals with Disabilities Education Act. (C) Any activity authorized by the Adult Education and Family Literacy Act. (D) Any activity authorized by the Carl D. Perkins Career and Technical Education Act of 2006. (E) Coordination of preparedness and response efforts of local educational agencies with State, local, Tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus. (F) Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population. (G) Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies. (H) Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases. (I) Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency. (J) Planning for, coordinating, and implementing activities during long-term closures, including providing meals to eligible students, providing technology for online learning to all students, providing guidance for carrying out requirements under the Individuals with Disabilities Education Act and ensuring other educational services can continue to be provided consistent with all Federal, State, and local requirements. (K) Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and children with disabilities, which may include assistive technology or adaptive equipment. (L) Providing mental health services and supports, including through the implementation of evidence-based full-service community schools. INDIANA STATE BOARD OF ACCOUNTS 52 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (M) Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, children with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care. (N) Addressing learning loss among students, including low-income students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and children and youth in foster care, of the local educational agency, including by? (i) administering and using high-quality assessments that are valid and reliable, to accurately assess students' academic progress and assist educators in meeting students' academic needs, including through differentiating instruction; (ii) implementing evidence-based activities to meet the comprehensive needs of students; (iii) providing information and assistance to parents and families on how they can effectively support students, including in a distance learning environment; and (iv) tracking student attendance and improving student engagement in distance education. (O) School facility repairs and improvements to enable operation of schools to reduce risk of virus transmission and exposure to environmental health hazards, and to support student health needs. (P) Inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and nonmechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement. (Q) Developing strategies and implementing public health protocols including, to the greatest extent practicable, policies in line with guidance from the Centers for Disease Control and Prevention for the reopening and operation of school facilities to effectively maintain the health and safety of students, educators, and other staff. (R) Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency." Cause Management had not designed nor implemented a system of internal controls that would have ensured compliance or that supporting documentation would have been maintained and available for audit related to the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 53 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Questioned Costs Questioned costs of $2,168,761 were identified as detailed in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and available for audit and comply with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Activities Allowed or Unallowed/Allowable Costs/Cost Principles Head Start ALN# 93.600 US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-02; 10CH011215-03; 10HE000901-01 Grant period – 2021 & 2022 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow 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). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – 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. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – The following exceptions were noted during testing of 138 program disbursements, 93 payroll disbursements, and 100 journal entry transactions: • 20 invoices could not be located related to program disbursements • 6 invoices tested did not agree to the approved allocation of Head Start expenses • 1 timecard could not be located • multiple instances where an approved pay rate covering the appropriate time-period could not be obtained • 12 instances where supporting documentation for journal entries to adjust Head Start expenses could not be obtained. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – $151,608. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Criteria: Title 2 of the Code of Federal Regulations (2 CFR), Part 200, Subpart E defines and discusses the federal cost principles that apply to federal awards administered by nonprofit organizations. The applicable sections of these cost principes are as follows: • 2 CFR 200.403 Factors affecting allowability of costs • 2 CFR 200.404 Reasonable costs • 2 CFR 200.405 Allocable costs • 2 CFR 200.413 Direct costs • 2 CFR 200.414 Indirect (F&A) costs Condition: The following were noted as related to compliance with allowable costs, cost allocation and federal cost principles: • Internal control on time spent by employees related to administrative functions or other indirect cost activities has not been properly designed or implemented. • All employee time, including employees and professional services contractors are being recorded directly to programs. Time spent on indirect activities is not being properly identified or properly allocated to programs. • A portion of time of the Operations Manager (Chief Executive of the Organization) is spent related to administrative time or other indirect cost activities. However, none of that time has been identified or charged as indirect costs. • The time card for the Operations Manager (Chief Executive of the Organization) is not reviewed or approved by a board member or other senior executive of the Organization. • The accounting services of AIRS is being provided by a third-party outsourced accountant. The costs related to these services were improperly recorded as direct personnel costs to the program rather than properly classified as indirect costs. • Payroll taxes, employee benefits and other allowable employee related expenses were allocated to the program in a manner that does not accurately reflect the relative benefits received. These costs were allocated to the program as a percentage of total payroll costs, however, the percentage used exceeds that actual percentage of these costs as a percentage of total payroll costs. • A reasonable, consistent and uniform cost allocation methodology has not been properly designed or implemented. Costs that benefit both federal programs, non-federal programs and indirect costs are not being allocated properly across and to federal programs, non-federal programs and indirect costs in a reasonable, consistent and uniform manner. • Certain direct costs charged to the program were not based on actual costs incurred and the amounts charged were not adequately supported. • Indirect costs were not properly identified and segregated from direct costs. • Allowable indirect costs were not charged to the federal program. Cause: AIRS accounting staff and senior management do not appear to have a full and complete understanding of Uniform Guidance or of the applicable federal cost principles. Management has not properly applied the applicable federal costs principles in 2 CFR, Part 200, Subpart E to the costs charged to the federal program. Effect: Payroll costs and allowable employee related expenses, certain direct costs, allocable direct costs and indirect costs were not properly charged to the federal program. In order to estimate the questioned costs, the auditor, with the assistance of management, developed a costs allocation methodology that charges costs to the federal program in a reasonable, consistent and uniform manner in compliance with the costs principles contained in 2 CFR, Part 200, Subpart E. The primarily characteristics of this methodology are as follows: • Based upon discussions with management, review of the job description, roles and responsibilities of the Operations Manager and using prior experience and comparison to similar nonprofit organizations; an estimate of the percentage of time spent by the Operations Manager related to administration and other indirect activities was developed. • The time for the outsourced accounting services provider was removed from direct personnel costs and charged to indirect costs. • After the above revisions were made, the auditor assisted management in reallocating payroll costs across all federal and nonfederal programs and to indirect costs in a reasonable, consistent and uniform manner. • Allowable payroll taxes, benefits and other employee related expense charges were estimated using the actual percentage of these expenses as a percentage of total allowable payroll costs. • Non-allocable direct costs were charged to the program at the actual amount of those costs incurred. • Allocable direct costs charges were estimated by allocating those costs to the federal program on the basis of allowable payroll costs charged to program as a percentage of total allowable payroll costs (percentage of payroll methodology). This methodology is in compliance with the requirements of 2 CFR 200.405 and appears to produce a result that reasonably estimates the proportional benefit of these costs to all federal and non-federal programs, and to indirect cost activities. • Indirect costs were estimated and charged to the program using the 10% de minimis indirect cost rate as defined in 2 CFR 200.414. Questioned Costs: Using the methodology described above, the auditor has estimated total federal expenditures allowable to the program of $247,119. However, AIRS has charged federal expenditures of $272,781 to the program. Therefore, the estimated questioned costs related to this program are $25,662. Repeat Finding from Prior Year: No Recommendation: Senior management and accounting personnel should create procedures to ensure that direct program costs are charged at the actual amounts incurred, develop a payroll cost allocation methodology, and an allocable direct cost allocation methodology that ensures that costs are reasonably, consistently and uniformly charged to and across all federal and non-federal programs and to indirect costs relative to the proportional benefit of those costs, and in compliance with the applicable federal cost principles in 2 CFR, Part 200, Subpart E. Management and the board should consider providing senior management, accounting personnel and applicable program personnel additional training and education related to the proper application of and compliance with the federal costs principles as defined in 2 CFR, Part 200, Subpart E. Management and the board may also want to consider engaging a third-party CPA or other accounting professional who has extensive prior skills, knowledge and experience related to Uniform Guidance and federal cost principles. Views of Responsible Officials: Management concurs with this audit finding.
Criteria: Title 2 of the Code of Federal Regulations (2 CFR), Part 200, Subpart E defines and discusses the federal cost principles that apply to federal awards administered by nonprofit organizations. The applicable sections of these cost principes are as follows: • 2 CFR 200.403 Factors affecting allowability of costs • 2 CFR 200.404 Reasonable costs • 2 CFR 200.405 Allocable costs • 2 CFR 200.413 Direct costs • 2 CFR 200.414 Indirect (F&A) costs Condition: The following were noted as related to compliance with allowable costs, cost allocation and federal cost principles: • Internal control on time spent by employees related to administrative functions or other indirect cost activities has not been properly designed or implemented. • All employee time, including employees and professional services contractors are being recorded directly to programs. Time spent on indirect activities is not being properly identified or properly allocated to programs. • A portion of time of the Operations Manager (Chief Executive of the Organization) is spent related to administrative time or other indirect cost activities. However, none of that time has been identified or charged as indirect costs. • The time card for the Operations Manager (Chief Executive of the Organization) is not reviewed or approved by a board member or other senior executive of the Organization. • The accounting services of AIRS is being provided by a third-party outsourced accountant. The costs related to these services were improperly recorded as direct personnel costs to the program rather than properly classified as indirect costs. • Payroll taxes, employee benefits and other allowable employee related expenses were allocated to the program in a manner that does not accurately reflect the relative benefits received. These costs were allocated to the program as a percentage of total payroll costs, however, the percentage used exceeds that actual percentage of these costs as a percentage of total payroll costs. • A reasonable, consistent and uniform cost allocation methodology has not been properly designed or implemented. Costs that benefit both federal programs, non-federal programs and indirect costs are not being allocated properly across and to federal programs, non-federal programs and indirect costs in a reasonable, consistent and uniform manner. • Certain direct costs charged to the program were not based on actual costs incurred and the amounts charged were not adequately supported. • Indirect costs were not properly identified and segregated from direct costs. • Allowable indirect costs were not charged to the federal program. Cause: AIRS accounting staff and senior management do not appear to have a full and complete understanding of Uniform Guidance or of the applicable federal cost principles. Management has not properly applied the applicable federal costs principles in 2 CFR, Part 200, Subpart E to the costs charged to the federal program. Effect: Payroll costs and allowable employee related expenses, certain direct costs, allocable direct costs and indirect costs were not properly charged to the federal program. In order to estimate the questioned costs, the auditor, with the assistance of management, developed a costs allocation methodology that charges costs to the federal program in a reasonable, consistent and uniform manner in compliance with the costs principles contained in 2 CFR, Part 200, Subpart E. The primarily characteristics of this methodology are as follows: • Based upon discussions with management, review of the job description, roles and responsibilities of the Operations Manager and using prior experience and comparison to similar nonprofit organizations; an estimate of the percentage of time spent by the Operations Manager related to administration and other indirect activities was developed. • The time for the outsourced accounting services provider was removed from direct personnel costs and charged to indirect costs. • After the above revisions were made, the auditor assisted management in reallocating payroll costs across all federal and nonfederal programs and to indirect costs in a reasonable, consistent and uniform manner. • Allowable payroll taxes, benefits and other employee related expense charges were estimated using the actual percentage of these expenses as a percentage of total allowable payroll costs. • Non-allocable direct costs were charged to the program at the actual amount of those costs incurred. • Allocable direct costs charges were estimated by allocating those costs to the federal program on the basis of allowable payroll costs charged to program as a percentage of total allowable payroll costs (percentage of payroll methodology). This methodology is in compliance with the requirements of 2 CFR 200.405 and appears to produce a result that reasonably estimates the proportional benefit of these costs to all federal and non-federal programs, and to indirect cost activities. • Indirect costs were estimated and charged to the program using the 10% de minimis indirect cost rate as defined in 2 CFR 200.414. Questioned Costs: Using the methodology described above, the auditor has estimated total federal expenditures allowable to the program of $247,119. However, AIRS has charged federal expenditures of $272,781 to the program. Therefore, the estimated questioned costs related to this program are $25,662. Repeat Finding from Prior Year: No Recommendation: Senior management and accounting personnel should create procedures to ensure that direct program costs are charged at the actual amounts incurred, develop a payroll cost allocation methodology, and an allocable direct cost allocation methodology that ensures that costs are reasonably, consistently and uniformly charged to and across all federal and non-federal programs and to indirect costs relative to the proportional benefit of those costs, and in compliance with the applicable federal cost principles in 2 CFR, Part 200, Subpart E. Management and the board should consider providing senior management, accounting personnel and applicable program personnel additional training and education related to the proper application of and compliance with the federal costs principles as defined in 2 CFR, Part 200, Subpart E. Management and the board may also want to consider engaging a third-party CPA or other accounting professional who has extensive prior skills, knowledge and experience related to Uniform Guidance and federal cost principles. Views of Responsible Officials: Management concurs with this audit finding.