FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context For the Child Nutrition Cluster, the reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals rates formula. However, the School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. All expenditures from the reimbursement payment must also be reasonable and allocable. The purchase of capital expenditures, those expenditures which are over $5,000 or more for an item that is to be used for general purposes for multiple years, must have approval by the Indiana Department of Education (IDOE) prior to purchase. In fiscal year 2022-2023, the School Corporation purchased two pieces of equipment, each over $5,000, without approval from the IDOE. The first piece of equipment was a liftgate in the amount of $6,906, and the second piece of equipment was a vehicle in the amount of $7,500. The total amount of $14,406 was considered questioned costs. In addition, the School Corporation did not have an allowable costs policy outlining the School Corporation's processes and policies with regards to costs charged to federal grants. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.439(b) states in part: "The following rule of allowability must apply to equipment and other capital expenditures: . . . (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, equipment was purchased without prior approval from the IDOE. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs Questioned costs in the amount of $14,406 were identified as noted in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that equipment purchased over $5,000 is approved by the IDOE prior to purchase. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context For the Child Nutrition Cluster, the reimbursement for meals served is not based on costs; it is determined solely by applying the applicable meals rates formula. However, the School Corporation can use its entire reimbursement payment for any combination of allowable operating and administrative costs. All expenditures from the reimbursement payment must also be reasonable and allocable. The purchase of capital expenditures, those expenditures which are over $5,000 or more for an item that is to be used for general purposes for multiple years, must have approval by the Indiana Department of Education (IDOE) prior to purchase. In fiscal year 2022-2023, the School Corporation purchased two pieces of equipment, each over $5,000, without approval from the IDOE. The first piece of equipment was a liftgate in the amount of $6,906, and the second piece of equipment was a vehicle in the amount of $7,500. The total amount of $14,406 was considered questioned costs. In addition, the School Corporation did not have an allowable costs policy outlining the School Corporation's processes and policies with regards to costs charged to federal grants. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.439(b) states in part: "The following rule of allowability must apply to equipment and other capital expenditures: . . . (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, equipment was purchased without prior approval from the IDOE. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs Questioned costs in the amount of $14,406 were identified as noted in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that equipment purchased over $5,000 is approved by the IDOE prior to purchase. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding Number: 2023-001 Repeat Finding: Yes Program Name/Assistance Listing Title: Education Stabilization Fund Assistance Listing Number: 84.425D and 84.425U Federal Agency: U.S. Department of Education Federal Award Number: 23SSPCON-311221-01A, 21FESSII-111221-01A, 21FESIII-111221-01A Questioned Costs: None Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Equipment/Real Property Management Condition/Context: The District did not tag and track the capital assets purchased with Education Stabilization Fund monies. Criteria: 2 CFR Section 200.313 (equipment) and section 200.439 (equipment and other capital expenditures) Effect: Noncompliance with grant requirements. Cause: Management oversight. Recommendation: The District should ensure that it tags, tracks, and inventories its capital assets purchased with federal monies. Response: The District concurs with this recommendation and will implement procedures to ensure compliance with grant requirements. Contact person: Clay Bowman, Director of Finance
2 CFR §400.1 gives regulatory effect to the Department of Agriculture for 2 CFR §200.439(b) which provides that the following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Furthermore, the School District’s Administration of Federal Grant Funds Policy (DECA) provides costs charged by the school system to a federal grant must be allowed under the individual program and be in accordance with the cost principles established in the Uniform Guidance, including how charges made to the grant for personnel are to be determined. Costs will be charged to a federal grant only when the costs is reasonable and necessary for the program, in compliance with applicable laws and regulations, allocable to the grant, adequately documented and consistent with School District policies and procedures that apply to both federally-funded and non-federally-funded activities. During fiscal year 2023, the School District purchased a catering truck in the amount of $80,000 with commingled Child Nutrition Cluster monies without obtaining prior written approval from the Ohio Department of Education, the pass-through entity, or the Department of Agriculture, resulting in questioned costs of $80,000. Failure to acquire prior written approval for capital expenditures with a unit cost of $5,000 or more from the Federal awarding agency or pass-through entity may result in expenditures that are not allowable under Federal awards. We recommend the School District acquire prior written approval for capital expenditures with a unit cost of $5,000 or more to ensure compliance with federal award requirements.
2 CFR §400.1 gives regulatory effect to the Department of Agriculture for 2 CFR §200.439(b) which provides that the following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Furthermore, the School District’s Administration of Federal Grant Funds Policy (DECA) provides costs charged by the school system to a federal grant must be allowed under the individual program and be in accordance with the cost principles established in the Uniform Guidance, including how charges made to the grant for personnel are to be determined. Costs will be charged to a federal grant only when the costs is reasonable and necessary for the program, in compliance with applicable laws and regulations, allocable to the grant, adequately documented and consistent with School District policies and procedures that apply to both federally-funded and non-federally-funded activities. During fiscal year 2023, the School District purchased a catering truck in the amount of $80,000 with commingled Child Nutrition Cluster monies without obtaining prior written approval from the Ohio Department of Education, the pass-through entity, or the Department of Agriculture, resulting in questioned costs of $80,000. Failure to acquire prior written approval for capital expenditures with a unit cost of $5,000 or more from the Federal awarding agency or pass-through entity may result in expenditures that are not allowable under Federal awards. We recommend the School District acquire prior written approval for capital expenditures with a unit cost of $5,000 or more to ensure compliance with federal award requirements.
2 CFR §400.1 gives regulatory effect to the Department of Agriculture for 2 CFR §200.439(b) which provides that the following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Furthermore, the School District’s Administration of Federal Grant Funds Policy (DECA) provides costs charged by the school system to a federal grant must be allowed under the individual program and be in accordance with the cost principles established in the Uniform Guidance, including how charges made to the grant for personnel are to be determined. Costs will be charged to a federal grant only when the costs is reasonable and necessary for the program, in compliance with applicable laws and regulations, allocable to the grant, adequately documented and consistent with School District policies and procedures that apply to both federally-funded and non-federally-funded activities. During fiscal year 2023, the School District purchased a catering truck in the amount of $80,000 with commingled Child Nutrition Cluster monies without obtaining prior written approval from the Ohio Department of Education, the pass-through entity, or the Department of Agriculture, resulting in questioned costs of $80,000. Failure to acquire prior written approval for capital expenditures with a unit cost of $5,000 or more from the Federal awarding agency or pass-through entity may result in expenditures that are not allowable under Federal awards. We recommend the School District acquire prior written approval for capital expenditures with a unit cost of $5,000 or more to ensure compliance with federal award requirements.
2 CFR §400.1 gives regulatory effect to the Department of Agriculture for 2 CFR §200.439(b) which provides that the following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Furthermore, the School District’s Administration of Federal Grant Funds Policy (DECA) provides costs charged by the school system to a federal grant must be allowed under the individual program and be in accordance with the cost principles established in the Uniform Guidance, including how charges made to the grant for personnel are to be determined. Costs will be charged to a federal grant only when the costs is reasonable and necessary for the program, in compliance with applicable laws and regulations, allocable to the grant, adequately documented and consistent with School District policies and procedures that apply to both federally-funded and non-federally-funded activities. During fiscal year 2023, the School District purchased a catering truck in the amount of $80,000 with commingled Child Nutrition Cluster monies without obtaining prior written approval from the Ohio Department of Education, the pass-through entity, or the Department of Agriculture, resulting in questioned costs of $80,000. Failure to acquire prior written approval for capital expenditures with a unit cost of $5,000 or more from the Federal awarding agency or pass-through entity may result in expenditures that are not allowable under Federal awards. We recommend the School District acquire prior written approval for capital expenditures with a unit cost of $5,000 or more to ensure compliance with federal award requirements.
2 CFR §400.1 gives regulatory effect to the Department of Agriculture for 2 CFR §200.439(b) which provides that the following rules of allowability must apply to equipment and other capital expenditures: (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. (2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. Furthermore, the School District’s Administration of Federal Grant Funds Policy (DECA) provides costs charged by the school system to a federal grant must be allowed under the individual program and be in accordance with the cost principles established in the Uniform Guidance, including how charges made to the grant for personnel are to be determined. Costs will be charged to a federal grant only when the costs is reasonable and necessary for the program, in compliance with applicable laws and regulations, allocable to the grant, adequately documented and consistent with School District policies and procedures that apply to both federally-funded and non-federally-funded activities. During fiscal year 2023, the School District purchased a catering truck in the amount of $80,000 with commingled Child Nutrition Cluster monies without obtaining prior written approval from the Ohio Department of Education, the pass-through entity, or the Department of Agriculture, resulting in questioned costs of $80,000. Failure to acquire prior written approval for capital expenditures with a unit cost of $5,000 or more from the Federal awarding agency or pass-through entity may result in expenditures that are not allowable under Federal awards. We recommend the School District acquire prior written approval for capital expenditures with a unit cost of $5,000 or more to ensure compliance with federal award requirements.
"U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION EDUCATION STABILIZATION FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 5403 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023" 2023-001. Equipment and Real Property Management Criteria or specific requirement: Purchases of real property and/or construction for improvements require the prior written approval of the Federal awarding agency or pass-through entity, as specified in OMB 2 CFR section 200.439. Condition: During our examination of real property and construction improvements from the Education Stabilization Fund, we identified a facilities improvement project that was denied prior approval of Education Stabilization funding by the Arkansas Division of Elementary and Secondary Education. Expenditures paid from Education Stabilization Fund for this project totaled $622,511. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $622,511 were paid from COVID-19-Education Stabilization Fund. Questioned costs: The amount of questioned costs was $622,511. Context: Examination of all payments for construction for improvements to land, buildings, and equipment totaling $1,577,417. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The issue related to this finding is being resolved by reclassifying the fund to the appropriate fund source. The District sought the guidance of Division of Elementary and Secondary Education (DESE) to confirm the reclassification along with returning the funds to the Arkansas Department of Education. A system of checks and balances has been established for approval of all purchases including contract services.
"U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION EDUCATION STABILIZATION FUND - AL NUMBERS 84.425D AND 84.425U PASS-THROUGH NUMBER 5403 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023" 2023-001. Equipment and Real Property Management Criteria or specific requirement: Purchases of real property and/or construction for improvements require the prior written approval of the Federal awarding agency or pass-through entity, as specified in OMB 2 CFR section 200.439. Condition: During our examination of real property and construction improvements from the Education Stabilization Fund, we identified a facilities improvement project that was denied prior approval of Education Stabilization funding by the Arkansas Division of Elementary and Secondary Education. Expenditures paid from Education Stabilization Fund for this project totaled $622,511. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $622,511 were paid from COVID-19-Education Stabilization Fund. Questioned costs: The amount of questioned costs was $622,511. Context: Examination of all payments for construction for improvements to land, buildings, and equipment totaling $1,577,417. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The issue related to this finding is being resolved by reclassifying the fund to the appropriate fund source. The District sought the guidance of Division of Elementary and Secondary Education (DESE) to confirm the reclassification along with returning the funds to the Arkansas Department of Education. A system of checks and balances has been established for approval of all purchases including contract services.
2023-042 Oregon Department of Education Retain support for pre-approval of equipment purchases Federal Awarding Agency: U.S. Department of Education Assistance Listing Number and Name: 84.425C, 84.425D 84.425U & 84.425W Education Stabilization Fund (COVID-19) Federal Award Numbers and Years: S425C210048, 2021 (COVID-19); S425D210049, 2021 (COVID-19); S425U210049, 2021 (COVID-19); S425W210038, 2021 (COVID-19) Compliance Requirement: Equipment Type of Finding: Significant Deficiency: Noncompliance Prior Year Finding: N/A Questioned Costs: N/A Criteria: 2 CFR 200.439; 2 CFR 200.303 Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the state agency. Federal regulations also require recipients of federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Education Stabilization Funds can be used to purchase equipment that meets the overall purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to the COVID-19 pandemic. Department procedure is for subrecipients to submit a capital request forms to the department for approval. Education will email an approval to the subrecipient. We tested 61 equipment purchases made during fiscal year 2023 and found that for one an approval could not be located. As no approval could be found, we were unable to determine if prior approval was made for the equipment. According to department management, documentation could not be located. If documentation is not retained, there is a risk that funds expended are not in compliance with federal requirements. We recommend the department retain documentation regarding every equipment approval.
2023-042 Oregon Department of Education Retain support for pre-approval of equipment purchases Federal Awarding Agency: U.S. Department of Education Assistance Listing Number and Name: 84.425C, 84.425D 84.425U & 84.425W Education Stabilization Fund (COVID-19) Federal Award Numbers and Years: S425C210048, 2021 (COVID-19); S425D210049, 2021 (COVID-19); S425U210049, 2021 (COVID-19); S425W210038, 2021 (COVID-19) Compliance Requirement: Equipment Type of Finding: Significant Deficiency: Noncompliance Prior Year Finding: N/A Questioned Costs: N/A Criteria: 2 CFR 200.439; 2 CFR 200.303 Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the state agency. Federal regulations also require recipients of federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Education Stabilization Funds can be used to purchase equipment that meets the overall purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to the COVID-19 pandemic. Department procedure is for subrecipients to submit a capital request forms to the department for approval. Education will email an approval to the subrecipient. We tested 61 equipment purchases made during fiscal year 2023 and found that for one an approval could not be located. As no approval could be found, we were unable to determine if prior approval was made for the equipment. According to department management, documentation could not be located. If documentation is not retained, there is a risk that funds expended are not in compliance with federal requirements. We recommend the department retain documentation regarding every equipment approval.
2023-042 Oregon Department of Education Retain support for pre-approval of equipment purchases Federal Awarding Agency: U.S. Department of Education Assistance Listing Number and Name: 84.425C, 84.425D 84.425U & 84.425W Education Stabilization Fund (COVID-19) Federal Award Numbers and Years: S425C210048, 2021 (COVID-19); S425D210049, 2021 (COVID-19); S425U210049, 2021 (COVID-19); S425W210038, 2021 (COVID-19) Compliance Requirement: Equipment Type of Finding: Significant Deficiency: Noncompliance Prior Year Finding: N/A Questioned Costs: N/A Criteria: 2 CFR 200.439; 2 CFR 200.303 Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the state agency. Federal regulations also require recipients of federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Education Stabilization Funds can be used to purchase equipment that meets the overall purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to the COVID-19 pandemic. Department procedure is for subrecipients to submit a capital request forms to the department for approval. Education will email an approval to the subrecipient. We tested 61 equipment purchases made during fiscal year 2023 and found that for one an approval could not be located. As no approval could be found, we were unable to determine if prior approval was made for the equipment. According to department management, documentation could not be located. If documentation is not retained, there is a risk that funds expended are not in compliance with federal requirements. We recommend the department retain documentation regarding every equipment approval.
2023-042 Oregon Department of Education Retain support for pre-approval of equipment purchases Federal Awarding Agency: U.S. Department of Education Assistance Listing Number and Name: 84.425C, 84.425D 84.425U & 84.425W Education Stabilization Fund (COVID-19) Federal Award Numbers and Years: S425C210048, 2021 (COVID-19); S425D210049, 2021 (COVID-19); S425U210049, 2021 (COVID-19); S425W210038, 2021 (COVID-19) Compliance Requirement: Equipment Type of Finding: Significant Deficiency: Noncompliance Prior Year Finding: N/A Questioned Costs: N/A Criteria: 2 CFR 200.439; 2 CFR 200.303 Capital expenditures for general and special purpose equipment purchases are subject to prior approval by the state agency. Federal regulations also require recipients of federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Education Stabilization Funds can be used to purchase equipment that meets the overall purpose of the Education Stabilization Fund, which is to prevent, prepare for, and respond to the COVID-19 pandemic. Department procedure is for subrecipients to submit a capital request forms to the department for approval. Education will email an approval to the subrecipient. We tested 61 equipment purchases made during fiscal year 2023 and found that for one an approval could not be located. As no approval could be found, we were unable to determine if prior approval was made for the equipment. According to department management, documentation could not be located. If documentation is not retained, there is a risk that funds expended are not in compliance with federal requirements. We recommend the department retain documentation regarding every equipment approval.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
Federal Program Affected Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or passthrough entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $305,312 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $305,312 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425D PASS THROUGH NUMBER 7104 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023 2023-001. Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: In our test of expenditures from the COVID-19 Education Stabilization Fund, we identified an equipment purchase with a unit cost greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education (DESE). The equipment had a cost of $30,967. Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $30,967 were paid from the COVID-19 Education Stabilization Fund. Questioned costs: The amount of questioned costs was $30,967. Context: As a result of an examination of 4 checks (totaling $139,550) from a population of 23 checks (totaling $268,217). Our sample was statistically valid. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The timeline for prior approval and ordering of the piece of equipment referenced above happened prior to the new administration coming into the District. However, as Superintendent of the District, I should have double checked to ensure that the correct protocol was followed. Since being in this role, every item the District has purchased using the COVID-19 Education Stabilization Fund has documented prior approval and will continue to do so until the end of these funds.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
FINDING #2023-003: EDUCATION STABILIZATION FUNDS (ESF) – EQUIPMENT AND OTHER CAPITAL EXPENDITURES (50000) Program Name: Elementary and Secondary School Emergency Relief II (ESSER II) Fund Assistance Listing Number: 84.425 Pass-Through Agency: California Department of Education (CDE) Federal Agency: U.S. Department of Education (ED) Criteria: Consistent with 2 CFR section 200.311 (real property), section 200.313 (equipment), and section 200.439 (equipment and other capital expenditures) ESF funds may be used to purchase equipment. Capital expenditures for general and special purpose equipment purchases are subject to prior approval by ED or the pass-through entity. Condition: Through testing a representative sample of ESF expenditures, we noted that the network switch purchases did not appear to be pre-approved by the California Department of Education (CDE). Each purchase order provided for the purchase and installation of network switches with a per unit cost in excess of $5,000 (including installation and other ancillary costs). Context: The condition was identified through the testing of ESF expenditures. Cause: District oversight. Effect: The funds spent on these purchases may be subject to review by or return to the awarding agency. Questioned Costs: $208,801. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the District obtain prior approval from CDE for all capital purchases from the Education Stabilization Fund in excess of $5,000. Views of Responsible Officials: See Corrective Action Plan on following page.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH THE ARKANSAS DEPARTMENT OF EDUCATION COVID-19 - AMERICAN RESCUE PLAN - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 7009 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023 2023-002 Allowable Costs/Cost Principles Criteria or specific requirement: Purchase of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR Section 200.439. Condition: In our test of expenditures from the COVID-19 Education Stabilization Fund, we identified two equipment purchases with unit costs greater than the $5,000 threshold for which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education (DESE). These purchases had a total cost of $10,400. Cause: Lack of Internal controls and management oversight over program expenditures. Effect or potential effect: Unallowable costs of $10,400 were paid from the COVID-19 - Education Stabilization Fund. Questioned costs: The amount of questioned costs were $10,400. Context: We examined all capital expenditures of the COVID-19 - Education Stabilization Fund totaling $68,927. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will communicate with the team at DESE to determine what is needed to bring all files current. The District understands fully that all state and federal spending must follow guidelines set forth in the grant or amount allocated. Accounts payable will not release funds until all guidelines and documents are secured and attached to the Purchase Card of Purchase Order form. The District will conduct a training to inform supervisors what forms and guidelines are required prior to the release of any monies.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION COVID-19 - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425D PASS-THROUGH NUMBER 5106 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023 2023-002.Allowable Costs/Cost Principles Criteria or specific requirement: Purchases of equipment and other capital expenditures require the prior written approval of the Federal awarding agency or pass-through entity, as specified in Office of Management and Budget (OMB) 2 CFR section 200.439. Condition: During our examination of expenditures, we identified four capital expenditures totaling $34,957 paid from the COVID-19 Education Stabilization Fund in which the District did not obtain prior written approval from the Arkansas Division of Elementary and Secondary Education (DESE). These capital expenditures included gymnasium windows ($20,259) and consultation for projects in which the District did not proceed with, including restroom renovations ($8,378) and an agricultural barn ($6,320). Cause: Lack of internal controls and management oversight over program expenditures. Effect or potential effect: Questioned costs of $34,957 were paid from COVID-19-Education Stabilization Fund. Questioned costs: Total questioned costs of $34,957 Context: All capital expenditures were examined totaling $97,536. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will contact the Division of Elementary and Secondary Education (DESE) for guidance regarding this matter. The District will follow the guidance from DESE to ensure compliance with federal regulations and commissioners memos to ensure the District follows allowable costs and principles. Further, the partnership DMJ now has with the Arkansas Public School Resource Center (APSRC) will help establish proper internal controls and management over program expenditures.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
Federal Agency: U.S. Department of Education Pass-through Entity: California Department of Education Federal Program: Education Stabilization Fund (ESF) ALN: 84.425D & 84.425U (FY 2022-2023) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Non-Compliance Criteria or Specific Requirements The Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1) states: “Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity.” Furthermore, the California Department of Education’s (CDE) FAQs on Capital Expenditures state the following: “In accordance with 2 CFR 200.439, prior approval is required for any single big-ticket purchases at the cost of $5,000 or more using the funding sources cited above. These purchases can include general purpose equipment, buildings, and land, including material improvements. This means one costly item (or several items which make up one unit) and the cost includes all the ancillary expenses such as design costs, new electrical circuit for the item, and other related fees. To obtain approval, an LEA must fill out the Capital Expenditures Pre-Approval Application Form” Condition The District had a total of $33,200 in capital expenditures charged to ESF that was not preapproved by CDE. Questioned Costs A total of $33,200 in questioned costs were noted based on the condition identified. Context The condition was identified as a result of our review and testing of expenditures charged to various ESF programs. Effect As a result of the condition identified, the District was not in compliance with the Code of Federal Regulations, Title 2, Subtitle A, Chapter II, Part 200, Subpart E, Section 200.439(a)(1). Cause The cause appears to be attribute to the District’s improper monitoring and lack of knowledge over this specific compliance requirement. Additionally, a contributing factor appears to be a turnover in a key position that provides oversight for this program. Repeat Finding No. Recommendation The District should become familiar with all of the compliance requirements with ESF. As a resource, the District should utilize a combination of guidance provided by CDE and also by Subpart E of the Uniform Guidance that provides guidance on cost principles. Additionally, the District should establish more effective control activities and monitoring over how Federal funds are spent to ensure compliance, moving forward. Corrective Action Plan and Views of Responsible Officials The District will ensure that all proposed capital expenditures originating from any Federal sources that are in excess of $5,000 are pre-approved by CDE prior to executing the proposed transaction.
2 CFR § 200.439(b)(1) states that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Further, 2 CFR § 200.439(b)(2) states that capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. 2 CFR § 200.439(b)(3) states, in part, that capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. 2 CFR § 200.421(e)(3) states, in part, that unallowable advertising and public relations costs include the costs of promotional items and memorabilia, including models, gifts, and souvenirs. Additionally, the federal grant agreement states, in part, that all construction and other capital expenditures/improvements supported with federal funds must be pre-approved by the Ohio Department of Education through the CCIP Application Process. Construction means (A) the preparation of drawings and specifications for school facilities; (B) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; and (C) inspecting and supervising the construction of school facilities. Capital expenditures means expenditures to acquire capital assets (i.e., land, facilities, or equipment over $5,000 per unit) or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. During our testing of the ESSER Federal grant monies, we sampled 60 non-payroll transactions totaling $923,224 and two individually important items totaling $372,000. We noted the following exceptions: • 18 out of 60 transactions totaling $344,620 and one out of two individually important items totally $198,000 were not allowable per the programmatic requirements listed above. These noncompliant expenditures resulted in a projected noncompliant amount of $1,168,544. • One of the above expenditures is unallowable per the Federal grant agreement and per CFR § 200.421(e)(3) which was for the purchase of new hire t-shirts in the amount of $288; and • Seventeen of the above expenditures and one individually important item were for the purchase of various capital expenditures (the Patterson Field project, scoreboard, gym floor resurfacing, electrical repairs, garage roof repairs, gymnasium sound system, boiler repairs, security cameras, riding floor scrubber, copiers, a tractor, classroom expansion project and an ice machine) which were unallowable per the Federal grant agreement and 2 CFR § 200.439(b)(1), 2 CFR § 200.439(b)(2), and 2 CFR § 200.439(b)(3). The unallowable activities/costs paid with these Federal grant monies is in excess of $25,000 and therefore considered questioned costs under 2 CFR § 200.516. District management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should thoroughly review all grant documentation to ensure all expenditures spent using Federal funds are in compliance with requirements.
2 CFR § 200.439(b)(1) states that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Further, 2 CFR § 200.439(b)(2) states that capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. 2 CFR § 200.439(b)(3) states, in part, that capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. 2 CFR § 200.421(e)(3) states, in part, that unallowable advertising and public relations costs include the costs of promotional items and memorabilia, including models, gifts, and souvenirs. Additionally, the federal grant agreement states, in part, that all construction and other capital expenditures/improvements supported with federal funds must be pre-approved by the Ohio Department of Education through the CCIP Application Process. Construction means (A) the preparation of drawings and specifications for school facilities; (B) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; and (C) inspecting and supervising the construction of school facilities. Capital expenditures means expenditures to acquire capital assets (i.e., land, facilities, or equipment over $5,000 per unit) or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. During our testing of the ESSER Federal grant monies, we sampled 60 non-payroll transactions totaling $923,224 and two individually important items totaling $372,000. We noted the following exceptions: • 18 out of 60 transactions totaling $344,620 and one out of two individually important items totally $198,000 were not allowable per the programmatic requirements listed above. These noncompliant expenditures resulted in a projected noncompliant amount of $1,168,544. • One of the above expenditures is unallowable per the Federal grant agreement and per CFR § 200.421(e)(3) which was for the purchase of new hire t-shirts in the amount of $288; and • Seventeen of the above expenditures and one individually important item were for the purchase of various capital expenditures (the Patterson Field project, scoreboard, gym floor resurfacing, electrical repairs, garage roof repairs, gymnasium sound system, boiler repairs, security cameras, riding floor scrubber, copiers, a tractor, classroom expansion project and an ice machine) which were unallowable per the Federal grant agreement and 2 CFR § 200.439(b)(1), 2 CFR § 200.439(b)(2), and 2 CFR § 200.439(b)(3). The unallowable activities/costs paid with these Federal grant monies is in excess of $25,000 and therefore considered questioned costs under 2 CFR § 200.516. District management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should thoroughly review all grant documentation to ensure all expenditures spent using Federal funds are in compliance with requirements.
4. Capital Expenditures Finding Number: 2023-009 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Equipment And Real Property Management Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance, Material Weakness, and Questioned Cost 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200.439 which states, in part, that capital expenditures for general purpose equipment, buildings and land and improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency or pass-through entity. The District expended $412,699 of its American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL number 84.425U federal grant funds for roof replacements and a bathroom renovation. The School District failed to have this capital expenditure pre-approved by the pass-through entity Ohio Department of Education and Workforce for the 2023 grant year due to a misunderstanding of requirements. Therefore, we consider the amount of $412,699 to be a questioned cost. Failure to obtain proper pre-approval for capital expenditures could lead to future questioned costs, reduced future federal funding, and the requirement to repay the Ohio Department of Education and Workforce.
4. Capital Expenditures Finding Number: 2023-009 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Equipment And Real Property Management Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance, Material Weakness, and Questioned Cost 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200.439 which states, in part, that capital expenditures for general purpose equipment, buildings and land and improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency or pass-through entity. The District expended $412,699 of its American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL number 84.425U federal grant funds for roof replacements and a bathroom renovation. The School District failed to have this capital expenditure pre-approved by the pass-through entity Ohio Department of Education and Workforce for the 2023 grant year due to a misunderstanding of requirements. Therefore, we consider the amount of $412,699 to be a questioned cost. Failure to obtain proper pre-approval for capital expenditures could lead to future questioned costs, reduced future federal funding, and the requirement to repay the Ohio Department of Education and Workforce.
4. Capital Expenditures Finding Number: 2023-009 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Equipment And Real Property Management Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance, Material Weakness, and Questioned Cost 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200.439 which states, in part, that capital expenditures for general purpose equipment, buildings and land and improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency or pass-through entity. The District expended $412,699 of its American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL number 84.425U federal grant funds for roof replacements and a bathroom renovation. The School District failed to have this capital expenditure pre-approved by the pass-through entity Ohio Department of Education and Workforce for the 2023 grant year due to a misunderstanding of requirements. Therefore, we consider the amount of $412,699 to be a questioned cost. Failure to obtain proper pre-approval for capital expenditures could lead to future questioned costs, reduced future federal funding, and the requirement to repay the Ohio Department of Education and Workforce.
4. Capital Expenditures Finding Number: 2023-009 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Equipment And Real Property Management Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance, Material Weakness, and Questioned Cost 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200.439 which states, in part, that capital expenditures for general purpose equipment, buildings and land and improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency or pass-through entity. The District expended $412,699 of its American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL number 84.425U federal grant funds for roof replacements and a bathroom renovation. The School District failed to have this capital expenditure pre-approved by the pass-through entity Ohio Department of Education and Workforce for the 2023 grant year due to a misunderstanding of requirements. Therefore, we consider the amount of $412,699 to be a questioned cost. Failure to obtain proper pre-approval for capital expenditures could lead to future questioned costs, reduced future federal funding, and the requirement to repay the Ohio Department of Education and Workforce.
4. Capital Expenditures Finding Number: 2023-009 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Equipment And Real Property Management Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance, Material Weakness, and Questioned Cost 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. § 200.439 which states, in part, that capital expenditures for general purpose equipment, buildings and land and improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency or pass-through entity. The District expended $412,699 of its American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL number 84.425U federal grant funds for roof replacements and a bathroom renovation. The School District failed to have this capital expenditure pre-approved by the pass-through entity Ohio Department of Education and Workforce for the 2023 grant year due to a misunderstanding of requirements. Therefore, we consider the amount of $412,699 to be a questioned cost. Failure to obtain proper pre-approval for capital expenditures could lead to future questioned costs, reduced future federal funding, and the requirement to repay the Ohio Department of Education and Workforce.
Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000 Name of Federal Agency: Listing Award Number Number 64.033 13-ZZ-134 U. S. Department of Veterans Affairs (VA) Program Title VA Supportive Services for Veteran Families (SSVF) Criteria or specific requirement: 2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. 14 THE ALSTON WILKES SOCIETY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2022 Section III - Federal Award Findings and Questioned Costs (continued) 2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements that add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. 2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3) 1 Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs, but only with the prior written approval of the Federal agency or pass-through entity. 2 Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity, and 3 Capital expenditures for improvements to land, buildings, or equipment that materially increase their value or useful life are allowable as a direct cost, but only with the prior written approval of the Federal agency or pass-through entity. Condition: We identified two transactions where the Society should have received prior written approval from the awarding agency, before incurring the costs. The transactions, in the amounts of $26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs, respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written approval. Cause of condition: The reason the condition occurred appears to be the lack of a thorough understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost Principles). Potential effect of condition: The possible effect of this condition is non-compliance with prior written approval requirements for disbursements totaling $44,057.51. Section III - Federal Award Findings and Questioned Costs (continued) Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The questioned cost amount was computed by adding the total of the two sample items tested for this condition, as shown below: Sample # Description 28 Floor Repairs 29 Equipment Maintenance Amount $18,000.00 26,057.51 $ 44,057.51 Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16 was selected. Out of the 40 sample items tested, two were identified where prior written approval was not obtained, totaling $44,057.51. Repeat Finding: No Recommendation: We recommend management ensure accounting personnel responsible for the administration of funds related to award programs, refamiliarize themselves with 2 CFR 200 Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental entities.
Finding 2022-5 No Prior Written Approval for Capital Disbursements in Excess of $10,000 Name of Federal Agency: Listing Award Number Number 64.033 13-ZZ-134 U. S. Department of Veterans Affairs (VA) Program Title VA Supportive Services for Veteran Families (SSVF) Criteria or specific requirement: 2 CFR 200.1 Definition for: Capital Expenditures means expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. 14 THE ALSTON WILKES SOCIETY SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2022 Section III - Federal Award Findings and Questioned Costs (continued) 2 CFR 200.452 Maintenance and repair costs states: Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements that add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. 2 CFR 200.439 Equipment and Other Capital Expenditures, (b) (1-3) 1 Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs, but only with the prior written approval of the Federal agency or pass-through entity. 2 Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity, and 3 Capital expenditures for improvements to land, buildings, or equipment that materially increase their value or useful life are allowable as a direct cost, but only with the prior written approval of the Federal agency or pass-through entity. Condition: We identified two transactions where the Society should have received prior written approval from the awarding agency, before incurring the costs. The transactions, in the amounts of $26,057 and $18,000, were recorded as equipment maintenance expense, and floor repairs, respectively. In accordance 2 CFR 200.439 b, it appears the cost should have had prior written approval. Cause of condition: The reason the condition occurred appears to be the lack of a thorough understanding of the cost principles under the Uniform Guidance (2 CFR Part 200, Subpart E - Cost Principles). Potential effect of condition: The possible effect of this condition is non-compliance with prior written approval requirements for disbursements totaling $44,057.51. Section III - Federal Award Findings and Questioned Costs (continued) Questioned Costs: This condition resulted in questioned costs totaling $44,057.51. The questioned cost amount was computed by adding the total of the two sample items tested for this condition, as shown below: Sample # Description 28 Floor Repairs 29 Equipment Maintenance Amount $18,000.00 26,057.51 $ 44,057.51 Prevalence and Consequence: A judgmental sample of 40 disbursements totaling $134,400.16 was selected. Out of the 40 sample items tested, two were identified where prior written approval was not obtained, totaling $44,057.51. Repeat Finding: No Recommendation: We recommend management ensure accounting personnel responsible for the administration of funds related to award programs, refamiliarize themselves with 2 CFR 200 Subpart E - Cost Principles, to enable them to recognize when prior written approval is required, and when to capitalize certain capital expenditures when the federal criteria are met for nongovernmental entities.
Finding No. 2022-004 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Allowable Costs/Cost Principles Questioned Costs: $28,975 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 25 (or 63%) of 40 transactions tested, aggregating $39,942 out of $4,631,757 in total payroll expenditures, the Notice of Personnel Action (NOPA) form was not provided for differential payments paid to employees. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-049031-US and PS-055730-US, which were acquired within fiscal year 2022, totaling $14,299. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $28,975. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with Condition 1. Management agrees with Condition 2. Auditor response: Condition 1 – Part T60-30.1-448 (Approval of Proposals to Provide Premium Pay or Differentials) of the PSS Personnel Rules and Regulations states that all proposals for pay differentials as defined herein shall be submitted by the Commissioner of Education on a request for personnel action (form CSC P 1) to the Personnel Management Officer for review and approval. The request must be accompanied by a letter of justification addressing each of the criteria required to support the particular differential. PSS is in noncompliance with its personnel rules and regulations as it failed to provide documentation supporting a request for personnel action, which is determined to be the NOPA for these instances. The NOPA also determines whether the employee is validly employed at date of payment of the differential. The condition remains.
Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.
Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.