Finding 1054591 (2023-001)

2023-001 Improve Controls over Disbursements Federal Agency: U.S. Department of Education Cluster/Program: Education Stabilization Fund Award Name: COVID-19 – Elementary and Secondary School Emergency Relief (ESSER III) Fund and COVID-19 – American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER) AL Number(s): 84.425D/84.425U Award Year: 2023 Compliance Requirement: Allowable Costs/Cost Principles Type of Finding Compliance and Internal Control over Compliance - Significant Deficiency Criteria or Specific Requirement Grantees must provide reasonable assurance that federal awards are expended only for allowable activities and that the costs of goods and services charged to federal awards are allowable and in accordance with the applicable cost principles. Management is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition and Context Supervisory approval was not obtained for 16 of 23 payroll transactions tested. Further, there was no documented evidence that multiple individuals were involved in 13 out of 16 vendor expenditures charged to the grant and one journal entry charging expenditures to the grant. Cause Weaknesses in the design and operation of controls. Effect or Potential Effect Due to the weaknesses in internal controls noted above, there is a risk that disbursements may be awarded to vendors in a manner that is not consistent with federal requirements. Known or likely questioned costs are reported equal to $214,332, as follows: AL Known or likely Questioned Number(s) Name of Federal Program or Cluster Costs 84.425D/84.425U COVID-19 – Elementary and Secondary School Emergency Relief Fund $214,332 Recommendation The Town should address the weaknesses in internal controls noted above in order to provide reasonable assurance that federal awards are expended only for allowable activities, and that the costs services charged to federal awards are allowable and in accordance with the applicable cost principles. Views of Responsible Official Management agrees with the finding. Planned Corrective Action Management’s corrective action plan is included at the end of this report.