Finding Text
Background
The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. The District spent $1,481,592 of its ESF awards during fiscal year 2023. This included $60,000 of its Balanced/Modified School Year Calendar Study Grant funded by the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP/ESSER II), subprogram 84.425U.
Federal regulations establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and recipients must support them with proper documentation that demonstrates costs are allowable.
The Office of Superintendent of Public Instruction requires the District to incur allowable costs before requesting reimbursement. The District must maintain documentation supporting the costs it charges to the program. The documentation must be sufficient to demonstrate compliance with program requirements.
Description of Condition
The District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements. However, our audit identified $60,000 in unallowable costs charged to the program. The District charged 32 percent of the Superintendent’s salary to the program but lacked documentation to demonstrate that the costs were allowable and complied with program requirements.
Cause of Condition
The District believed it was following the requirements of the grant and did not know it needed to retain documentation to support the allocation of the Superintendent’s salary that it charged to the federal program.
Effect of Condition and Questioned Costs
Without support, we cannot confirm the expenditures the District charged to the program were allowable, so we are questioning these costs.
Federal regulations require the Office of the Washington State Auditor to report known questioned costs that are greater than $25,000 for each type of compliance requirement. We question costs when we find the District does not have adequate documentation to support expenditures.
Recommendation
We recommend the District work with the awarding agency to determine audit resolution.
District’s Response
We appreciate the thoroughness of the audit process and acknowledge the importance of ensuring compliance with federal program requirements. However, we believe that the District complied with the requirements of the Balanced/Modified School Year Calendar Study Grant (the “Grant”). Therefore, the District disagrees with the auditor’s finding. In particular, the District disagrees with the auditor’s finding for the following reasons.
First, the District believed its approach was consistent with Grant requirements and the approach of other grant recipients. The Grant did not require documentation in the form of time and effort reports and OSPI did not require documentation for reimbursement under the Grant. In addition, it is the District’s understanding that its approach was consistent with the actions of other Grant recipients. As far as the District is aware, other Grant recipients took the same approach, yet, based on information and belief, the District is the only recipient that has been singled out for an audit finding.
Second, we appreciate the auditors revising the finding once we brought forward contradicting language around internal controls. In the original finding information, it indicated that the “District had adequate internal controls for ensuring it materially complied with activities allowed and allowable cost requirements.” However, the finding goes on to recommend that the District “strengthen internal controls to ensure it maintains documentation to demonstrate that costs it charged to federal programs are supported, allowable and comply with grant requirements.”
Third, the District reached out to OSPI regarding the auditor’s recommendation for the District to work with OSPI to “determine audit resolution.” According to OSPI, there is nothing to resolve as they approved the District’s charges to the Grant. As a result, the auditor’s recommendation would be fruitless.
The District values the recommendation to strengthen internal controls and will continue to monitor grant requirements as directed by OSPI.
We appreciate the opportunity to further enhance transparency and accountability in our financial process.
Furthermore, we are committed to ongoing monitoring and review of our financial processes to proactively identify and address any potential areas of concern.
Auditor’s Remarks
As noted above in order to charge this cost to the grant the District is required to support that 32% of the Superintendents time was spent performing allowable ESSER activities. Therefore, we found that the District did not have any support and therefore we are required to question the costs under Uniform Guidance. We reaffirm our finding and will review the District’s corrective action during our next regularly scheduled audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 403, Factors affecting allowability of costs, describes the cost principles for how direct and indirect costs should be charged to federal programs.