Finding Text
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.