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.