Finding 1140289 (2024-001)

FA 2024-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principes Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: COVID-19 – 84.425D - Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U - American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $72,595.67 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund programs revealed that the School District’s internal control procedures were not operating appropriately to ensure that expenditures were properly recorded. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,128,574.33 were expended and reported on the Seminole County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to 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 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (f) Not be included as a cost or used to meet the cost sharing or matching requirements of any other federally-financed program in either the current or a prior period, (g) Be adequately documented…” Condition: Auditors performed a review of expenditure activity associated with ESSER to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that expenditures for personnel services were overstated by $72,595.67 due to the duplication of salary and benefits expenditures in the general ledger. As a result, duplicate federal reimbursement funding was also requested and received for those unallowable expenditures. Questioned Costs: Known questioned costs of $72,595.67 were identified for unallowable expenditures that were reimbursed through ESSER programs. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: In discussing this deficiency with management, they stated that the School District payroll accruals recorded in the general ledger were duplicated due to oversight causing salary and benefits expense charged to the ESSER program to be overstated. Effect: The School District is not in compliance with the Uniform Guidance and the U.S. Department of Education (ED) guidance related to the ESSER program. Failure to ensure that appropriate controls exist may expose the School District to unnecessary financial strains and shortages as the grantor and/or pass-through entity may require the School District to return funds associated with the unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that duplicate reimbursements are not sought from ESSER programs for the same expenditures. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.