Finding 1166242 (2025-001)

Material Weakness Repeat Finding
Requirement
B
Questioned Costs
-
Year
2025
Accepted
2025-12-23

AI Summary

  • Core Issue: Unallowed costs totaling $377,467 were charged to the COVID-19 Education Stabilization Fund due to a misunderstanding of allowable expenses.
  • Impacted Requirements: Compliance with 2 CFR 200.402, which outlines allowable costs for federal awards, was not met.
  • Recommended Follow-Up: Review all grant agreements to understand allowable costs and implement controls to ensure charges do not exceed the budget.

Finding Text

Finding 2025-001 – ACTIVITIES ALLOWED OR UNALLOWED and ALLOWABLE COSTS/COST PRINCIPLES (repeat comment) Type: Material weakness in internal control over compliance / Noncompliance Program: COVID 19 Education Stabilization Fund (ALN 84.425W - ARP Homeless II / ALN 84.425U – ESSER III Formula) Condition: Expenditures charged to the grant were not authorized in the grant budget. Criteria: As detailed by 2 CFR 200.402, “the total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits”. Cause: Management’s misunderstanding of costs allowed under this grant. Effect: Unallowed costs were charged to the grant based on comparison to MDE approved budgets. Consequently, reimbursements (funding sources) may be overstated. Context: Amounts expended in the current year for this grant by function code and/or object code were over the amounts allowed in the MDE approved budget by $377,467. Also, supplies and equipment charged to the grant were not approved in the grant. Recommendation: We recommend that the District review all grant agreements to gain a thorough understanding of allowable costs and establish internal controls to assure that 1) charges to the grant do not exceed budget, and 2) only allowable costs are charged to the grant. Management’s Resp: Management is in agreement with this recommendation.

Corrective Action Plan

Following the district's normal grant process with ESSER III was very difficult. ESSER III was a three-year grant. This made the process of reviewing, monitoring and amending extremely difficult. Using a normal year-to-year grant process, with carryover and a new application each year, the district could have avoided the issues that led up to this finding. That being said, the district will implement a process that allows for improved planning for expenditures and an improved monitoring of the approved budget. Through proper planning, the "last-minute" spending would be avoidable. In addition to improving the planning process, the district has implemented monthly meetings between the Director of Business Services and the Federal Programs Director. The focus of these meetings will be to complete a monthly review of planned expenses, recorded expenses, the general ledger budget within our accounting system and the budget approved in Nexsys. This monthly review, will allow the district to ensure that expenditures are classified and recorded properly. This also allows for spending to align with the approved budgets for all federal grants. This process is in addition to the approval process that is in place within the district's accounting sysem, Munis. All expenses are approved by building administrators, central office, the Business Director and then, finally, the Shepherd Board of Education as the final approval. The planned monthly meeting process for the monthly review of our federal grants will have the most impact on continued improvement of the district's internal control process.

Categories

Allowable Costs / Cost Principles

Other Findings in this Audit

  • 1166241 2025-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
93.243 SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES PROJECTS OF REGIONAL AND NATIONAL SIGNIFICANCE $414,403
84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES $231,987
10.553 SCHOOL BREAKFAST PROGRAM $213,068
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $49,086
84.367 SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (FORMERLY IMPROVING TEACHER QUALITY STATE GRANTS) $42,375
93.778 MEDICAL ASSISTANCE PROGRAM $25,479
84.424 STUDENT SUPPORT AND ACADEMIC ENRICHMENT PROGRAM $17,706
84.425 EDUCATION STABILIZATION FUND $7,801
10.555 NATIONAL SCHOOL LUNCH PROGRAM $1,364
84.365 ENGLISH LANGUAGE ACQUISITION STATE GRANTS $1,030