Finding Text
Shelton School District No. 309 September 1, 2023 through August 31, 2024 2024-002 The District overcharged costs to the Educational Stabilization Fund program. Assistance Listing Number and Title: 84.425, COVID-19 Education Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425U-137039 COVID-19, 84.425U-138110 COVID-19, 84.425W-459031 COVID-19, 84.425W-459604 COVID-19, 84.425D Known Questioned Cost Amount: $45,194 Prior Year Audit Finding: N/A Background The objectives of the Education Stabilization Fund (ESF) are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2024, the District spent $1,494,470 of its ESF awards. This included $1,340,129 in the American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER/ESSER III) subprogram (84.425U), $90,092 in the American Rescue Plan Elementary and Secondary School Emergency Relief – Homeless Children and Youth (ARP-HCYI/HCYII) subprograms (84.425W), and $64,249 in Community Eligibility Provision program (84.425D). 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 this compliance with proper documentation that demonstrates costs are allowable. The Office of Superintendent of Public Instruction (OSPI) establishes the indirect cost rate for each award, and districts cannot exceed this approved rate when claiming reimbursement. If there are changes to the rate during a multi-year award, districts must adjust the amount claimed, if needed, to ensure they do not exceed the approved rate. Description of Condition Although the District’s internal controls were adequate to ensure it materially complied with the program’s allowable activities and cost requirements, the District claimed reimbursement for unallowable interest charges accrued on a past-due invoice and did not retain support for all expenditures it charged to the program. Further, the District charged the incorrect indirect cost rate for its ARP HCYII award. Cause of Condition Previous staff did not know that interest costs were not allowable or that they need to manually adjust the District’s OSPI-issued unrestricted rate for the ARP HCYII award. The District had significant turnover in the finance department and current staff was unable to locate some of the requested supporting documentation. Effect of Condition and Questioned Costs The District claimed reimbursement for $40,366 of unallowable interest costs in award number 137039 and $199 of unsupported costs in award number 138110. We are therefore questioning these costs. Based on projection of our statistical sample, we identified an additional $1,299 in estimated overpayments. We found the District charged $4,629 more in indirect costs than allowable to the ARP HCYII award because it did not use the correct rate as instructed by OSPI. We are questioning these costs in award 459604. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the District ensure all costs it charges to federal programs are allowable and comply with cost principles and ensure it retains supporting documentation. We also recommend the District ensure it uses the correct OSPI-issued unrestricted indirect cost rate when charging costs to federal awards. District’s Response We agree with the State Auditor’s Office on the finding of the COVID-19 expenditures of unallowable interest costs. We will follow the recommendation to ensure that all costs associated to federal programs are allowable and comply with cost principles. We will ensure that supporting documentation is retained. We will also use the correct OSPI indirect cost rate when charging to these federal awards. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next 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.