Finding Text
Finding No.: 2023-009 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 AL Sub-Program: 84.425L HEERF - Minority Serving Institution Federal Award No.: COVID-19 P425L200219 Area: Activities Allowed or Unallowed Area: Allowable Costs/Cost Principles Questioned Costs: $745,189 Criteria: In accordance with applicable activities allowed or unallowed requirements, institutions must demonstrate that costs incurred are allowable under the relevant statutory provisions and consistent with the purpose of the ESF “to prevent, prepare for, and respond to coronavirus”. Allowable expenditures incurred and liquidated prior to December 27, 2020 must have been “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus”. Further, beginning December 27, 2020, any unused HEERF I Institutional Portion funds, new HEERF II Institutional Portion funds and HEERF III Institutional Portion Funds, may be used to defray expenses associated with coronavirus (including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll) and to make additional financial grants to students. HEERF I and HEERF II funds may also have been used to carry out student support activities authorized by the Higher Education Act (HEA) that address needs related to coronavirus. HEERF Frequently Asked Questions (FAQ) Rollup Document dated October 14, 2020 states that: • Question #38: Institutions can use CARES Act funds under Section 18004(a)(2) to make scholarships to students. Section 18004(a)(2) of the CARES Act state that institutions may use funds specifically “for grants to students for any component of the student’s cost of attendance (as defined under section 472 of the HEA), including food, housing, course materials, technology, health care, and child care”. • Question #47: Institution may use funds from the Institutional Portion of its section 18004(a)(1) allocation to purchase equipment or software, pay for online licensing fees, or pay for internet service to enable students to transition to distance learning as such costs are associated with a significant change in the delivery of instruction due to the coronavirus. An institution may also use Institutional Portion funds for any other costs for computer system upgrades that are reasonably related to “significant changes to the delivery of instruction due to the coronavirus.” This would not include, for example, previously planned upgrades to computer systems. 2 CFR 200.403(a) states that federal program expenditures should be necessary and reasonable for the performance of the Federal award in accordance with allowable costs/cost principles requirements and 2 CFR 200.403(g) states that costs should be adequately documented. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: For four items (or 33%) of twelve items, aggregating $1,085,985 of $1,184,585 in total non-payroll expenditures, we noted the following: Item #s 1 and 2 were not supported by adequate documentation (i.e. justification of the purpose prior to purchase and receiving reports) to ascertain whether such expenditure is associated to distance learning due to coronavirus. There is no evidence of communication or consultation with the grantor agency that this expenditure is allowable. Item # 3 pertains to relinquishment of student’s outstanding debt with the College, whereas the College directly credited student’s accounts and got reimbursement from the CARES Act funds under Section 18004(a)(2). These are not associated with coronavirus. There is no evidence of communication or consultation with the grantor agency that these expenditures are allowable. Item # 4 is standard recurring cost and not associated with coronavirus. Specifically, expenditure relates to annual software subscription of the College. There is no evidence of communication or consultation with the grantor agency that this expenditure is allowable. Cause: The College lacks adequate internal controls over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions and ensuring expenditures are necessary and reasonable for the performance of the Federal award. Effect: The College is in noncompliance with activities allowed or unallowed and allowable costs/cost principles requirements. The reportable questioned cost is $745,189 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-019 Recommendation: College management should improve internal control policies and strengthen controls and procedures over compliance with applicable activities allowed or unallowed and allowable costs/cost principles requirements, specifically, retaining sufficient documentation to support transactions. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.