FA 2025-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.010 – Title I Grants to Local Educational Agencies Federal Award Numbers: S010A240010 (Year: 2025), S010A230010 (Year: 2024) Questioned Costs: $127,026 Repeat of Prior Year Findings: FA 2024-001, FA 2023-001, FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it related to the Title I Grants to Local Educational Agencies program. Background Information: The Title I Grants to Local Educational Agencies (Title I) program is authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in highpoverty schools in particular for children failing or most at-risk of failing, to meet challenging state academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding is granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED), and GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $621,294 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, 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 criteria 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 recipient or subrecipient… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) …Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of ten nonpersonal expenditures was randomly selected for testing using a nonstatistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For three expenditures, evidence of review and approval was not reflected within the voucher package totaling $3,597. • For one expenditure, the amount recorded on the general ledger did not agree to supporting documentation resulting in a difference of $112. In addition, a sample of eleven employees was randomly selected for testing using a nonstatistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For two employees, supporting documentation could not be provided to support payments totaling $126,674. • For one employee, the amount paid did not agree to the supporting documentation provided and resulted in an overpayment of $240. Questioned Costs: Upon testing a sample of $16,775 in nonpersonal services expenditures, known questioned costs of $112 were identified for expenditures not supported by adequate documentation. Using the total nonpersonal services expenditures population of $101,353, we project the likely questioned costs to be approximately $678. Upon testing a sample of $136,554 in personal services expenditures, known questioned costs of $126,914 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $356,564, we project the likely questioned costs to be approximately $331,393. Cause: In discussing the deficiencies with the School District, they believe that these items are primarily due to improper documentation retention and oversight of approval processes. Effect: The School District was not in compliance with the Uniform Guidance and GaDOE guidance. Failure to ensure that expenditures and employee compensation payments associated with the Title I program are made for the appropriate amount and supported by appropriate documentation could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the Title I program fund as GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should evaluate their internal control processes regarding the retention of documentation to support expenditures and employee compensation payments. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are appropriately documented and to ensure that Title I program employees are paid appropriately. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are functioning properly. Views of Responsible Officials: We concur with this finding.