Finding Text
Compliance Over Allowable Costs/Activities Allowed U.S. Department of Education Title I ALN 84.010 Criteria: 2 CFR 200.405, costs must be allocable to a federal award. A cost is allocable if it is assignable to the award in accordance with the relative benefits received. Costs that benefit another program or activity may not be charged to a federal award. Additionally, the award agreement governing Title I requires that reimbursement requests be supported by adequate documentation evidencing that costs claimed are allowable, allocable, and in compliance with the terms and conditions of the federal award. Per 2 CFR 200.403, costs must be adequately documented to be allowable under federal awards. Condition: During our testing of Allowable Costs and Activities Allowed for Title I, we selected a sample of 77 transactions from the program’s population of expenditures for the year ended June 30, 2025. Of the 77 transactions tested, 2 exceptions were identified. For one transaction selected, professional service costs totaling $6,400 were charged to Title I that were incurred for and should have been charged to a separate, unrelated federal program. These costs do not benefit Title I and are therefore unallowable charges to this award. For one transaction selected, the School Board was unable to provide a reimbursement request to support costs of $1,350 claimed under the program. Cause: The $6,400 cross-charge of professional services costs appears to result from an error in cost allocation or coding, in which expenditures incurred for another program were incorrectly assigned to Title I. This indicates a deficiency in the School Board’s controls over the allocation of costs across federal programs. The unsupported reimbursement request of $1,350 indicates a deficiency in controls over the retention of supporting documentation for costs charged to the program. Effect: The misallocation of $6,400 in professional services costs to Title I resulted in unallowable costs being charged to the award. These costs provided no benefit to Title I and may be subject to disallowance by the federal awarding agency. The unsupported reimbursement request of $1,350 similarly represents a cost for which compliance with award requirements cannot be demonstrated. In aggregate, the 2 exceptions represent $7,750 in known questioned costs. Projecting the identified error rate of 2.6% (2 exceptions out of 77 transactions tested) to the full program population results in approximately $80,900 in likely questioned costs. Recommendation: We recommend that management strengthen controls over the allocation of costs to federal award programs to ensure that expenditures are charged only to the award that received the benefit of those costs, consistent with 2 CFR 200.405. Specifically, management should implement a review process to verify the accuracy of program costs coding prior to submission of reimbursement requests. Management should also refund or reclassify the $6,400 in professional service costs that were incorrectly charged to Title I. Additionally, management should implement controls to ensure that all reimbursement requests are supported by adequate documentation retained and available for audit. Repeat Finding: No. View of Responsible Officials: Beginning with FY2026, a new Federal Programs Supervisor/Director was hired by the Board, and a Fiscal Administrator was appointed on August 27, 2025. These new designees will ensure that all federal programs operate within their allowable costs, activities, procurement, suspension and debarment guidelines. Approved budgets will be reviewed and complied with as purchases are made and reviewed monthly thereafter.