Finding Text
2022-002 The District?s internal controls were inadequate for ensuring compliance with federal requirements for allowable costs and time-and-effort documentation. Assistance Listing Number and Title: 84.010, Title I Grants to Local Educational Agencies 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: 0204081, 0271084 Known Questioned Cost Amount: $56,959 Background The objective of the Title I program is to improve the teaching and learning of children who are at risk of not meeting state academic standards and who reside in areas with high concentrations of children from low-income families. In fiscal year 2022, the District spent $841,598 in federal funds through the Title I program. Of this amount, the District spent $687,612 on salaries and benefits. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding award requirements and monitoring the effectiveness of established controls. Federal regulations also establish principles and standards for determining allowable direct costs for federal programs. The District is responsible for ensuring it supports all costs charged to the Title I program. Payroll costs must be supported with adequate time-and-effort documentation, as federal regulations and the awarding agency require. Depending on the number and type of activities employees perform, time-and-effort documentation can be a semiannual certification or monthly personnel activity report, such as a detailed timesheet. Timesheets should be detailed enough to show actual time worked on each program. Time-and-effort documentation must also be signed and dated after the work is completed. Description of Condition Our audit found the District?s internal controls were ineffective in ensuring all costs charged to the Title I program were supported by appropriate documentation. Specifically, we noted the following: ? When submitting the last reimbursement request for the year, the District did not compare the final expenditure report to the reimbursement request for accuracy. As a result, the District overclaimed program expenditures. ? In addition, the District did not support all salaries and benefits charged to the program with appropriate time-and-effort documentation, as federal regulations require. The District could not provide time-and-effort documentation for four employees tested. We consider this deficiency in internal controls to be a significant deficiency. This issue was not reported as a finding in the prior audit. Cause of Condition At the beginning of the school year, the District provides employees with time-and-effort documents that include what program their time is charged to. As changes are made throughout the year, the District does not ensure the employees? time-and-effort documentation is updated to reflect the actual programs they worked in. District staff also did not know that administrators needed to have time-and-effort documentation to support their time worked in the program. Additionally, the District will transfer payroll costs to the program at year-end without confirming employees had time-and-effort documentation to support transferring the time worked to the program. Effect of Condition and Questioned Costs Because the District did not have effective internal controls over its review of costs charged to the program, it overclaimed its Title I funds by $4,262. We are questioning these costs. We used a statistical sample and found six out of 22 payroll transactions tested did not have time-and-effort documentation that indicated employees performed any Title I activities for the period charged to the program. Without adequate time-and-effort documentation, the District cannot assure its federal grantor that payroll costs charged to the program were accurate and valid. Additionally, the District could not provide alternative documentation to show that employees worked in the program and the costs charged to it were for allowable activities. As a result, we are questioning costs of $52,697. In total, we are questioning $56,959 in costs charged to the Title I program. Recommendation We recommend the District implement internal controls to ensure it only claims reimbursement from the Title I program for allowable costs. This should include ensuring employees complete required time-and-effort documentation to support payroll costs charged to the program in compliance with federal requirements. District?s Response Auditor?s Remarks 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 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Office of Superintendent of Public Instruction Addendum to Bulletin 048-17, Guidelines for Charging Employee Compensation to Federal Grants.