FA 2022-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Listing Numbers and Titles: COVID-19 ? 84.425D ? Elementary and Secondary School Emergency Relief Fund COVID-19 ? 84.425U ? American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 ? 84.425W ? American Rescue Plan Elementary and Secondary School Emergency relief Fund Federal Award Numbers: S425D200012 (Year: 2020), S425D210012 (Year: 2021) S425U2120012 (Year: 2022), S425W210011 (Year: 2021) Questioned Costs: $117,383 Description: A review of expenditures charged to the American Rescue Plan Elementary and Secondary School Emergency Relief Fund program (Assistance Listing Number 84.425U) revealed that the School District?s internal control procedures were not operating appropriately to ensure that expenditures were allowable for the program. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE was responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $8,670,356.56 were expended and reported on the Murray County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. Criteria: As a recipient of federal awards, the School District is required to establish 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. Provisions included in the Uniform Guidance, Section 200.403 ? Factors Affecting Allowability of Costs state that ?costs must meet the following general criteria in order 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 non-Federal entity? (h) Cost must be incurred during the approved budget period?? Additionally, provisions included in the Uniform Guidance, Section 200.77 state, ?Period of performance means the time during which the non-Federal entity may incur new obligations to carry out the work authorized under the Federal award.? Condition: A sample of 60 non-personal services expenditures was randomly selected for testing using a nonstatistical sampling approach. Seven individually significant items were also selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. Upon completing this testing, it was noted that subscription bundles and licenses were paid for six-year and ten-year periods. Because the period of performance for this funding ends on September 30, 2024 and the liquidation period for the program ends 120 days thereafter, $117,383 of these expenditures were incurred after the period of performance and deemed unallowable. Questioned Costs: Known questioned costs of $117,383 were identified for expenditures that were not incurred during the appropriate period of performance. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. The following Assistance Listing Number was affected by known and likely questioned costs: 84.425U. Cause: In discussing these deficiencies with management, they stated per the guidance at the time, the School District believes that the multi-year contract was the best fiscally responsible use of ESSER funds. The science curriculum, along with the materials, comes with no reoccurring costs. Student workbooks are shipped throughout the course of the contract at no additional cost to the district. The vendor provided a multi-year discount for the materials, along with the grade level curriculum, that was a direct savings to the district. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures will fall within the respective federal program?s period of performance before expending Federal program funds. Views of Responsible Officials: We concur with this finding.