Finding 3629 (2023-002)

The United States Department of Education has approved a delegation agreement with the California Department of Education (CDE) that authorizes the CDE to establish indirect cost rates for California local education agencies (LEAs). The CDE has been delegated authority to calculate and approve indirect cost rates annually for LEAs. For the Education Stabilization Fund (ESF) Program in fiscal year 2022‐2023, Education Code Section 38101(c) limits school district indirect costs to the lesser of the District’s individual CDE approved indirect cost rate, or the statewide average indirect rate. For ESSER III (Resource 3214), indirect costs are not allowable. The District charged unallowable indirect costs totaling $25,053 to the ESSER III portion of the ESF Program. The condition identified above resulted in $25,053 of questioned costs for unallowable indirect costs charged to the grant funds. The condition was identified through recalculation of all indirect costs charged to the ESF programs. The condition identified appears to be due to the Districts lack of familiarity with the indirect cost requirement for ESSER III. It is recommended that the District implement a review process for indirect costs which would include a review of the relevant grant agreements and guidance.