Finding Text
Finding 2022-001- Significant deficiency in internal controls over compliance Federal Programs: 1)American Rescue Plan ? Elementary and Secondary School Emergency Relief (ARP ESSER) Assistance Listing Number: 84.425U and 2)Elementary and Secondary School Emergency Relief (ESSER II) Assistance Listing Number: 84.425D Pass-through: PA Department of Education Criteria: The Uniform Guidance Section 200.303 states ? ?The non-Federal entity must: (a)Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).? Internal controls are procedures and processes that are designed to allow School employees to prevent, or detect and correct, noncompliance in the normal course of their duties. Condition: In the course of our audit, we noted two instances in which the School?s internal controls did not prevent or detect noncompliance. 1)ARP-ESSER 84.425U - In the fall of 2021, the School prepaid software subscriptions of 8 and 10 years and charged them to this grant. These purchases would not be considered allowable costs as the number of years purchased far exceeded the grants period of performance which will end September 30, 2024. The cost for years purchased beyond the period of performance was $130,322. 2)ESSER II -84.425 D - The School planned a major improvement to their HVAC system and requested bids from contractors. The bid document, and contract, mistakenly referenced Pennsylvania state prevailing wage rates, rather than federal prevailing wage rates. The contract of $405,000 was signed in the spring of 2022. The amount representing wages, and the difference between wages under state and federal prevailing rates has not yet been determined. Cause: The School?s internal controls did not include certain elements included in the Guidance of the ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the `Internal Control Integrated Framework?, issued by COSO.? These elements of risk assessment, information and communication, and monitoring might have allowed the School to prevent or detect these instances of noncompliance. Consequence: Because these instances of noncompliance were brought to light in the audit process, and the periods of performance for both grants is long, there was time for the corrective actions noted below to be taken. While no questions costs will result, the control deficiency still exists as control procedures have not been strengthened. 1)ARP-ESSER 84.425 U - When the audit raised the question as to allowability of the costs for services that were to be provided after the period of performance, the School verified that these costs were not allowed by calling the PA Department of Education. Adjustment was then made to the accounts, to transfer the costs that represented the years after the period of performance to local funding. Therefore, no questioned costs will result. 2)ESSER II -84.425 D The actual work under the contract was performed after June 30, 2022, and, therefore, no unallowed costs were incurred, and no questioned costs are reported in this audit period. When the audit revealed that the federal prevailing wage had not been included in the contract, the School immediately began a process by which the School intends to work with contractors to assure that the correct wages rates are paid retrospectively. It is the School?s intent that the correction will be made before the end of the grant period on September 30, 2023. Recommendation: We suggest that the School strengthen internal controls by introducing procedures such as- Consideration of new grant requirements, degree of School experience with the requirements, training of staff involved (risk assessment) Review of Compliance Supplement and Uniform Guidance, circulation of information among all staff members involved in initiating, approving, recording transactions (information and communication) Review of significant transactions to be sure proper procedures were followed (monitoring) Views of responsible officials: The School concurs with this finding.