Finding 400094 (2023-001)

Federal Program Affected Program Name: COVID-19 - Elementary and Secondary School Emergency Relief (ESSER III) Fund: Learning Loss (Resource 3214) and Expanded Learning Opportunities (ELO) Grant, ESSER III (Resource 3219) Assistance Listing Number: 84.425U Pass-Through Entity: California Department of Education (CDE) Five Digit Code AB 3627 Finding Type 50000 Federal Compliance 2023-001 50000 – Federal ComplianceFederal Agency: U.S. Department of Education Type of Compliance Finding: Activities Allowed or Unallowed and Allowable Costs Criteria 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’s 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) Programs in fiscal year 2022-2023, Education Code Section 38101(c) limits school districts’ indirect costs to the lesser of the District’s individual CDE approved indirect cost rate, or the statewide average indirect cost rate. Indirect costs for the total ESSER III allocation (Resource 3213 and 3214 combined) should be charged to Resource 3213 only. Indirect cost for the Expanded Learning Opportunities, ESSER III program (Resource 3219) is not allowable. In addition, the Uniform Guidance, Section 200.303 Internal Controls, requires that the non-Federal entity must establish and maintain documentation of effective internal controls over Federal awards that provide reasonable assurance that awards are being managed in compliance with Federal statutes, regulations and the terms and conditions of the Federal award. Condition During our audit, we found the District incorrectly charged $10,900 of indirect costs to Resource 3214. The District’s total indirect costs, $30,500, for Resources 3213 and 3214 combined were under the LEA approved rate of 7.78%. In addition, the District incorrectly charged $2,200 of indirect costs to Resource 3219, which does not allow indirect costs.Questioned Costs A total of $13,100 in questioned costs was identified as a result of the conditions identified above. Context The condition was identified through review of the general ledger and indirect cost recalculations for all programs under the ESF Programs. Effect The District is out of compliance with allowable indirect cost charge requirements of the COVID-19 - Elementary and Secondary School Emergency Relief Fund programs. Cause The condition identified above appears to be due to the District not being familiar with the indirect cost requirements for each of the ESF federal programs. In addition, the independent reviewer did not complete a thorough review of the indirect cost calculation. Repeat Finding No Recommendation In the 2023-2024 fiscal year, the District should transfer $10,900 from the District’s General Fund Resource 3213 to the District’s General Fund Resource 3214, as well as, transferring $2,200 from the District’s General Fund unrestricted resource. In addition, the District should revamp its procedures over indirect cost calculation to ensure it is only charging indirect costs to those programs that allow it.