FA 2023-001 Strengthen Controls over Expenditures
Compliance Requirement: Activities Allowed or Unallowed
Allowable Costs/Cost Principles
Internal Control Impact: Material Weakness
Compliance Impact: Material Noncompliance
Federal Awarding Agency: U.S. Department of Education
Pass-Through Entity: Georgia Department of Education
Assistance Listing Number and Title: 84.010 - Title I Grants to Local Educational Agencies
Federal Award Number: S010A210010-21A (Year: 2022), S010A220010 (Year 2023)
Questioned Costs: $6,942
Repeat of Prior Year Finding: FA 2022-001
Description:
The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Title I Grants to Local Educational Agencies program.
Background:
The Title I Grants to Local Educational Agencies (Title I) program was authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and
learning in high-poverty schools in particular for children failing or most at-risk of failing, to meet challenging State academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served.
Title I funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $523,820 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal
year 2023.
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.
lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Additionally, 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… (g) Be adequately documented…”
Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…”
Condition:
Three nonpersonal services expenditures were randomly selected for testing using a non-statistical sampling approach. The expenditures were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. For one sampled expenditure in the amount of $31, adequate supporting documentation in the form of an invoice was not maintained.
Additionally, three personal services expenditures were randomly selected for testing using a non-statistical sampling approach. One individually significant expenditure was also selected for testing.
These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted:
• For all employees tested, supporting documentation was not maintained for additional payments totaling $6,194.
• For two employees tested, specific administrative supplements were overpaid and underpaid
by $717 and $500, respectively.
Questioned Costs:
Upon testing a sample of $1,275 in nonpersonal service expenditures, known questioned costs of $31 were identified for expenditures that were not supported by adequate documentation. Using the total nonpersonal services expenditures population of $74,447, we project the likely questioned costs to be approximately $1,810.
lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Additionally, upon testing a sample of $38,405 in personal services expenditures, known questioned costs of $6,611 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $143,515 (excluding benefits payments), we project the likely questioned costs to be approximately $24,705.
Furthermore, known questioned costs identified for undocumented personal services payments associated with individually significant items tested totaled $300. Therefore, the known and likely questioned costs identified for all unallowable and/or undocumented payments throughout the sample and individually significant items tested totaled $6,942 and $26,815, respectively.
Cause:
Per discussion with management, the School District believes that this is due to change in management in the financial department.
Effect or Potential Effect:
The School District is not in compliance with the Uniform Guidance or ED guidance related to the
Title I program. Failure to ensure that documentation exists to support the allowability of payments from the Title I fund 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 Title I program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District's purchasing and employee compensation policies and procedures.
Views of Responsible Officials:
We concur with this finding.