FA 2023-002 Improve 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 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 – Homeless Children and Youth
Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021)
Questioned Costs: $98,807
Repeat of Prior Year Finding: FA 2022-002
Description:
A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability.
Background:
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 the 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 is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,201,097 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal
year 2023.
lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
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… (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:
A sample of 12 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. In addition, two individually significant items were 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:
• A purchase order was not maintained for two of the expenditures.
• The check amount, invoice, and purchase requisition form for one expenditure did not agree.
lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
In addition, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted:
• Timesheets or other supporting documentation could not be provided for payments made to 15 employees.
• Timesheets provided for 15 employees did not agree to amounts paid for the corresponding time period.
• One employee received a salary increase that was not supported by a board-approved salary scale.
Questioned Costs:
Upon testing a sample of $34,392 in nonpersonal services expenditures, known questioned costs
of $1,365 were identified. Using the total non-personal services expenditures population of $144,208, we project the likely questioned costs to be approximately $5,723.
Additionally, upon testing a sample of $274,649 in personal services expenditures, known questioned costs of $97,442 were identified. Using the total personal services expenditures population of $864,482, we project the likely questioned costs to be approximately $306,706.
Therefore, the known and likely questioned costs identified for unallowable payments totaled $98,807 and $312,429. The following Assistance Listing Numbers were affected by known and questioned
costs: 84.425D and 84.425U.
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 ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER 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 ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all 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.