Finding 528196 (2023-005)

Inadequate Controls Over Expenditures Federal Program Name and Year: McKinney Education for Homeless Children Project Number: 2022-4920-RF and 2023-4920-RF Assistance Listing No.: 84.196 Passed Through: Illinois State Board of Education Federal Agency: U.S. Department of Education Criteria/Specific Requirements The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) require that the Regional Office follow the standards set forth at 2 CFR 200.334 that requires “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” The Uniform Guidance section 200.303 Internal Controls states the following: “The non Federal entity must: 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.” In addition, Regional Office of Education #56 practices require the stamping of invoices as “paid” when processed in order to avoid duplicate payments. Condition During our testing of a sample of 40 expenditures of McKinney Education for Homeless Children grant funds by the Regional Office of Education #56, we noted that six expenditures totaling $52,005 did not have any supporting documentation. In addition, for those expenditures with supporting documentation, none of the invoices were stamped “paid”. During our testing of an additional sample of 40 expenditure transactions of the Regional Office of Education #56 for purposes of testing controls over financial reporting, we noted the following: • No documentation was available for four expenditures • No supporting invoices, but only purchase orders, were available for three expenditures • One invoice was not stamped “paid”. Questioned Costs $52,005 Context The Regional Office of Education expended a total of $1,187,011 of federal awards in fiscal year 2023. Of the total number of transactions tested (both grant and non-grant), 12.5% lacked any type of documentation. The greater percentage of total exceptions related to grant expenditures. Effect Inadequate controls over expenditures increase the risk of unauthorized or inappropriate spending as well as duplicate payment of invoices. A lack of supporting documentation for expenditures also results in questioned costs. Cause Regional Office of Education #56 management indicated that they have gone through many personnel changes recently and the new personnel had some difficulty finding files from when their predecessors were employed. Also, the “paid” stamp should have been used but was not used by everyone. Recommendation We recommend the Regional Office of Education #56 establish procedures to ensure that documentation supporting expenditures of federal awards is maintained in accordance with the Uniform Guidance. In addition, we recommend that the Regional Office of Education #56’s practice of cancelling invoices upon payment be consistently followed. Management Response We agree with the finding. Expenditures of federal funds will be more closely monitored, more adequately supported, and paid invoices will be marked as paid. Uniform Guidance will be more closely followed.