FA 2024-001 Improve Controls over Employee Compensation
Compliance Requirement: Allowable Costs/Cost Principles
Internal Control Impact: Significant Deficiency
Compliance Impact: Nonmaterial Noncompliance
Federal Awarding Agency: U.S. Department of Agriculture
Pass-Through Entity: Georgia Department of Education
AL Numbers and Title: 10.553 – School Breakfast Program
10.555 – National School Lunch Program
COVID-19 – 10.555 – National School Lunch
Program
Federal Award Number: 245GA324N1199 (Year: 2024) 225GA324N1099 (Year: 2024)
Questioned Costs: $102,234
Repeat of Prior Year Finding: 2023-004
Description:
The policies and procedures of the School District were insufficient to provide adequate internal controls over the employee compensation process as it relates to the Child Nutrition Cluster.
Background Information:
The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities.
CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $58,647,091.23 were expended and reported on the DeKalb County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024.
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 60 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were properly functioning, and applicable compliance requirements were met. The following deficiencies were noted:
• One employee who no longer worked for the School District received salary payments
totaling $8,715.
• Two employees did not have any of the required certifications, or comparable documentation, to support their salary payments totaling $48,837.
• One employee was missing required certifications, or comparable documentation, to support a portion of their salary payments totaling $8,128.
• One employee’s salary in the amount of $2,671 was incorrectly charged to the federal program for one pay period.
• Documentation of additional pay totaling $33,883 could not be located for 14 employees.
Questioned Costs:
Upon testing a sample of $1,399,390 in personnel services expenditures, known questioned costs
of $102,234 were identified for payroll charges not supported by adequate documentation. Using the total personnel services expenditure population of $18,999,516 (excluding benefits payments), we project the likely questioned costs to be approximately $1,388,035. The following Assistance Listing Numbers were affected by known and likely questioned costs: 10.553 and 10.555.
Cause:
A lack of oversight by personnel in the Office of Federal Grants and Program Compliance led to noncompliance with the requirements of the Uniform Guidance in relation to charging of personnel costs to a federal program.
Effect:
The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to
pay employees with CNC funds the appropriate amount and/or maintain documentation supporting those payments could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the CNC funds as ED or GaDOE may require the School District to return funds associated with improperly documented expenditures.
Recommendation:
The School District should evaluate their internal control process related to the approval and retention of documentation to support employee compensation payments. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that CNC employees are paid appropriately. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are functioning properly.
Views of Responsible Officials:
We concur with this finding.