Finding Text
Finding 2023-001 - Allowable Cost/Cost Principles U.S. Department of Education
Pass-through S.C. Department of Education
Elementary and Secondary School Emergency Relief Funds (ESSER)
CFDA No: 84.425U
Grant / FAIN: ESSER III / S425U210019
Grant Period: June 30, 2023
Questioned Costs: $77,740.98
Condition: When a District claims, for reimbursement, indirect costs related to a federal program, the District should ensure that all
excluded costs have been removed from the total direct costs prior to applying the indirect cost rate per the District's indirect cost
rate proposal.
Reason Improvement Needed: Management is responsible for establishing and maintaining effective internal control over the
applicable compliance requirements for each federal program. Without controls requiring the review of each claim, it is highly possible the District claim excess indirect cost by using excluded expenditures to
inflate the indirect cost reimbursement.
Cause of Condition: When calculating the current year indirect cost reimbursement, the District did not exclude the appropriate
expenditures for capital improvements paid for by the grant, as required by the South Carolina Department of Education's indirect
cost rate proposal. Effect of Condition: The District overstated its indirect cost allocation and claimed funds in excess of the allowable amount
resulting in unallowable expenditures and a return of claimed funding. Perspective Information: We do not find this to be a systemic issue. This was the only program that this was found contained
within and the District understands the rules and regulations related to indirect cost. Identification of Repeat Findings: This is a new finding for fiscal year 2023.
Recommendation: It is our recommendation that the District review the indirect cost rate proposal, as presented by the SC
Department of Education in line with federal guidelines, to all department heads, programmatic leaders and finance staff to refresh
their knowledge and understanding of the requirements of expenditures to be utilized in the calculation.
Benefits of Recommended Action: By ensuring that the internal controls for the District address the key controls above, and
ensuring that District staff are trained appropriately on how to implement those controls, the District will reduce the likelihood that
material misstatements will occur in future periods and that relevant, accurate information will be made available in a timely manner
to make accurate District decisions. It will also ensure that the District effectively spends its federal funding and is not required to pay funding back in the future. Client Response: The Finance Director has already met with many of the various program leaders within the District to ensure they
understand and grasp the concept of indirect cost calculations. They have also shared with them the excluded expenditure listing
again to re-emphasize the need to accurately budget for indirect cost. The District has also looked into the potential to reduce its
reliance on indirect cost and increase its direct spending from grants.