FA 2022-001 Strengthen Controls over Equipment
Compliance Requirement: Equipment and Real Property Management
Internal Control Impact: Significant Deficiency
Compliance Impact: Nonmaterial Noncompliance
Federal Awarding Agency: U.S. Department of Education
Pass-Through Entity: Georgia Department of Education
AL 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
Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021)
Questioned Costs: None Identified
Description:
The policies and procedures of the School District were insufficient to provide adequate internal
controls over equipment and real property management as it relates to the Elementary and Secondary School Emergency Relief Fund program.
Background Information:
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 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 was responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $6,979,815.88 were expended and reported on the Ben Hill County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2021.
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 200.313(d)(1) state, “Property records must be maintained that include a description of the property, a serial number or other identification number,
the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.”
Furthermore, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported.
Lastly, LEA personnel must also provide program-specific assurances related to the ESSER programs within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...”
Condition:
The following deficiencies were noted when reviewing the ESSER program:
• 12 pieces of equipment with costs totaling $347,619.04, which were purchased with program
funds, were not included on the federal program’s equipment listing.
• The related expenditures for seven equipment additions with costs totaling $156,067.46 were
not appropriately approved by GaDOE through the Consolidated Application process. Further,
the expenditures were not submitted for approval on an amended budget as of the end of audit
fieldwork.
Cause:
Issues were a result of inadequate controls and review procedures over equipment.
Effect:
The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to maintain a complete and accurate equipment listing and reconcile results of the physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or federal funds. Additionally, failure to verify compliance with applicable policies and regulations, including reviewing approved budgets prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages.
Recommendation:
The School District should develop and maintain an equipment listing that reflects all required
information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. Management should also implement controls to ensure that a complete physical inventory of equipment is performed, and the results are reconciled back to the equipment listing at least once every two years. In addition, the School District should also revise current internal control procedures related to the ESSER program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. Management should also develop and implement a monitoring process to ensure that control procedures are being followed.
Views of Responsible Officials:
We concur with this finding.