FA 2022-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: COVID-19 ? 84.425D ? Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D200012 (Year: 2020), S425D210012 (Year: 2021) Questioned Costs: $187,246 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program (Assistance Listing Number 84.425D) revealed that the School District?s internal control procedures were not operating appropriately to ensure that expenditures were allowable. 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 $4,249,034 were expended and reported on the Bryan County Board of Education?s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. 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. Additionally, 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? (f) Not be included as a cost or used to meet the cost sharing or matching requirements of any other federally-financed program in either the current or a prior period, (g) Be adequately documented?? Lastly, as a condition of receiving federal subawards from the GaDOE, LEAs are required to prepare an annual budget that reflects how funding will be expended. This budget is submitted in the Consolidated Application system and is required to be reviewed and approved by the GaDOE program and grants management prior to expending federal program funds. LEA personnel must also provide program-specific assurances related to the ESSER program 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: A sample of 45 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. Nine individually significant items were also selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that one expenditure totaling $187,246 was not appropriately approved by GaDOE through the Consolidated Application process. Further, the expenditure was ineligible for reimbursement under the ESSER program as the expenditure had previously been approved for funding through the Emergency Connectivity Fund (ECF) program. Upon further review, it was noted that reimbursement was requested and received from both the ESSER program and the ECF program after year-end and a refund of such funding had not been processed for either of the programs as of the end of audit fieldwork. Questioned Costs: Known questioned costs of $187,246 were identified for expenditures that were not reflected within the approved project budget for the ESSER program and were approved for reimbursement under another federal program. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: In discussing these deficiencies with management, they stated that the School District management did not update the ESSER Consolidated Application system prior to expending the funds. Additionally, the Finance Department thought the expenditures were not allowable under the Emergency Connectivity Fund program; therefore, they charged the expenditures to the ESSER program. However, the Director of the Emergency Connectivity Fund Program also requested reimbursement for the expenditures. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate documentation, including an approved budget, exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE should require the School District to return funds associated with the unapproved and 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 expenditures are appropriately approved through the Consolidated Application process prior to the expending of federal program funds. Additionally, the School District should initiate a refund in the amount of $187,246 to GaDOE. Views of Responsible Officials: We concur with this finding.