Finding Text
2022-001 Internal Control over Compliance and Compliance with Special Tests and Provisions Information on Federal Program: U.S. Department of Education Name of Program: Credit Enhancement for Charter School Facilities Assistance Listing Number: 84.354 Grant Award Number: None Grant Award Period: February 4, 2003 until the Federal funds and earnings on those funds have been expended for the grant purposes or until financing facilitated by the grant has been retired, whichever is later. Criteria or Specific Requirement: In accordance with ?200.303(a), Internal Controls, a 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. ?200.328, Monitoring and Reporting Program Performance, documents that the non-federal entity is responsible for oversight of the operations of the federal award supported activities. The non-federal entity must monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved. Monitoring by the non-federal entity must cover each program, function or activity. The grant agreement section VI, paragraph 5, requires the grantee to not comingle reserve account funds from this grant with other funds the grantee may have, even if the funds are used for similar purposes. Condition: During our testing over special tests and provisions, we identified the following condition: Under the terms of the grant agreement, at no point in time for the duration of the grant agreement shall there be commingling of reserve account funds from the grant with other funds that the Organization may have, even if the funds are used for similar purposes. Based on four (4) credit enhancements sampled and tested from a population of four (4) credit enhancements obligated between 1/1/2022 and 12/31/2022, there was commingling of federal reserve funds with private funds for one (1) of the four (4) samples tested. Both the federal and private funds were commingled into one reserve account. While the monitoring process did not appropriately detect or prevent, on a timely basis, the noncompliance with the special provisions of the grant agreement, the monitoring process did ensure that the grantee met the special provisions of the grant agreement after the end of the year. Questioned Costs: There are no questioned costs as the item outlined above is an internal control related matter related to compliance requirements not met in accordance with the grant agreement. Context: This is a condition identified per review of the Organization?s compliance with the special tests and provisions criteria of the Uniform Guidance using a statistically valid sample. The prevalence of these findings is detailed in the condition section above. Cause: The Organization has documented monitoring policies and procedures; however, as identified above, the implementation of these policies and procedures did not detect or prevent the instance of noncompliance with the special tests and provisions criteria contained within the Uniform Guidance. Effect: While there are no known questioned costs that resulted from the condition identified above, the improper implementation of established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to expenditures incurred being disallowed or reserve funds being required to be returned for the major federal program. Repeat Finding: This finding is not a repeat finding. Recommendation: We recommend that management regularly provide training to those involved with the grant to ensure that those monitoring the reserve fund accounts are knowledgeable of the terms of the grant agreement and have knowledge of the grant operations. We also recommend that management ensure that reserve fund accounts invested in certificates of deposits are tracked by maturity and for those coming due, management provides timely written instructions to the financial institution as to where to direct the reserve funds to ensure that reserve funds are not comingled. Views of Responsible Officials: Management agrees with the finding. Management plans to ensure that the financial institutions holding reserve funds have clear instruction in writing as to how to direct all reserve funds to ensure that the reserve funds are not comingled.