Finding 960960 (2023-001)

Material Weakness
Requirement
BN
Questioned Costs
$1
Year
2023
Accepted
2024-03-26

AI Summary

  • Core Issue: The School Corporation improperly requested reimbursements exceeding actual expenditures and misallocated funds, leading to questioned costs.
  • Impacted Requirements: Noncompliance with 2 CFR 200.303 and 2 CFR 200.403 regarding internal controls and allowable costs.
  • Recommended Follow-Up: Implement stronger internal controls and conduct regular reconciliations to ensure compliance with funding requirements.

Finding Text

FINDING 2023-001 Subject: Emergency Connectivity Fund Program - Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Federal Agency: Federal Communications Commission Federal Program: Emergency Connectivity Fund Program Assistance Listings Number: 32.009 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023 Compliance Requirements: Allowable Costs/Cost Principles, Special Tests and Provisions - Restricted Purpose Audit Findings: Material Weakness, Modified Opinion Condition and Context The Emergency Connectivity Fund (ECF) Program established by the American Rescue Plan Act of 2021 was for the purchase of eligible equipment, advanced communications, and information services for use by students, school staff, and library patrons at locations that include locations other than at a school or library. The ECF Program provides funding to meet the remote learning needs of students, school staff, and library patrons who would otherwise lack access to connected devices and broadband connections sufficient to engage in remote learning during the COVID-19 emergency period. To ensure that funding is focused on unmet need, the grantor agency required schools to certify, as part of their funding application, that they are only seeking support for eligible equipment and/or broadband connectivity to provide to students and school staff who would otherwise lack access to connected devices and/or broadband connectivity sufficient to engage in remote learning. The unmet need at the time of the funding application can be based on an estimate. However, when the school corporation files the request for reimbursement, only equipment and services provided to students or school staff who would otherwise lack broadband services and/or devices sufficient to engage in remote learning should be requested. The School Corporation made four reimbursement requests during the audit period. All four reimbursement requests were selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the four reimbursement requests tested, issues were identified with three of the reimbursement requests. The issues identified were as follows:  For two reimbursement requests, the amount requested, in total, exceeded the expenditures posted to the grant fund. The total amount requested for reimbursement was $616,800; however, total expenditures in the fund were $615,400. As such, the amount requested and received exceeded the amount spent out of the grant fund by $1,400. The School Corporation did not perform a reconciliation, which would have identified the error and allowed them to move the associated expenses to the grant fund, nor did the School Corporation return the additional funds to the grantor agency. At the end of the audit period, the $1,400 was included in the fund's overall ending cash balance. INDIANA STATE BOARD OF ACCOUNTS 18 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)  For one reimbursement request, although an invoice was submitted as evidence of expenditures, the funding received from the grantor agency was not used to pay the invoice. Instead, the School Corporation paid for that invoice using a lease and opted instead to use the funding received over the course of the next five years to cover maintenance and service costs for school technology. This information was not disclosed with the initial reimbursement request nor has a substitution request been sent to the awarding agency. The amount received from the grantor agency and not paid to the vendor, $500,000, will be considered questioned costs. At the end of the audit period, this money had not been expended, and was included in the fund's overall ending cash balance. The lack of internal controls and noncompliance were isolated to the two reimbursements noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, 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. . . . (g) Be adequately documented. . . ." 47 CFR 54.1710(a)(1) states in part: "The FCC Form 471 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (vii) The school or school consortium listed on the FCC Form 471 application is only seeking support for eligible equipment and/or services provided to students and school staff who would otherwise lack connected devices and/or broadband services sufficient to engage in remote learning. . . ." INDIANA STATE BOARD OF ACCOUNTS 19 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 47 CFR 54.1710(b) states in part: "(1) A request by an applicant to substitute equipment or service for one identified on its FCC Form 471 must be in writing. (2) The Administrator shall approve such written request where: (i) The equipment or service has the same functionality; and (ii) This substitution does not violate any contract provisions or state, local, or Tribal procurement laws. . . . " 47 CFR 54.1711(a)(1) states in part: "The FCC Form 472 shall be signed by a person authorized to order eligible services for the eligible school, library, or consortium and shall include that person's certification under penalty of perjury that: . . . (iv) The funds sought in the request for reimbursement are for eligible equipment and/or services that were purchased or ordered in accordance with the Emergency Connectivity Fund Program rules and requirements in this subpart and received by either the school, library, or consortium, or the students, school staff, or library patrons as appropriate. (v) The portion of the costs eligible for reimbursement and not already paid for by another source was either paid for in full by the school, library, consortium, or will be paid to the service provider within 30 days of receipt of funds. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, reimbursements in excess of expenditures were received and retained by the School Corporation. In addition, reimbursements received were not used to pay the invoices for which the reimbursement was sought. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs Known questioned costs of $500,000 were identified as detailed in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 20 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a system of internal controls and develop policies and procedures to ensure reimbursement requests are used to pay the invoices used to support the request and that only the amount spent is requested for reimbursement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Categories

Questioned Costs Allowable Costs / Cost Principles Procurement, Suspension & Debarment Special Tests & Provisions

Other Findings in this Audit

  • 384517 2023-001
    Material Weakness
  • 384518 2023-001
    Material Weakness
  • 384519 2023-002
    Material Weakness
  • 384520 2023-002
    Material Weakness
  • 384521 2023-003
    Material Weakness
  • 384522 2023-003
    Material Weakness
  • 384523 2023-004
    Material Weakness Repeat
  • 384524 2023-004
    Material Weakness Repeat
  • 384525 2023-004
    Material Weakness Repeat
  • 384526 2023-004
    Material Weakness Repeat
  • 960959 2023-001
    Material Weakness
  • 960961 2023-002
    Material Weakness
  • 960962 2023-002
    Material Weakness
  • 960963 2023-003
    Material Weakness
  • 960964 2023-003
    Material Weakness
  • 960965 2023-004
    Material Weakness Repeat
  • 960966 2023-004
    Material Weakness Repeat
  • 960967 2023-004
    Material Weakness Repeat
  • 960968 2023-004
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
84.425 Education Stabilization Fund 2023 $6.02M
10.555 National School Lunch Program 2023 $4.21M
10.555 National School Lunch Program 2022 $3.84M
84.027 Special Education_grants to States 2023 $2.85M
84.010 Title I Grants to Local Educational Agencies 2022 $2.48M
84.027 Special Education_grants to States 2022 $2.36M
84.010 Title I Grants to Local Educational Agencies 2023 $2.28M
84.425 Education Stabilization Fund 2022 $1.36M
10.553 School Breakfast Program 2023 $1.33M
10.553 School Breakfast Program 2022 $1.25M
32.009 Emergency Connectivity Fund Program 2022 $736,800
93.778 Medical Assistance Program 2023 $683,302
93.778 Medical Assistance Program 2022 $586,016
84.367 Improving Teacher Quality State Grants 2022 $545,532
32.009 Emergency Connectivity Fund Program 2023 $500,000
84.367 Improving Teacher Quality State Grants 2023 $392,275
84.002 Adult Education - Basic Grants to States 2022 $368,258
84.002 Adult Education - Basic Grants to States 2023 $297,516
84.287 Twenty-First Century Community Learning Centers 2023 $236,069
84.424 Student Support and Academic Enrichment Program 2022 $210,416
10.559 Summer Food Service Program for Children 2022 $167,971
84.424 Student Support and Academic Enrichment Program 2023 $161,680
10.558 Child and Adult Care Food Program 2023 $153,793
84.173 Special Education_preschool Grants 2023 $131,522
84.365 English Language Acquisition State Grants 2022 $129,777
10.558 Child and Adult Care Food Program 2022 $128,816
84.173 Special Education_preschool Grants 2022 $124,639
84.365 English Language Acquisition State Grants 2023 $111,336
10.559 Summer Food Service Program for Children 2023 $102,819
84.287 Twenty-First Century Community Learning Centers 2022 $88,225
10.649 Pandemic Ebt Administrative Costs 2022 $5,814
10.649 Pandemic Ebt Administrative Costs 2023 $3,135