East Liverpool City School DistrictLocal Government

2 CFR § 200.439(b)(1) states that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Further, 2 CFR § 200.439(b)(2) states that capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. 2 CFR § 200.439(b)(3) states, in part, that capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. 2 CFR § 200.421(e)(3) states, in part, that unallowable advertising and public relations costs include the costs of promotional items and memorabilia, including models, gifts, and souvenirs. Additionally, the federal grant agreement states, in part, that all construction and other capital expenditures/improvements supported with federal funds must be pre-approved by the Ohio Department of Education through the CCIP Application Process. Construction means (A) the preparation of drawings and specifications for school facilities; (B) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; and (C) inspecting and supervising the construction of school facilities. Capital expenditures means expenditures to acquire capital assets (i.e., land, facilities, or equipment over $5,000 per unit) or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life. During our testing of the ESSER Federal grant monies, we sampled 60 non-payroll transactions totaling $923,224 and two individually important items totaling $372,000. We noted the following exceptions: • 18 out of 60 transactions totaling $344,620 and one out of two individually important items totally $198,000 were not allowable per the programmatic requirements listed above. These noncompliant expenditures resulted in a projected noncompliant amount of $1,168,544. • One of the above expenditures is unallowable per the Federal grant agreement and per CFR § 200.421(e)(3) which was for the purchase of new hire t-shirts in the amount of $288; and • Seventeen of the above expenditures and one individually important item were for the purchase of various capital expenditures (the Patterson Field project, scoreboard, gym floor resurfacing, electrical repairs, garage roof repairs, gymnasium sound system, boiler repairs, security cameras, riding floor scrubber, copiers, a tractor, classroom expansion project and an ice machine) which were unallowable per the Federal grant agreement and 2 CFR § 200.439(b)(1), 2 CFR § 200.439(b)(2), and 2 CFR § 200.439(b)(3). The unallowable activities/costs paid with these Federal grant monies is in excess of $25,000 and therefore considered questioned costs under 2 CFR § 200.516. District management should review all grant award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should thoroughly review all grant documentation to ensure all expenditures spent using Federal funds are in compliance with requirements.

2 CFR 180.305 states that Non-Federal entities are prohibited from entering into a covered transaction with parties that are suspended or debarred or whose principals are suspended or debarred, unless the Federal agency responsible for the transaction grants an exception under 2 CFR § 180.135. 2 CFR 180.200 identifies “covered transactions” as nonprocurement or procurement transactions at the primary tier, between a Federal agency and a person; or at the lower tier, between a participant in a covered transaction and another person. Procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) are covered transactions if the contracts are expected to equal or exceed $25,000 or meet certain other specified criteria outlined in 2 CFR § 180.220. All nonprocurement transactions (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt by 2 CFR § 180.215. When a non-Federal entity enters into a covered transaction, the non-Federal entity must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking SAM exclusions (https://sam.gov ); collecting a certification from the entity, or adding a clause or condition to the covered transactions with that entity. District Policy DECA, Administration of Federal Grant funds – Procurement, states in part, effective July 1, 2018, all purchases for property and services made using federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District’s written policies and procedures. In addition, the District’s purchasing records are sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District did not have the proper internal controls in place to verify that all entities, with whom the District had entered into covered transactions, had not been suspended or debarred. During testing of Procurement and Suspension and Debarment Procedures for Nutrition Cluster, we noted three out of five (60%) in which the program had a payment to a vendor of more than $25,000 and there was no evidence the District verified the contracted service was not suspended or debarred. For the same vendor, the District did not provide documentation showing the service was awarded using federal procurement standards nor did the District obtain approval from the Ohio Department of Education (ODE) for this vendor as a sole service provider. Due to the deficient internal control structure, the required verification was not completed for the only covered transaction in the Nutrition Cluster during Fiscal Year 2023. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred. Prior to contracting with vendors that will be paid with federal funds, the District should verify the vendor is not suspended or debarred by checking the SAM exclusions, collecting a certification from the vendor, or adding a clause or condition to the covered transaction with the vendor. In addition, the District should follow their policy and federal regulations regarding procurement and, if necessary, obtain approval from ODE for a vendor the District believes is a sole service provider.

2 CFR Subpart F Section 200.510(b) requires the auditee prepare a Schedule of Expenditures of Federal Awards (the Schedule) for the period covered by the District?s financial statements which must include the total federal awards expended as determined in accordance with ? 200.502. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. (2) For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards expended for each individual Federal program and the AL number or other identifying number when the AL information is not available. (4) Include the total amount provided to subrecipients from each Federal program. (5) For loan or loan guarantee programs described in ? 200.502 Basis for determining Federal awards expended, paragraph (b), identify in the notes to the schedule the balances outstanding at the end of the audit period. (6) Include notes that describe the significant accounting policies used in preparing the schedule, and note whether or not the auditee has elected to use the 10 percent de minimis cost rate as covered in ? 200.414 Indirect (F&A) costs. The following errors and omissions were identified: ? The District failed to report donated commodities in the amount of $61,757; ? The District failed to separately identify National School Lunch and National School Breakfast program COVID-19 monies in the amounts of $137,914 and $87,357, respectively; ? The District received and expended $7,087 from the National School Breakfast program, however, the District misposted these funds to the National School Lunch program; ? The District overstated the receipts and expenditures for the Fresh Fruits and Vegetable Program in the amounts of $21,453 and $28,612, respectively, by including adjustments on the Schedule; ? The District omitted $15,389 in NSLP Equipment Assistance receipts that was received during the fiscal year; ? The District received and expended $95,170 from the Student Support Academic Enrichment Program, however, the District posted these funds into ESEA Title 1 Grants to Local Educational Agencies Program. In addition, $15,309 was expended from the Student Support Academic Enrichment Program that was omitted from the Schedule; ? The District overstated receipts in the ESEA Title 1 Grants to Local Educational Agencies fund in the amount of $63,126 by including several adjustments and corrections that should not have been included on the Schedule; ? The District omitted $764,317 in expenditures from the Covid-19 Education Stabilization Fund under the Coronavirus Aid, Relief, and Economic Security Act Program; ? The District omitted $851 in expenditures from the Career and Technical Education-Basic Grants to States fund; and ? The District overstated receipts in the State Personnel Development Grant in the amount of $72,185 by including adjustments and corrections that should not have been reported on the Schedule. This lack of effective controls over this compliance requirement resulted in the expenditures in the Schedule being understated by $813,622. This is due to the District not reviewing the Schedule to ensure it was complete and accurate. Adjustments, to which management have agreed, are reflected in the accompanying Schedule. Noncompliance with grant requirements as well as errors and omissions on the Schedule of Receipts and Expenditures of Federal Awards could have an adverse effect on future grant awards by the awarding agencies in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant and loan requirements, including Schedule reporting requirements. The District should implement a system to track all federal receipts and expenditures and related information separately from other receipt and expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This may help ensure the District is in compliance with grant and loan requirements, the Schedule is complete and accurate, and major federal programs are accurately identified for audit.

Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended. ?Covered transactions? include those procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All nonprocurement transactions entered into by a recipient (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov/portal/public/SAM/,(2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Additionally, per The NDAA of 2017, Section 217 (Pub. L. No. 114-328, 130 Stat. 6 (2051)) and 41 USC 1902(a)(2) contained the following provisions. Raise the micro-purchase threshold to $10,000 for procurements under grants and cooperative agreements to institutions of higher education, or related or affiliated nonprofit entities, independent research institutes and nonprofit research organizations. One out of four (25%) of the vendors paid from the Nutrition Cluster program exceeding $25,000 did not have a verification performed to ensure these vendors were not suspended or debarred. Although the District's policy states that they do not contract with vendors who are neither suspended nor debarred, there are no procedures in place noted in the policy regarding the matters taken by the District to assure the vendors are neither suspended nor debarred. In addition, a review of the District's policy manual identified it has not been updated to reflect the micro-purchase threshold. This is the result of the District not reviewing their policies and could result in expenditures made to parties excluded by the Federal Government. The District should establish formal procedures within the policy to help ensure federal requirements over suspension and debarment are satisfied, as well as updating and maintaining the procurement policy in accordance with federal guidelines.

2 CFR Section 200.313(d)(1) states, in part, that property records must be maintained for equipment and real property purchases using federal funds. The property records should include, but are not limited to, a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), and any ultimate disposition data including the date of disposal and sales price of the property. Testing over the District's Elementary and Secondary School Emergency Relief funds (ESSER) capital outlay purchases identified two purchases totaling $98,065, which projects to an error of $305,723, that were not recorded on the District's Property Inventory & Accounting Cost Report. This is the result of the District not reviewing their policies and Property Inventory & Accounting Cost Report. Failure to ensure equipment purchases are included on the District's inventory listing could result in a misappropriation of the equipment and a possible a future loss of funding. To effectively control equipment and to maintain accountability over expenditures, the District should review its policy and ensure all equipment is properly identified and recorded on their Property Inventory & Accounting Cost Report.

2 CFR 200 Subpart E Section 200.431(c) states, in part, the cost of fringe benefits are allowable, provided such benefits are granted under established written policies. Such benefits must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices. The District has established a policy over allowable costs, however, due to the lack of review of the policy, testing over the Nutrition Cluster Program identified a former nutrition cluster employee's longevity pay in the amount of $1,050 was charged to the Food Service fund rather than the General Fund for a projected error of $20,295. This could result in improper spending and federal questioned costs, which could result in a loss of funding. To effectively control the Nutrition Cluster payroll cycle and to maintain accountability over expenditures, the District should review its policy and ensure employees are federally certified prior to charging payments to federal grant programs.

2 CFR Section 200.305(b) states in part that for non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass through entity and the disbursement by the non-Federal entity. Additionally, the Ohio Department of Education Grants manual requires advance funds to be disbursed within five days of receipt. Testing over the ESSER grant identified one out of nine (11%) requests, or $43,600 out of $1,053,028 where the District requested an advance of funds, however, the funds were not disbursed until 84 days after receipt. Of the advance amount of $43,600, $8,788 was not disbursed within the five day requirement. This is due to the District not reviewing the guidance above to ensure advance monies are timely spent. Failure to spend advance monies within five days could result in improper spending and federal questioned costs, which could result in a loss of funding. The District should maintain and follow written procedures that minimize the time lapsing between transfer of funds and their disbursement. Financial management systems should meet the standards for fund control and accountability.

Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended. ?Covered transactions? include those procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All nonprocurement transactions entered into by a recipient (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov/portal/public/SAM/,(2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). Additionally, per the NDAA of 2017, Section 217 (Pub. L. No. 114-328, 130 Stat. 6 (2051)) and 41 USC 1902(a)(2) contained the following provisions. Raise the micro-purchase threshold to $10,000 for procurements under grants and cooperative agreements to institutions of higher education, or related or affiliated nonprofit entities, independent research institutes and nonprofit research organizations. During fiscal year 2020, the District entered into transactions with four vendors for the Nutrition Cluster program exceeding $25,000 but provided no documentation that a verification was performed to ensure these vendors were not suspended or debarred. Although the District's policy states that they do not contract with vendors who are neither suspended nor debarred, there are no procedures in place noted in the policy regarding the matters taken by the District to assure the vendors are neither suspended nor debarred. In addition, a review of the District's policy manual identified it has not been updated to reflect the micro-purchase threshold. This is the result of the District not reviewing their policies and could result in expenditures made to parties excluded by the Federal Government. The District should establish formal procedures within the policy to help ensure federal requirements over suspension and debarment are satisfied, as well as updating and maintaining the procurement policy in accordance with federal guidelines.

Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended. ?Covered transactions? include those procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. All nonprocurement transactions entered into by a recipient (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR Section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the Excluded Parties List System (EPLS) maintained by the General Services Administration (GSA) and available at https://www.sam.gov/portal/public/SAM/,(2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Section 180.300). During fiscal year 2019, the District had procedures in place for this requirement as evidenced through a Board-approved policy, however, the procedures were not always followed. As a result, the District entered into transactions with vendors for the Nutrition and Title VI-B Cluster programs exceeding $25,000 but provided no documentation that a verification was performed to ensure these vendors were not suspended or debarred. This could result in expenditures made to parties excluded by the Federal Government and the result of the District not reviewing their policy. The District should enact policies and procedures to help ensure federal requirements over suspension and debarment are satisfied.