NORTH CENTRAL LOCAL SCHOOL DISTRICTLocal Government

Noncompliance and Material Weakness 2 CFR § 3474.1 gives regulatory effect to the Department of Education for 2 CFR § 200.430(a), which provides that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: • Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; • Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and • Is determined and supported as provided in paragraph (i) of this section, Standard for Documentation of Personnel Expenses, when applicable. Furthermore, Ohio Department of Education Grants Management Guidance 2014-002, revised on June 16, 2016 and August 29, 2019, further clarifies these requirements. The type of documentation required is based on the funding source and/or cost objective: • Semi-annual certifications are allowed when an employee's compensation is funded by only one Federal grant. An employee funded by a federal grant and the General fund would fall under this category. • Time and effort documentation is used when an employee's compensation is funded by more than one federal grant. • The substitute system of collecting time and effort is used when an employee’s compensation is funded by more than one grant. Due to a deficiency in internal policies and procedures over compliance, the District employee paid from the Special Education Cluster funds did not complete time and effort documentation for payroll expenditures in fiscal year 2023. This resulted in Special Education Cluster actual and projected expenditures of $9,300 not being supported with time and effort documentation. Based on the above guidance, the employee should have completed semi-annual certifications or time and effort documentation as their compensation was funded by a single Federal grant and the General fund. The District should implement control procedures to verify that all District employees who perform work for federal cost objectives complete time and effort documentation. The documentation should be signed by each individual employee or a supervisor who has firsthand knowledge of the information contained in the documentation.

2 CFR ? 3474.1 provides the Department of Education (DOE) adopts the Office of Management and Budget (OMB) Guidance in 2 CFR part 200. Thus, this section gives regulatory effect to the OMB guidance and supplements the guidance as needed for the DOE, except as otherwise noted in that section. 2 CFR ?200.403(h) requires costs, in order to be allowable under Federal awards, must be incurred during the approved budget period. The District expended $105,192 from the Education Stabilization Fund, American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER, AL#84.425U), for costs which were incurred July 1, 2020 to March 13, 2020. These costs were incurred outside the budget period of March 13, 2020 through September 30, 2024. These expenditures which were originally charged to the General Fund and the Athletic Fund in the amounts of $73,471 and $31,721, respectively, and subsequently reallocated to the ARP ESSER Fund are not allowable under the terms of the grant awxard and 2 CFR 200.403(h). 2 CFR ?200.403(a) and (b) requires costs, in order to be allowable under Federal awards, to be necessary and reasonable for the performance of the Federal award and conform to any limitations or exclusions set forth in the Federal award as to types or amounts of cost items. ARP ESSER funds may be used to support a wide range of activities, including activities that are necessary to maintain the operation of and continuity of services in the District and continuing to employ existing staff of the District. 2 CFR ?200.403(a) and (b) requires costs, in order to be allowable under Federal awards, to be necessary and reasonable for the performance of the Federal award and conform to any limitations or exclusions set forth in the Federal award as to types or amounts of cost items. ARP ESSER funds may be used to support a wide range of activities, including activities that are necessary to maintain the operation of and continuity of services in the District and continuing to employ existing staff of the District. Due to deficiencies in internal policies and procedures over compliance, the District expended $105,192 which was not allowed under the terms of the ESSER III grant award and 2 CFR 200.403. The accompanying financial statements were adjusted for this error. Expenditures were increased in the General Fund by $73,471 and the Athletic Fund by $31,721 and decreased in the Education Stabilization Fund, ARP ESSER by $105, 192. The District was able to provide expenditure in the amount of $105,192 from the General Fund which were substituted for these funds that were determined to be unallowable To help avoid potential loss or decrease of federal funding, the District should establish and implement policies and procedures to verify that all expenditures made from federal funds are necessary, reasonable and fully supported by underlying documentation. Failure to do so could result in unallowable expenditures being paid out of grant funds and potential costs in future audits.