Flossmoor School District 161Local Government

Finding 2025-001: Material Weakness in Internal Control and Material Noncompliance, Activities Allowed or Unallowed and Allowable Costs/Cost Principles. Assistance Listing Program Title and Number: Education Stablization Fund: COVID-19 American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER) (84.425U) Federal Agency: U.S. Department of Education Pass-Through Entity: Illinois State Board of Education Award Year: 2024-2025 Award Number: 25-4998-C3 and 24-4998-E3 Criteria or Specific Requirement: Per 2 CFR §§ 200.403 and 200.438, costs charged to federal awards must be necessary, reasonable, and allowable under federal statutes, regulations, and the terms and conditions of the award. Costs for entertainment, gifts, or similar items are generally unallowable unless they serve a documented, programmatic purpose and are explicitly authorized. In addition, U.S. Department of Education guidance for the ARP ESSER program indicates that funds may not be used to provide direct monetary incentives, such as gift cards, to students or families to encourage attendance or participation, as such expenditures do not meet federal allowability requirements. Condition: During our testing of nine transactions totaling $428,326, we identified one transaction in the amount of $38,200 for the purchase and distribution of Amazon gift cards to students as incentives to improve attendance. Further inquiry of the District’s management and specific identification of all expenditures labeled as “prepaid gift cards” indicated that the District expended $113,200 of ARP ESSER funds during the fiscal year ended June 30, 2025 on prepaid gift cards for similar purposes. Cause: The condition was caused by inadequate design and implementation of controls over the review and approval of nonpayroll expenditures charged to federal awards, specifically the lack of procedures to evaluate allowability in accordance with federal regulations and program guidance prior to purchase. The District submitted an application for the use of funds and the pass through entity approved the submitted annual ESSER budget for the period ending June 30, 2025. Effect: District incurred unallowable costs and was not in compliance with federal requirements. As a result of the noncompliance, the District may be required to return the funds to the State. Additionally, the lack of effective controls increases the risk that additional unallowable expenditures could occur and not be detected in a timely manner. Context: The unallowable costs of $113,200 represented approximately 12% of the $915,106 in total expenditures reported for this award. The sample used was not a statistically valid sample. Questioned Costs: Questioned costs of $113,200 represent the total amount of ARP ESSER funds expended on prepaid gift cards identified through testing and follow-up procedures as unallowable. Repeat Finding: N/A Recommendation: We recommend the District strengthen internal controls over federal expenditures by implementing procedures to: • Evaluate and document allowability of expenditures prior to approval, • Require review of expenditures against Uniform Guidance and program-specific requirements, and • Provide training to relevant personnel regarding allowable and unallowable costs under federal programs. Views of Responsible Officials: The District's determination was based on its interpretation of available guidance and the approval of the related grant budget; however, the District acknowledges that additional reviews should have been performed to independently assess and document the allowability of the expenditures under federal requirements. However, the District recognizes that approval of a budget does not relieve the District of its responsibility to independently evaluate and document compliance with federal allowability requirements. The District will strengthen its review and approval procedures for expenditures charged to federal programs by providing additional training to personnel responsible for grant administration and implementing enhanced procedures to evaluate and document allowability before costs are incurred and charged to federal awards.

Finding 2024-001: Untimely Submission of the 2023 Single Audit Reporting Package Federal Programs: Applicable to all assistance listing numbers (ALN’s) and federal agencies (and pass-through entities) included on the schedule of expenditures of federal awards for the year ended June 30, 2023. Criteria: Uniform Guidance 2 CFR 200.512(a), Report Submission requires that each organization’s audit must be completed and the data collection form and reporting package submitted within the earlier of 30 calendar days after receipt of the auditor’s report or nine months after the end of the audit period. For any 2023 submissions with fiscal periods ending between January 1, 2023 and September 30, 2023, the 2 CFR 200.512(a)(1) requirement for Single Audit report to be submitted to the Federal Audit Clearinghouse 30 days after receipt of the auditor’s report(s), is waived. These audits will be considered on time if they are submitted within nine months after the end of the audit period. Condition and Context: As the waiver noted above was applicable to the District, the Single Audit reporting package for the District’s fiscal year ended June 30, 2023 should have been submitted to the Federal Audit Clearinghouse by March 31, 2024. However, submission did not take place until April 29, 2024. Cause: The District does not have sufficient controls in place over timely submission of the Single Audit reporting package. Effect: The Single Audit reporting package was not received timely by the Federal Audit Clearinghouse. This could potentially impact future funding by federal agencies. Questioned Costs: None. Repeat Finding: No Recommendation: To ensure compliance with Federal regulations, we recommend the District develop additional controls so all elements of the Single Audit reporting package are submitted timely. View of Responsible Officials: Management agrees with this finding.

Although the District completed and timely filed its income verification summary report, we noted that the report did not accurately reflect the lack of responses for income verification.

Although the District completed the calculation for paid lunch equity, they failed to increase the cost of a school lunch by the amount determined by the calculation.

GSA_MIGRATION