Bay City Independent School District

Material weakness in internal control over compliance - Lack of control over monitoring of maintenance of effort Federal Program: Title I, Part A, Improving Basic Programs (ALN 84.010A) Federal Agency: U.S. Department of Education Pass-through Entity: Texas Education Agency (24610101158901 and 25610101158901) Compliance Requirement: G - Matching, Level of Effort, Earmarking Criteria: According to the Uniform Guidance (2 CFR 200.303), non-federal entities must establish and maintain effective internal controls over federal awards to ensure compliance with applicable regulations and terms and conditions of the federal awards. Per 34 CFR 299.5, an LEA receiving funds under the applicable program must maintain fiscal effort per student of no less than 90% of the preceding fiscal year. Condition: The District could not provide the documentation demonstrating compliance with maintenance of effort. There is a limited awareness that the maintenance of effort calculation should be monitored throughout the year to ensure the District is in compliance. Cause: The District had a lack of understanding and control surrounding the maintenance of effort calculation and requirements. The District had not been preparing its own maintenance of effort calculation, therefore had no baseline to know if they were meeting the requirement of spending no less than 90% of the preceding fiscal year grant amount. Effect: Failure to perform and document maintenance of effort calculations increases the risk of noncompliance with federal requirements, which could result in potential repayment of funds or loss of future funding. Questioned Costs: No questioned costs were identified. Context: The District did not prepare the required maintenance of effort calculation. The federal program was not tested in the prior year, therefore, it has only been a known issue in the current year. The consequence of this audit finding is failure to document maintenance of effort may put the District at risk of noncompliance, which can result in questioned costs, loss of grant funding and required repayment. Recommendation: We recommend that the District assign responsibility to qualified personnel for the preparation of maintenance of effort calculations. Utilization of the calculation tools provided by TEA, including the guidance handbooks, will assist in the preparation. We also recommend the District implement procedures and provide the necessary training to qualified personnel to ensure maintenance of effort is calculated and reviewed as part of the grant monitoring process. Views of Responsible Officials: See Corrective Action Plan. None

Material weakness in internal control over compliance - Lack of control over monitoring of maintenance of effort Federal Program: Special Education Cluster (ALNs 84.027A, 84.173A) Federal Agency: U.S. Department of Education Pass-through Entity: Texas Education Agency (246600011589016600, 256600011589016600, 66002512, 2466100115890116610, 256610011589016610) Compliance Requirement: G - Matching, Level of Effort, Earmarking Criteria: According to the Uniform Guidance (2 CFR 200.303), non-federal entities must establish and maintain effective internal controls over federal awards to ensure compliance with applicable regulations and terms and conditions of the federal awards. Per 34 CFR 300.203, an LEA must budget at least the same amount from the same source as the prior year to maintain fiscal effort. Condition: The District could not provide the documentation demonstrating compliance with maintenance of effort. There is a limited awareness that the maintenance of effort calculation should be monitored throughout the year to ensure the District is in compliance. Cause: The District had a lack of understanding and control surrounding the maintenance of effort calculation and requirements. The District had not been preparing its own maintenance of effort calculation, therefore had no baseline to know if they were meeting the requirement of spending at a minimum of 100% of the preceding fiscal year. Effect: Failure to perform and document maintenance of effort calculations increases the risk of noncompliance with federal requirements, which could result in potential repayment of funds or loss of future funding. Questioned Costs: No questioned costs were identified. Context: The District did not prepare the required maintenance of effort calculation. The federal program was not tested in the prior year, therefore, it has only been a known issue in the current year. The consequence of this audit finding is failure to document maintenance of effort may put the District at risk of noncompliance, which can result in questioned costs, loss of grant funding and required repayment. Recommendation: We recommend that the District assign responsibility to qualified personnel for the preparation of maintenance of effort calculations. Utilization of the calculation tools provided by TEA, including the guidance handbooks, will assist in the preparation. We also recommend the District implement procedures and provide the necessary training to qualified personnel to ensure maintenance of effort is calculated and reviewed as part of the grant monitoring process. Views of Responsible Officials: See Corrective Action Plan.

Material weakness in internal control over compliance - Lack of control over monitoring of excess costs Federal Program: Special Education Cluster (ALNs 84.027A, 84.173A) Federal Agency: U.S. Department of Education Pass-through Entity: Texas Education Agency (246600011589016600, 256600011589016600, 66002512, 2466100115890116610, 256610011589016610) Compliance Requirement: A - Activities Allowed or Unallowed Criteria: Per the federal compliance supplement and Uniform Guidance (2 CFR 200.403), federal funds must supplement, not supplant, state and local funds. Excess cost calculations are required to ensure compliance with the federal program requirements. Condition: The District could not provide the documentation demonstrating compliance with the excess cost calculation. There is a limited awareness that the excess cost calculation should be monitored throughout the year to ensure the District is in compliance. Cause: The District had a lack of understanding and control surrounding the excess cost calculation and requirements. The District had not been preparing its own excess cost calculation, therefore had no baseline to know if they were meeting the requirement of spending at a minimum. Effect: Failure to perform and document excess cost calculations increases the risk of noncompliance with federal requirements, which could result in potential repayment of funds or loss of future funding. Questioned Costs: No questioned costs were identified. Context: The District did not prepare the required excess cost calculation. The federal program was not tested in the prior year, therefore, it has only been a known issue in the current year. The consequence of this audit finding is failure to document the excess cost calculation may put the District at risk of noncompliance, which can result in questioned costs, loss of grant funding and required repayment. Recommendation: We recommend that the District assign responsibility to qualified personnel for the preparation of excess cost calculations. Utilization of the calculation tools provided by TEA, including the guidance handbooks, will assist in the preparation. We also recommend the District implement procedures and provide the necessary training to qualified personnel to ensure maintenance of effort is calculated and reviewed as part of the grant monitoring process. Views of Responsible Officials: See Corrective Action Plan.