SHELDON INDEPENDENT SCHOOL DISTRICTLocal Government

Finding 2021-005 Information on Federal Program: Assistance Listing 84.425U ? Elementary and Secondary School Emergency Relief Fund III (ESSER III) United States Department of Education Pass-Through Entity: Texas Department of Education Award Number: 212528001101924 Compliance Requirements: Allowable Costs/Cost Principles Type of Finding: Material Weakness in Internal Control Over Compliance and Noncompliance (Questioned Costs over $25,000 for a Major Program) Criteria As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. The Department of Education established ?allowable costs/cost principles? compliance requirement applicable to ESSER III which stipulates that direct costs be specifically identified and that operating agencies not receive duplicate payments for said costs. Condition: During the fiscal year ended June 30, 2021, the District did not have effective internal controls over compliance with the allowable costs/cost principles requirement described above. The District requested reimbursement from the ESSER III for $88,875 in expenditures that had previously been reimbursed from the Coronavirus Relief Fund. Cause: The District did not have adequately designed controls in place to ensure compliance with the allowable costs/cost principles requirement. Effect or Potential Effect: The District was not in compliance with the allowable costs/cost principles requirement. Questioned Costs: $88,875 Context: Of the approximately $3.28 million reimbursed from the ESSER III, $88,875 in expenditures claimed for reimbursement were previously claimed in another federal program. This was identified as a result of our audit procedures and the District adjusted the reported expenditures in Fund 282 to reduce expenditures by this amount, and record the balance as "unearned revenue" as of June 30, 2021. Repeat Finding: No Recommendation: We recommend that the District review its internal controls over compliance to ensure controls are suitably designed and are in place to prevent, or detect and correct, noncompliance with applicable compliance requirements. Views of Responsible Officials and Planned Corrective Action Plan See corrective action plan.

Finding 2020-004 Information on Federal Program: CFDA 84.010A ? ESEA Title I, Part A ? Improving Basic Programs United States Department of Education Pass-Through Entity: Texas State Department of Education Award Number: 191610101101924/2061010101924 Compliance Requirements: Matching, Level of Effort, Earmarking Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. The Department of Education established a ?maintenance of effort? (MOE) compliance requirement applicable to Elementary and Secondary Education Act (ESEA) programs which stipulates that a local education agency (LEA) may receive funds under an applicable program only if the state education agency (SEA) finds that the combined fiscal effort per student or the aggregate expenditures of the LEA from State and local funds for free public education for the preceding year was not less than 90 percent of the combined fiscal effort or aggregate expenditures for the second preceding year, unless specifically waived by the Department of Education. Condition: During the fiscal year ended June 30, 2020, the District did not have effective internal controls over compliance with the MOE requirement described above. As described under finding 2020-002, the District was notified by the TEA that is was found to be noncompliant with the MOE requirements applicable to the ESEA programs for the prior fiscal year ending June 30, 2019. This finding of noncompliance was attributable to the fact that the District failed to report a full twelve months of expenditures for that period, and upon further investigation, the District?s management determined that when measured against the full twelve months of expenditures, the District did in fact comply with this requirement. However, effective internal controls over compliance with the MOE requirement would have detected the error and prevented inaccurate reporting. The fact that the District?s self-reported data, while inaccurate, resulted in a finding of noncompliance, is an indication that actual noncompliance would likely not be detected or prevented by the District?s internal controls over compliance. Cause: The District did not have adequately designed controls in place to ensure compliance with the MOE requirement. Effect or Potential Effect: Noncompliance with the MOE requirement could occur and not be prevented, or detected and corrected, by the District?s system of internal control over compliance, leading to potential loss of federal award funding. Questioned Costs: N/A Context: MOE is determined on an annual basis and therefore there is only one instance of the control over compliance during any given fiscal year. The District?s control over compliance did not operate as designed for this one instance. Repeat Finding: No Recommendation: We recommend that the District review its internal controls over compliance to ensure controls are suitably designed and are in place to prevent, or detect and correct, noncompliance with applicable compliance requirements. Views of Responsible Officials and Planned Corrective Action Plan See corrective action plan.

Finding 2020-005 Information on Federal Program: CFDA 84.010A ? ESEA Title I, Part A ? Improving Basic Programs United States Department of Education Pass-Through Entity: Texas State Department of Education Award Number: 191610101101924/2061010101924 Compliance Requirements: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. The Department of Education established an allowable costs/cost principles compliance requirement applicable to Elementary and Secondary Education Act (ESEA) programs which stipulates that a local education agency (LEA) must maintain time and effort distribution records that support the portion of time and effort dedicated to the program. Condition: During the fiscal year ended June 30, 2020, the District did not have effective internal controls over compliance with the allowable costs/cost principles requirement described above. The District was unable to produce time and effort distribution records for an employee whose payroll expenditures were charged to the program. Cause: The District did not have adequately designed controls in place to ensure compliance with the allowable costs/cost principles requirement. Effect or Potential Effect: Noncompliance with the allowable costs/cost principles requirement could occur and not be prevented, or detected and corrected, by the District?s system of internal control over compliance, leading to potential loss of federal award funding. Questioned Costs: $102 Context: $102 of the known questioned costs related to the employee for which time and effort distribution records were not produced. The total payroll expenditures sampled were $28,485. For one out of 12 items in our sample, the District?s internal controls did not operate to ensure that the expenditure was supported by time and effort documentation and as a result the District did not produce such records. Repeat Finding: No Recommendation: We recommend that the District review its internal controls over compliance to ensure controls are suitably designed and are in place to prevent, or detect and correct, noncompliance with applicable compliance requirements. Views of Responsible Officials and Planned Corrective Action Plan See corrective action plan.

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