UNION GAP SCHOOL DISTRICTLocal Government

The District overcharged costs to the Educational Stabilization Fund Program. Assistance Listing Number and Title: 84.425, COVID-19 Educational Stabilization Fund Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: COVID-19, 84.425D, 0120579 COVID-19, 84.425D, 0135506 COVID-19, 84.425U, 0138263 COVID-19, 84.425U, 0137251 COVID-19, 84.425U, 0140079 Known Questioned Cost Amount: $45,212 Prior Year Audit Finding: N/A Background The objectives of the Education Stabilization Fund (ESF) program are to prevent, prepare for and respond to the COVID-19 pandemic. In fiscal year 2023, the District spent $1,185,712 of its ESF awards. This included $532,562 Elementary and Secondary School Emergency Relief Fund (ESSER II) subprogram (ALN 84.425D) and $653,150 in the American Rescue Plan Elementary and Secondary School Emergency Relief (ARP ESSER III) subprogram (ALN 84.425U). Federal regulations establish principles and standards for determining allowable direct and indirect costs for federal awards. All costs that recipients charge to the program must comply with program requirements and recipients must support this compliance with proper documentation that demonstrates costs are allowable. The Office of Superintendent of Public Instruction (OSPI) establishes the indirect cost rate for each award, and districts cannot exceed this approved rate when claiming reimbursement. If there are changes to the rate during a multi-year award, districts must adjust the amount claimed, if needed, to ensure they do not exceed the approved rate. Description of Condition Although the District’s internal controls were adequate for ensuring it materially complied with the program’s allowable activities and costs requirements, the District claimed reimbursement for purchases when it received a purchase order from its vendor and again when it received the invoice. As a result, the District claimed reimbursement for the same expense twice. In addition, the District charged the incorrect indirect cost rate for its ESSER II and ESSER III awards. Cause of Condition District staff claimed expenses using a purchase order and then claimed the expenses a second time using an invoice. Staff did not identify the duplicate claims when preparing the reimbursements. They had no secondary review of the claimed amounts prior to submission. District management and staff did not know they needed to manually adjust the District’s OSPI-issued unrestricted indirect cost rate for ESSER awards that covered two fiscal years. Instead, they relied on the rate established in the iGrants claim reimbursement system, which was the prior year’s rate. Effect of Condition and Questioned Costs The District claimed reimbursement twice for two invoices each, totaling $17,754, and associated indirect costs of $4,440. We are questioning $7,400 in award number 135506 and $14,794 in award number 137251. We reviewed all indirect costs charged to the program. We found that the District charged $23,018 more in indirect costs than was allowable because it did not use the correct rate as instructed by OSPI. We are questioning $20,894 in award number 138263 and $2,124 in award number 137251. Federal regulations require the State Auditor’s Office to report known questioned costs that are more than $25,000 for each type of compliance requirement. We question costs when we find the District has not complied with grant regulations and/or when it does not have adequate documentation to support expenditures. Recommendation We recommend the District ensure all costs it charges to federal programs are allowable and comply with cost principles. We also recommend the District ensure it uses the correct OSPI-issued unrestricted indirect cost rate for the fiscal period when it charges costs to federal awards.