San Bernardino City Unified School District

50000 – Special Education Activities Allowed & Allowable Costs (Material Weakness in Internal Control Over Compliance, Noncompliance) Federal Agency: U.S. Department of Education Pass-Through Entity: California Department of Education Program Name: Special Education Grants to States - Basic Local Assistance Federal Financial Assistance Listing: 84.027 Award Identification Number: 13379 Award Year: 2024-2025 Compliance Requirements: A. Activities Allowed or Unallowed & B. Allowable Costs/Cost Principles Type of Finding: Material Weakness in Internal Control over Compliance; Noncompliance Criteria Per Title 2, Code of Federal Regulations, Subtitle A, Part 200, Subpart E, Section 200.403(a), in order for costs to be allowable under Federal awards, they must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Condition The District did not have sufficient controls in place to ensure that expenditures charged to the Special Education program were allowable in accordance with federal requirements. The District transferred expenditures into the federal program from the state special education program. The amount of expenditures transferred into the federal program was $235,962 in excess of the amount of available expenditures in the state program. As such, this amount was not supported by invoices in order to determine allowability. Cause The condition identified appears to have materialized due to the District’s lack of internal controls over compliance. Effect The District has not complied with Title 2, Code of Federal Regulations, Subtitle A, Part 200, Subpart E, Section 200.403(a). Questioned Costs The condition identified above resulted in $235,962 of questioned costs for Special Education Grants to States - Basic Local Assistance under Assistance Listing 84.027 and Award Identification Number 13379. Context/Sampling: Questioned costs were identified through review of one of one large journal transfers noted. It was noted through review of the transfer that the expenditures remaining in the state program were negative due to the over-transfer of $235,962 of expenditures into the federal program. Repeat Finding No. Recommendation The District should implement additional internal controls over compliance with federal programs to ensure that expenditures are made in compliance with all federal regulations and program guidance.

Federal Agency: U.S. Department of Education Pass-Through Entity: California Department of Education Program Name: COVID-19 – Education Stabilization Fund Federal Financial Assistance Listing: 84.425D, 84.425U, 84.425W Compliance Requirements: A/B – Activities Allowed or Unallowed & Allowable Costs/Cost Principles Type of Finding: Material Weakness and Noncompliance Criteria or Specific Requirements Title 2 Code of Federal Regulations 200.403(e) requires costs to be determined in accordance with generally accepted accounting principles (GAAP), which requires expenditures to be accrued in the period in which they are incurred. Condition The District accrued balances on open purchase orders at year-end, resulting in over-accrual of expenditures of $1,172,500 which did not have related services rendered or goods received by June 30, 2024. Additionally, this resulted in $176 of unallowable indirect costs charged to the program. Cause The cause appears to be due to lack of sufficient internal controls over year-end financial statement preparation. Effect The District is not in compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles related to the Education Stabilization Fund program. Questioned Costs The condition identified above resulted in known questioned costs of $1,172,500 in direct costs and $176 in related indirect costs charged, resulting in total questioned costs of $1,172,676. Context/Sampling: Unallowable costs were identified through a review of accounts payable for the District as a whole and not through the sample selected for major program testing. Repeat Finding No. Recommendation The District should implement controls to ensure that all expenditures charged to federal programs are allowable.

Federal Agency: U.S. Department of Education Pass-Through Entity: California Department of Education Program Name: COVID-19 – Education Stabilization Fund Federal Financial Assistance Listing: 84.425D, 84.425U, 84.425W Compliance Requirements: L – Reporting Type of Finding: Material Weakness and Noncompliance Criteria or Specific Requirements Title 2 Code of Federal Regulations 200.328 requires financial reports to be collected no less than annually. Reports should reflect financial information for the period reported on. Condition The District charged unallowable direct and indirect costs to the program totaling $1,172,676 which resulted in expenditure reports reflecting unallowable expenditures. Cause The cause appears to be due to lack of sufficient internal controls over compliance with reporting requirements. Effect The District is not in compliance with Reporting related to the Education Stabilization Fund program. Questioned Costs There are no questioned costs identified. Context/Sampling: Inaccurate reporting was identified through a review accounts payable for the District as a whole which identified unallowable costs charged to the program. Repeat Finding No. Recommendation The District should implement controls to ensure that all reports are prepared accurately.

Federal Agencies: U.S. Department of Education, U.S. Department of Justice Pass-Through Entity: California Department of Education, except for Indian Education and School Violence Prevention, which are direct awards Program Name: Various, see Condition below Federal Financial Assistance Listing: Various, see Condition below Compliance Requirements: A/B – Activities Allowed or Unallowed & Allowable Costs/Cost Principles Type of Finding: Material Weakness and Noncompliance Criteria or Specific Requirements Title 2 Code of Federal Regulations 200.403(e) requires costs to be determined in accordance with generally accepted accounting principles (GAAP), which requires expenditures to be accrued in the period in which they are incurred. Condition The District accrued balances on open purchase orders at year-end, resulting in over-accrual of expenditures which did not have related services rendered or goods received by June 30, 2024 for various federal programs which were not identified as major programs. Additionally, this resulted in unallowable indirect costs charged to various federal programs which were not identified as major programs. Detailed information for unallowable direct and indirect costs charged related to this issue is as follows: SEE TABLE IN THE FINDING Cause The cause appears to be due to lack of sufficient internal controls over year-end financial statement preparation. Effect The District is not in compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles for various federal programs not identified as major programs Questioned Costs The condition identified above resulted in known questioned costs of $537,362 in direct costs and $14,784 in related indirect costs charged, resulting in total questioned costs of $552,146. Context/Sampling: Unallowable costs were identified through a review of accounts payable for the District as a whole and not through the sample selected for major program testing. Repeat Finding No. Recommendation The District should implement controls to ensure that all expenditures charged to federal programs are allowable.

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