Audit 410019

Finding 2025-002 Material Weakness & Non-Compliance: U.S. Department of Education Passed-through Mississippi Department of Education Program Name: Elementary and Secondary School Emergency Relief ARP III (ESSER) Program CFDA: 84.425U Compliance Requirement: Allowable Costs/Cost Principles CRITERIA: Recipients of federal funds must properly account for funds expended under the program. CONDITION: During our testing of accounts receivable and revenue, we noted that the district expended funds within the ARP ESSER Fund in excess of the approved grant budget. To zero out the resulting negative fund balance, the district recorded an accounts receivable/revenue adjustment of $842,663 related to expenditures coded in excess of funds available to be drawn. This was corrected by auditor adjustment, removing the receivable and related revenue and instead recording a transfer of funds from the District Maintenance Fund to cover the expenditures. CONTEXT: The school district did not follow requirements related to properly accounting for funds expended under the program. CAUSE: The district lacked a process to monitor grant expenditures against the approved budget prior to coding costs to the federal program EFFECT: Absent the auditor adjustment, the district's ESSER fund financial statements and the SEFA would have overstated federal grant revenue and expenditures by $842,663, and understated the funding needed from local sources. IDENTIFICATION OF REPEAT FINDING: No QUESTIONED COSTS: None. As the excess expenditures were ultimately funded by the District Maintenance Fund rather than the federal award, no costs were charged to the federal program in excess of the approved budget RECOMMENDATION: The school district should implement policies and procedures to ensure all applicable compliance requirements are being met. VIEWS OF RESPONSIBLE OFFICIALS: We will implement policies or procedures to establish an internal control system that will ensure strong financial accountability, including compliance with state and federal grant requirements.