Finding Text
FA 2023-003 Strengthen Controls over Expenditures Compliance Requirements: Period of Performance Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants Federal Award Numbers: HO27A210073(Year: 2022), HO27A220073 (Year: 2023), HO27X220073 (Year: 2023) Questioned Costs: None Identified Repeat of Prior Year Finding: FA 2022-003 Description: A review of journal entries charged to the Special Education Cluster revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred. Background Information: The Special Education Cluster (SEC), which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was authorized under the Individuals with Disabilities Education Act (IDEA). Special Education Cluster funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. SEC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. SEC funds totaling $1,053,381.74 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Condition: A sample of four journal entries was randomly selected for testing using a non-statistical sampling approach. These journal entries were reviewed to determine if appropriate internal controls were implemented and applicable period of performance compliance requirements were met. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for those journal entries tested. Cause: The School District did not maintain evidence of review and approval of journal entries as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds Lastly, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Special Education Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries reflect evidence of review for associated compliance requirements. Additionally,, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with this finding. The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 4 journal entries. While not approved by the Director in charge of the grant, one journal entry, in the amount of $1.52, was made to eliminate fund balance which cannot exist in any federal grant. While not approved by the Director in charge of the grant, one journal entry was necessary to accurately match revenues and expenditures to the appropriate grant years as two grants were operating simultaneously during the period from July 1, 2022, through September 30, 2022. A reclassification journal entry was made to reclassify grant revenue from account number 404-2838-4535-00000-8010-0 (2023 grant) to account number 404-2838-4535- 00000-8010-1 (2022 grant). Two journal entries to reverse salary and benefit accruals are annual, standard journal entries utilized for operational efficiency and best practice to reverse salary and benefit accruals that are required under Generally Accepted Accounting Principles. While not approved by the Director in charge of the grant, the journal entries were appropriate and necessary to ensure expenditures were accurately recorded in the proper accounting period and only included reversals related to personnel the Director approved to be paid from the grant. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Period of Performance and Procurement and Suspension and Debarment compliance requirements, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the transactions identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.