2025-003. Payroll and Disbursement (Allowable Costs/Cost Principles) United States Department of Education, Passed-through New York State Department of Education: Special Education Cluster: Special Education Grants to States: IDEA Part B ALN: 84.027 Education Stabilization Funds COVID 19: American Rescue Plan – Elementary and Secondary School Emergency Relief ALN: 84.425U Criteria: Ensure that costs charged to federal awards are allowable, reasonable, and allocable in accordance with terms and conditions of the federal award and the approved grant budget, and maintain a financial management system that provides accurate, current, and complete disclosure of expenditures charged to federal awards prescribed by Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Condition: As required under Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302, which require a financial management system to provide effective control over accountability for federal funds, and to identify the source and application of funds. During the year, we noted that the District recorded journal entries transferring payroll and disbursement related expenditures from the General Fund to the Special Aid Fund under the Special Education Cluster and Education Stabilization Funds grant codes. These journal entries lacked adequate supporting documentation to demonstrate approvals and if the costs were allowable and allocable to the applicable federal awards. Consequently, we were unable to obtain sufficient appropriate audit evidence to conclude whether the journalized transactions were properly charged to the federal programs in order to comply with Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Cause: All journalized transactions should include adequate supporting documentation to substantiate the transfer of funds, especially when recorded to federal awards, as prescribed in Subpart E, 2 CFR §200.430 and Subpart D, 2 CFR §200.302. During the current year, we noted the District did not consistently retain or attach original source documentation to journal entries reallocating General Fund expenditures to the Special Aid Fund. Additionally, internal controls were not in place to ensure that such journal entries were reviewed to confirm allowability, reasonableness, allocability, and compliance with the approved budgets for the Special Education Cluster and Education Stabilization Funds prior to being posted, as required by Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Effect: Due to the lack of supporting documentation and approvals, there is an increased risk that unallowable or unsupported costs may have been charged to the Special Education Cluster and Education Stabilization Funds and included in reimbursement requests. As a result, the District could be subject to disallowed costs and potential repayment to the grantor agencies, if costs are determined to be unallowable. Questioned Costs: The dollar amount was undetermined at the time of the audit due to insufficient documentation to support the allowability of the journalized expenditures. Context: For the Special Education Cluster and the Education Stabilization Funds, based on a sample of journal entries, we noted instances where supporting documentation was insufficient. For the Special Education Cluster, one (1) of three (3) journal entries lacked adequate documentation for payroll-related transactions, as original timesheets were not available to verify the employee’s work activity or confirm alignment with the grant’s approved budget. Similarly, for the Education Stabilization Funds, two (2) of three (3) journal entries lacked sufficient supporting documentation. The District did not provide time and effort records for payroll-related transactions or supporting invoices for disbursement transactions, limiting the ability to confirm that these costs were properly documented and consistent with grant requirements. Identification of a Repeat Finding: This is not a repeat finding. Recommendation: The District should implement procedures to ensure all journal entries made that reallocate payroll and disbursement expenditures charged to federal grants are supported by complete and adequate documentation and approvals, including time and effort documentation for payroll, and supporting invoices for disbursements as support for the journal entries in accordance with the requirements of Uniform Guidance at Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Views of Responsible Officials of Auditee: The District acknowledged the finding and noted that procedures have been implemented to prevent recurrence. These procedures are intended to ensure all journal entries contain adequate supporting documentation and approvals, including time and effort records for payroll, and supporting invoices for disbursements. Additionally, documentation will be consistently maintained and reviewed for all payroll and disbursement expenditures reallocated through journal entries and charged to federal grants in compliance with Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302.