Finding 16542 (2022-001)

Finding No. 2022-001 (Cost Segregation) Type of Finding: Significant Deficiency Federal Program: Education Stabilization Fund ALN: 84.425D; 84.425U Federal Award Year: 2020, 2021 Federal Agency: Department of Education Pass-thru entity: PA Department of Education Pass-thru nos. FA-200-21-1091; FA-225-21-1091; 223-21-1091 Questioned Costs: N/A Repeat Finding: No Type of Compliance Requirement: Allowable Costs/Cost Principles Criteria: Federal Agencies issuing grants to schools, require all federal transactions to be segregated from non-federal transactions. In addition, each federal grant requires its costs to be segregated from other federal grants. This segregation usually occurs by using a source code as established by the PDE Chart of Accounts. Condition: The Charter School does not segregate federal grant expenditures within the accounting software instead choosing to track the expenditures for each grant in excel. During our audit, we found inconsistencies with where expenditures were reported in the excel spreadsheet and where they were recorded in the software. Cause: The Charter School uses QuickBooks for its accounting software and does not segregate the expenditures for each federal grant within the software itself. The School was tracking the expenditures in excel by the original grant budget code instead of by the actual expenditure account codes. Effect: Failure to correctly identify and segregate expenditures can lead to reporting errors. Context: We reviewed the expenditures in the client?s excel tracker and compared the total amount of expenditures by major function-object to the client?s trial balance to verify the expenditures existed in those accounts. We noted an instance of a specific teacher?s salary in the workbook was reported as 1100-100 when their salary was recorded to the 1400 function series. We also noted an expense of $3,950 that was reclassed to the Title II grant but was not removed from the excel tracker. Recommendation: We recommend the School utilize a more appropriate software for fund accounting that will allow for the segregation of federal grant expenditures directly in the software using a distinct source code for each grant in accordance with the PDE Chart of Accounts. Views of Responsible Officials and Planned Corrective Actions: The Charter School agrees with the finding and the recommended procedures have been implemented.