Finding Text
2023-003 Internal Control Over Financial Reporting
Title and Assistance Listing Number of the Federal Program: 84.425D COVID-19 - Elementary and Secondary School Emergency Relief Fund; 84.425U COVID-19 - American Rescue plan - Elementary and Secondary School Emergency Relief
Fiscal Year Finding Originated: 2023
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Name of Federal Agency: Department of Education
Pass-through Agency: Louisiana Department of Education / East Baton Rouge Parish School Board
Questioned Costs: No questioned costs reported.
Condition: Significant audit adjustments were required to fairly present the consolidated financial statements and related Schedule of Expenditures of Federal Awards (SEFA).
Criteria: According to 2 CFR 200.508 “Auditee Responsibilities” the auditee must prepare appropriate financial statements, including the SEFA (as specifically defined under 2 CFR 200.510 “Financial statements”). Title 2 CFR 200.510 “Financial statements” requires recipients of Federal funds to prepare a SEFA for the period covered by the auditee’s financial statements, which must include the total Federal awards expended. In addition, as noted in 2 CFR 200.302 “Financial management”, the financial management system of each non-Federal entity must provide for identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received, and records that identify adequately the source and application of funds for federally-funded activities including expenditures.
When federal expenditures are incurred over $750,000, a Single Audit is required to be performed under Uniform Guidance. Failure to properly record federal expenditures could cause the Academies to not have a Single Audit performed, or have it performed improperly, which would be considered noncompliant with Uniform Guidance.
Cause: The impacts of the financial statement audit adjustments are as follows:
• Accounts receivable and revenue related to Employee Retention Tax Credits were overstated by $600,000.
• Revenues and expenditures related to reimbursement-based federal grants included in testing as a major program were understated $426,863. The Academies did not record certain grant revenues and expenditures for expenditures paid directly by the granting agency on behalf of the Academies. This adjustment impacted the SEFA and financial statements.
• Revenue related to Child Nutrition Program funds were overstated $19,150. This adjustment impacted the SEFA and financial statements.
• Adjustments to property and equipment resulting in a net increase to net assets of $29,583.
• Adjustments to accumulated depreciation resulting in a net decrease in net assets of $54,906.
• Adjustments to inter-school payable amounts resulting in a net increase in net assets of $23,015.
• Adjustments to accounts payable resulting in a net increase in net assets of $60,179.
• Adjustments to due to management company resulting in a net increase in net assets of $45,903.
• Adjustments to compensated absences resulting in a net decrease in net assets of $24,391.
Effect: The consolidated financial statements and related SEFA required material adjustments in order to be presented fairly. A lack of accounting practices can cause potential misstatements to remain unidentified and cause the financial statements and related schedules to be misleading. Noncompliance with Uniform Guidance may result in a temporary suspension of federal awards.
Recommendation: We recommend the Academies implement monthly financial statement closing procedures which capture all relevant information necessary to reconcile accounts to supporting documentation on a timely basis. These procedures should include implementing internal controls over recording and monitoring revenues related to federal awards to ensure accuracy of funds recorded.
Views of responsible officials: See views of responsible officials on page 36.