Finding Text
Findings and Questioned Costs – Major Federal Award Programs Audit
Finding 2023-003 Material Weakness
Federal Agency: U.S. Department of Education
Passthrough Entity: Missouri Department of Elementary and Secondary Education
Assistance Listing Number and Federal Program: 84.425 Education Stabilization Fund – Elementary and Secondary Education
Compliance Requirements: B. Allowable Costs and L. Reporting
Criteria:
In accordance with 2 CFR part 200.302, the District is required to maintain financial management systems to trace funds to expenditures to establish that funds have been used according to Federal statutes, regulations, and the terms and conditions of the Federal award. The financial management system must provide for records that identify adequately the source and application of funds for federally-funded activities, among other conditions. The reporting of the federal expenditures should be supported by these records. Amounts may not be expended from project funds on an arbitrary basis. Thus, it is critical to have a process in place to regularly reconcile underlying financial records with the grant reports. This will also help ensure correct revenue is being reported and underlying costs in the financial records are supported.
Statement of Condition:
During the course of our audit, we noted that the District requested reimbursement for expenses that were not properly supported by the necessary project codes and source codes in the financial management system. The grant payment request for reimbursements for respective Federal grants were not reconciled to the District’s general ledger and the classification of expenditures did not agree to what was detailed on the grant payment request for reimbursements. Additionally, the calculation for allocating expenses and the journal entries made were not approved. The District must be able to specifically identify and provide support for every Federal expenditure that is reimbursed.
Statement of Cause:
Control procedures were not in place to reconcile the general ledger project codes to the grant payment request for reimbursement for the grant. The District failed to review expenses throughout the year to ensure transactions were properly classified. Controls were not in place to properly review expense allocations or journal entries.
Statement of Effect:
Without timely reconciliations and monitoring processes, grant expenditures can be omitted or overstated on submitted grant reports or other grant noncompliance can be overlooked. This could result in missed funding or noncompliance with grant agreements which could lead to adverse conditions with the grantors.
Questioned Costs:
No questioned costs.
Perspective Information:
This appears to be a systemic problem because after reviewing other grants received by the District, the correct project codes and source codes were not being properly utilized.
Identification of Repeat Findings:
Not a repeat finding.
Recommendation:
We recommend that the District develop written procedures that require grant payment request for reimbursements and any other required reporting to be reconciled to the internal accounting records prior to report submission. The District must be able to specifically identify and provide support for every expenditure that is reimbursed. A review should be performed to ensure the expenditures are properly classified and allowable. This process should be attainable if each grant utilizes the proper project codes and sources codes as required by the grant agreements. The reconciliation should be monitored by someone not responsible for the recording and procedures should be put in place to ensure the reconciliation is being performed timely. Controls should be implemented for adjustments that need to be made to be reviewed by a person other than the one recording the adjustment. Evidence of reconciliations and reviews should be clearly identifiable.
Views of Responsible Officials:
The Hannibal School District received millions of one-time federal grant monies to assist with expenditures incurred as a result of the effects of the coronavirus pandemic. Although these funds were hugely helpful, minimal guidance was available. This is not a finding that has been presented to us in the past. The school district has received federal and state grants annually that are reconciled to the appropriate project codes and this process will be diligently followed as in prior years. For example, the district was awarded the Immediate Responses Services grant in Fall 2023. The expenditure project codes for this grant have been provided by grant guidance and any and all expenditures will be coded using these expenditures codes. This should prevent any need for future journal entries moving forward. This process is an example of the systematic process that will be followed for all grants. See Corrective Action Plan.