Finding Text
Finding #2024-003; Education Stabilization Fund – CFDA No. 84.425; Year Ended June 30, 2024
CONDITION:
An audit adjustment was necessary to remove 2024-25 ESSER expenditures from the 2023-24 fiscal year.
CRITERIA:
Allowable costs under Federal awards are to be determined in accordance with generally accepted accounting principles (GAAP).
CAUSE:
The cause was a misunderstanding of the term “encumbrance” by management. Instead of relying on purchase orders (POs) to encumber grant funds, checks were issued for expenditures that were not invoiced or incurred until after year end.
EFFECT:
This deficiency resulted in otherwise allowable ESSER expenditures to be erroneously recognized in 2023-24 instead of 2024-25. (Also see Finding #2024-001 under Section II.)
QUESTIONED COSTS:
$40,555
PROPER PERSPECTIVE (SAMPLING):
A sample of sixty (60) totaling $923,850 (44.6% of population) was selected for testing of non-payroll related expenditures during the financial statement audit. Included in the sample were twenty-one (21) federal grant expenditures ($631,176, or 68.3% of sample). Of those, four (4) were ESSER costs of $40,555 (4.4% of sample) attributable to fiscal year 2024-25, not 2023-24. The audit sample was statistically valid.
REPEAT FINDING:
No.
RECOMMENDATION:
We recommend the business office obtain a better understanding of encumbrances, especially with regard to grant programs, and that expenditures are recorded only for items or services received to ensure inclusion in the correct fiscal year.
MANAGEMENT RESPONSE:
Management agrees with the recommendations and will obtain a better understanding of encumbrances, especially with regard to grant programs, and will record expenditures only for items or services received.