Finding Text
2023-001 – Internal Controls Surrounding Claim Reconciliation and Reimbursement
Finding Type: Material Weakness in Internal Control over Compliance / Material Non-Compliance
Program: Education Stabilization Fund (ALN #84.425)
Compliance Area: Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Criteria: Generally Accepted Accounting Principles and 2 CFR Part 200.303 requires that non-Federal entities establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the award. In addition, the SC Department of Education, the Pass-Through Entity, requires that all claims for expenditures through June 30th of any fiscal year be performed prior to August 15.
Condition: The District failed to reconcile expenditures to filed claims to ensure that all expenditures were appropriately accounted for and timely claimed by the SC Department of Education deadline of August 15. The failure in the design of internal controls led to the Districts’ oversight of not timely claiming certain funds for the Education Stabilization Fund and the Special Education Cluster in the amount of $834,955 and $1,838,443, respectively. In addition, after performing appropriate reconciliations and final claims of the Education Stabilization Fund, the District had overclaimed funds and is required to return $114,865 to the SC Department of Education for use in future fiscal years.
Cause: The District failed to have an adequate documented system of internal controls in place surrounding the claims process for federal claims passed through the SC Department of Education.
Effect: Despite the SC Department of Education making an exception to allow the District to claim these funds past the deadline, the failure to properly reconcile and timely claim expenditures could result in the loss of the District’s ability to claim the federal funds. Any expenditures not allowed to be claimed after the State’s deadline would have to be transferred from the federal program to the general fund of the District.
Auditor’s Recommendations: The District should implement internal control processes and monitoring to ensure grant expenditures are appropriately reconciled and claims filed quarterly.