Finding Text
Condition - The District did not accrue a June 2023 invoice totaling $1,620,380.99 for a ventilation project at the Spaulding Union High School funded through a Federal Education Stabilization Fund grant at June 30, 2023. An audit adjustment was proposed to correct this misstatement. Criteria - Uniform Guidance §200.502 states that “the determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs.” For financial statement reporting in the fund financial statements as prescribed by the GASB “expenditures should be recognized in the accounting period in which the fund liability is incurred, if measurable.” Cause - This invoice was paid by the District on July 20, 2023 and was not recorded in the general ledger as a June 2023 expenditure but was instead recorded as a July 2023 expenditure. Effect - The Districts Grants Fund expenditures were understated by $1,620,380.99. The Schedule of Expenditures of Federal Awards presented for audit was also understated by $1,620,380.99. Lastly, capital assets in the government-wide governmental activities were understated by this same amount. Recommendation - We recommend a careful review of costs paid in the first quarter of a fiscal year or just prior to scheduled audit work. We would recommend that such a review include the review of significant amounts paid and verification that those costs are recorded in the proper fiscal year. The condition in this finding discussed previously was first identified by the auditor while performing a standard search for unrecorded liabilities by obtaining the subsequent year check register and reviewing invoice(s) supporting significant amounts paid and verifying that those costs were included in the proper period. Management’s response - In response to the finding indicated in the governance letter, management recognizes that the physical work performed for this expense occurred in FY23, but this is also an ongoing project and the period of performance for the ARP ESSER grant ends on 9/30/2024 not 6/30/23. Therefore, Management believes their interpretation is also correct. All federal and state grants with a period of performance ending 6/30/23 were accrued back to FY23 ensuring payments and receipts activities were in the correct time frame. Final reimbursement was requested, and the grants were closed out. The implementation of our new financial system also added an extra layer of complexity to our end of year accounting. Work in 2 different systems that do not work cohesively with each other was very challenging. We respect and appreciate the work of our auditors and understand that at times we will disagree and interpret things differently, which is what happened in regard to the expense for the HVAC project surrounding the "period of performance" language.