Finding Text
Finding No. 2022-003
Federal Agency: U.S. Department of Education
Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B)
Area: Allowable Costs/Cost Principles
Questioned Costs: $0
Criteria:
The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements.
2 CFR 200.403(g) provides that costs must be adequately documented to be considered allowable under Federal awards.
2 CFR 200.430(i)(1)(i) requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.
Condition:
1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was lower by $480,743 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under the program but were reclassified to the Education Stabilization Fund (ESF) federal program through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail.
2. For 3 (or 8%) of 40 transactions tested aggregating $61,202 out of $3,196,892 in total payroll expenditures, employee timecards were not provided. No questioned costs are raised as summary timesheets were provided.
See Schedule of Findings and Questioned Costs for chart/table.
Cause:
PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported.
Effect:
PSS is in noncompliance with applicable allowable costs/cost principles requirements.
Recommendation:
PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant.
Views of responsible officials:
The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding.
Auditor response:
Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains.
Condition 2 – Based on our understanding of PSS’ internal controls, timecards are required to be provided every pay period to support the payment of salaries and wages. The condition remains.