Overview of 2010-11 SINGLE AUDIT – MOST Audit Findings COMMON FEDERAL 2 AWARD FINDINGS 1 174 Federal Single Audit Findings
108 Different School Districts, CESAs and 2r Independent Charter Schools
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Overview of 2010-11 Overview of 2010-11 Audit Findings Audit Findings 3 4
Code of Federal Regulations; Title 34: Education Allowable Cost PART 80—Unif orm Admini str ati ve Requir em en t for GaGran ts 143 Time and Effort Findings and Cooperative Agreements to State and Local Governments Financial management systems standards: (1) Financial reporting Fiscal Management (2) Accounting records No Separate Ledger Accounts (3) Internal control Review and Signoff of Claims (4) Budget control (5) Allowable cost Project Detail Does Not Support Final Claim (6) Source documentation Claim Did Not Agree With General Ledger (7) Cash management Claims in Excess of Eligible Cost Costs Claimed Did Not Have Supporting Documentation
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
1 Audit Process in General 6
AUDIT PROCESS U.S. Office of Management and Budget (OMB)
5 Circular A-133 Compliance Supplement Compliance supplement to assist auditors in performing the required audits Each federal program has specific requirements Auditors do not need to research laws and regulations for each program Understanding the objectives, procedures and compliance requirements of each program
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
When is the auditor required to perform a federal Audit Process in General single audit under OMB Circular A-133? 7 8
U.S. Office of Management and Budget (OMB) LEAs that expend $500,000 or more in a year in Circu lar A-133 Compli ance Suppl ement Federal awards shall have a single audit conducted for that year.
Use of the supplement is mandatory The determination of when an award is expended should be based on when the activity related to the award occurs. Identifies important compliance requirements that the Federal ggpovernment expects to be included in the audit When a sch ool is no t su bjec t to a s ingl le au dit, they are still subject to compliance with the federal award
DPI performs fiscal monitoring
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
2 When is the auditor required to audit a Audit Findings specific federal program? Required to be Reported 9 10
Significant deficiencies in internal control over major Auditors use a risk-based approach in determining which programs will be audited in the current year for ppgrograms compliance Material noncompliance with laws, regulations, Internal controls over federal awards contracts, or grant agreements related to a major Dollar amount of award program Evaluate risks associated with the grant Known questioned costs >$10,000 for a type of Past experience with auditing the award compliance requirement for a major program Past experience with auditing the client Likely l questidioned costs >$10,000 for a type of Coverage of expenditures compliance requirement for a major program
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Audit Findings Required to be Reported Audit Finding Detail 11 12
Enough detail that district can write a corrective action Known questioned costs >$10,000 for a Federal program not audited as a major program ppglan and DPI can arrive at a management decision Circumstances for an unqualified opinion (if not Federal program and specific Federal award identification including already reported as a finding) CFDA title and number Known fraud affecting a Federal award, unless Federal award number and year otherwise reported as a finding Name of Federal agency Instances where the district materiallyyp misrepresents Name of pass-through entity the status of any prior audit finding
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
3 Audit Finding Detail Audit Finding Detail
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Criteria or specific requirement upon which the audit Possible asserted effect finding is based Provide sufficient information to the district and to DPI so they can Including statutory, regulatory, or other citation determine cause and effect and facilitate proper corrective action Condition found Recommendations to prevent future occurrences Including facts that support the deficiency identified in the audit View of responsible officials of the school when there is finding disagreement with the finding Identification of questioned costs and how computed Reference numbers Enough information for judging the prevalence and consequences of the finding (i.e. isolated instance or a systemic problem)
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
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4 Audit Procedures that Identify Federal Grant Findings COMMON AUDIT 18 FINDINGS 2011-12 OMB Circular A-133 requires auditors: 17
Obtain an understanding of the internal controls in place over federal grants
Test the internal controls How does an auditor test controls?
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Internal Control Deficiencies Segregation of Duties
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Common Control Deficiencies Example: Segregation of Duties 3 staff in business office (Bookkeeper/Accountant, Superintendent, Secretary) Preparation of financial statements and schedule of financial Accountant enters the employee information into the payroll assistance system Accountant enters time sheets into payroll system Accountant runs the payroll Material Adjustments Accountant sends off electronic payment Accountant reconciles the bank account Accountant prepares W-2s
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
5 Segregation of Duties – Types of Corrective Action Preparation of Financial Statements 21 22 Segregation of Duties:
Auditing Standards are making it harder for auditors to Review of payroll report by a party independent of the processing and reporting procedures justify creating the financial statements Who enters employee information? Standards are influenced by large accounting firms that Who runs the payroll? don’t have little 3 people offices Who reviews the payroll register? Who reviews the W-2’s? Yellow Book Independence Documentation Who performs or reviews the bank reconciliation? Auditor must document reasoning that preparing the financial statement does not impair their independence Secretary may be able to assist in one of the duties Superintendent may be able to provide review Board and Management knowledge of matters relating to the district
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Preparation of Financial Statements Types of Compliance Requirements 23 24 IDEA Title I Grants Grants Activities Allowed or Unallowed Yes Yes District personnel review the financial statements and Allowable Costs/Cost Principles Yes Yes approve them Cash Management Yes Yes District personnel who prepare the schedule of federal Davis-Bacon Act Yes No and state assistance Eligibility No Yes Equipment and Real Property Yes Yes Management Needs to have the knowledge, skills, and experience to be able to discern whether the non-audit service was done correctly Matching, Level of Effort, Earmarking Yes Yes Period of Availability of Federal Funds Yes Yes Procurement and Suspension and Yes Yes Debarment Reporting Yes Yes Subrecipient Monitoring Yes Yes
Wisconsin Department of Public Instruction Special Tests and Provisions Yes Yes
6 Types of Compliance Requirements Types of Compliance Requirements
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Activities Allowed or Unallowed Allowable Costs/Cost Principles
Unique to each program OMB cost principles circular A-87
Found in the provisions of the contract or grant agreement applies to all Federal awards
establishes principles and standards for determining allowable direct and indirect costs for Federal awards
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Allowable Costs/Cost Principles Types of Compliance Requirements (Time and Effort Reporting) 27 28 Time and Effort Reporting Allowable Costs/Cost Principles Finding Compp(,g,gensation for Personnel Services (includes salaries, wages, and fringe Requi red documen ta tion o f time an d e ffor t for s ing le an d mu ltip le benefits) cost objective employees was not accurate Question Cost Compensation considered reasonable to the extent that it is $26,000 consistent with that paid for similar work in other activities of the Cause governmental unit Controls and procedures of the district did not ensure they were in compliance with OMB Circular A-87 Time and Effort Reporting AditAuditor Recommen dtidation Allowable if costs are reasonable, comparable for similar work, and District review and modify their controls and procedures relating to charges are supported with time distribution records or other time and effort documentation as stipulated in OMB A-87. District Response Agreement and will review and modify
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
7 Allowable Costs/Cost Principles Allowable Costs/Cost Principles (Time and Effort Reporting) (Highly Qualified Teacher) 29 30
Time and Effort Reporting Highly Qualified - Follow up on a Prior DPI Response for 2010-11 findings The District needs to implement a procedure for the preparation Year Finding of semi-annual certifications or personnel activity reports as Title I - one teacher did not meet the definition of highly soon a they receive the auditor finding. qualified Cause DPI will be following up with a notification that monitoring will occur for verification of personnel claimed on the grant in the Established controls and procedures did not ensure teachers 2011-12 school year. hired for core academic courses met the definition of highly qualified at an alternative school with programs supported by Title I Part A funds
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Allowable Costs/Cost Principles Allowable Costs/Cost Principles (Highly Qualified Teacher) (Excess Cost for Special Education) 31 32
Questioned Costs Criteria $66,334 Fun ds provide d for specia l educat ion ( IDEA) may only be used for excess cost of providing the Auditor Recommendation services Review the current policies and procedures Finding District Response District’s entire cost of standardized testing was No disagreement allocated to special education This finding was repeated in the current Remodeling costs for which the District could not year provide evidence that the remodeling would not have taken place without the special education program
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
8 Allowable Costs/Cost Principles Allowable Costs/Cost Principles (Excess Cost for Special Education) (Excess Cost for Special Education) 33 34
Questioned Costs Corrective Action Plan $6$10,926 Diiistrict ffleels it is appropr iate to a llocate a Recommendation portion of the fees when special education students are using the service. District will All purchases related to IDEA are made connected with specific items of the needs of individual contact DPI when using IDEA money for students rather than allocated among program extraordinary expenses Provide additional training to personnel responsible for requesting and determining appropriate program expenditures Corrective Action Plan
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Eligibility Eligibility
35 36 Cause Finding Due to staff turnover, District did not retain the Tit le I – LEA must determi ne whihihch schhlool low income targeting data report used to attendance areas are eligible to participate in Title I complete the eligibility report. The system used Part A. The school was not able to provide the low is live and cannot reproduce low income income targeting data report used to complete the targeting data report used to determine eligibility eligibility report required by DPI for the federal at that point in time. The District is able to grant substantiate a current repot from their data system Auditor Recommendation District establish procedures to retain a copy of the data used to prepare the eligibility report
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
9 Eligibility Eligibility
37 38 Auditor Recommendation Finding District has imppplemented a control process to Child Nutr it ion Cluster – Distri ct allowed a stu dent ensure that the District properly enters income free meals when based on the auditors into the computer system recalculation; the student should have received reduced meals Cause District has proper procedures in place, however the application was entered into the system as bi- weekly income being the yearly income
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Eligibility Staff Turnover
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Finding Common theme – Staff turnover Special Education– District unable to show support (IEP or overall file) for one student charged to IDEA, Important: Part B funds Written Policies and Procedures Cause More than one individual performing a duty Turnover in the position in charge of special education and the IEP and file was misplaced Appropriate review Audito r Recomme n dati on Implement a review process to ensure the district is only claiming students with a current IEP as well as ensure all information is being obtained for students who are receiving special education services.
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
10 Level of Effort Types of Compliance Requirements 41 42
Supplement Not Supplant - applies to Title I but not IDEA Matching, Level of Effort, Earmarking May use Federal funds only to supplement and, to the extent LlLevel of Effort ildincludes requ irements for practiliical, increase t hlhe leve lffdhl of funds that wou ldihld, in the a bsence of the Federal funds, be made available from non-Federal (a) a specified level of service to be provided from sources for the education of participating students. In no case period to period, may a school district use Federal program funds to supplant— (b) a specified level of expenditures from non-Federal take the place of—funds from non-Federal sources. or Federal sources for specified activities to be maintained from ppperiod to period, and Federal funds are used to implement programs and services that would no t be ava ila ble if it were no t for these fe dera l fun ds (c) Federal funds to supplement and not supplant non-Federal funding of services
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Level of Effort Maintenance of Effort
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Maintenance of Effort applies to IDEA and Title I Finding Special Education - District did not meet Funds received cannot be used, except under certain limited circumstances, to reduce the level of expenditures for the any of the four tests of maintenance of education of children with disabilities made by the LEA from local effort funds, or a combination of State and local funds, below the level of those expenditures for the preceding fiscal year Questioned Cost $33,647
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
11 Maintenance of Effort Maintenance of Effort
45 46 Cause Finding Reduction in benefits due to ACT 10 and Special Education - District did not meet receiving additional School Based any of the four tests of maintenance of Services/Medical Assistance payments effort from prior years that were unexpected Questioned Cost • Exception? $140,741 Auditor Recommendation Monitor MOE requirement more regularly during the year
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Maintenance of Effort Types of Compliance Requirements
47 48 Cause Period of Availability of Federal Funds The federal award may specify a time period during which Reduction in benefits due to ACT 10, the Fed eral fun ds may be use d. decreases in special education enrollment, staff turnover Charge to the award only costs resulting from obligations incurred during the funding period (any pre-award costs • Exception? must be authorized by the Federal awarding agency) Auditor Recommendation If the Federal program authorizes, unobligated balances may be carried over and charged for obligations of a subsequent Periodic reviews of actual expenditures funding period. compared to budget as well as analysis of staff and enrollment projections to the program should be performed
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
12 Period of Availability of Types of Compliance Requirements Federal Funds 49 50 Period of Availability of Federal Funds When is an obligation made? Obligations – Obligation is for Obligation is made Occur during a given period that will require payment during Real or personal property Date of a binding written the same or a future period commitment to acquire Orders placed (PO) Employee personal services Service is performed Contracts Contracted personal services when Date of a binding written not an employee commitment to obtain the services Goods and services received Work other than personal services Date of a binding written Similar transactions commitment to obtain the work Public Utility services Receives the service All obligations incurred under the award should be paid no later than 90 days after the end of the funding period Travel Travel is taken Rental of real or personal property Use of the property
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
Period of Availability Period of Availability
51 52
Finding Recommendation Title I – District mayyg charge to the award onl y costs resultin g District should verifyyy if costs are related to the current year or from obligations of the funding period subsequent year when determining costs to include on the current year claims report Cause District claimed costs for items which will be used after the District’s Response grants period of availability Year end final claim was corrected by the District so that no pay back of costs was required Effect District may be forced to pay back the cost of the unallowable items
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
13 Reporting (Fiscal Management) Reporting (Fiscal Management)
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Finding Questioned Cost District’s year-end ppjroject detail for the IDEA grant does not $$,21,600 support it’s final grant claims. The district claimed more than the general ledger details supported Recommendation District should reconcile grant claims with the general ledger Cause District did not reconcile it’s grant claims to expense project District’s Response detail District will reconcile claims with general ledger. In addition, District will keep more accurate and complete information Effect regarding the IDEA grant and supporting documentation will Expenses cla ime d on the gran t cla ims may no t be correc t be kept in a file for the gran t.
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
DPI Follow-up and Resolution to Federal Audit Findings DPI PROCESS 56
Audit Finding filed with DPI Is this an What will appropriate the DOE resolution? allow? DPI School Finance Auditors Review
School Finance Auditor provides appropriate program staff with the finding
Program staff follow up with district Resolution required Follow up in subsequent year Fiscal Monitoring
Wisconsin Department of Public Instruction
14 OMB Circular A-133 Contact
57 58 Requires the State as the pass-through agency to issue a management decision on audit findings within six months after receipppt of the audit report and ensure that a pppyppropriate and timely corrective action is taken. Kathy Guralski The management decision shall clearly state whether or not the audit finding is sustained, the reasons for the decision, and the School Finance Auditor expected action to repay disallowed costs, make financial adjustments or take other action. 608-266-2658 [email protected] Prior to issuing the management decision, the State may request additional information or documentation
The management decision should describe any appeal process available
Wisconsin Department of Public Instruction Wisconsin Department of Public Instruction
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