9 th Annual Title Programs Conference Title I: Fostering Innovation and Excellence - June 2011

1. 9th Annual Title Programs ConferenceTitle I: Fostering Innovation and Excellence - June 2011 Single Audit Findings and ARRA Audits Presented by Gerald Schaefer and William Smith

2. The Single Audit What is a Single Audit? An audit of an organization’s financial statements and a compliance audit of Federal awards When is it required? A single audit will also be conducted if you expend $500,000 or more in a fiscal year in Federal awards

3. Single Audit Elements When is it done? Each year What time period does it cover? State fiscal year Does it include all Federal programs? No Which Federal programs does it cover? Only major programs What is a major program? That requires some explanation

4. OMB Circular A-133 & Compliance Supplement • What is it? • Who uses it? • Why is it important? Auditors use it to determine which programs they audit and how to do the audits

5. Major Program Determination The auditors are to use a risk-based approach to determine which programs are major programs. • How much money does the program get? • Is it a low-risk program? • Is it a high-risk program? • What is the audit coverage?

6. Step 1 Identifying Type A programs Auditors first identify larger (in terms of dollars received) Federal programs. How they identify larger programs depends on the total dollar amount of Federal awards received by the school system.

7. The Formula Used in Step 1 • If the LEA receives Federal awards between $500,000 and less than or equal to $100 million then the programs audited are programs, which received the larger of $300,000 or 3% of total Federal awards. • If the LEA receives Federal awards greater than $100 million but are less than or equal to $10 billion then an audited program is the larger of $3 million or .03% of the total amount of the Federal awards.

8. Major Program Threshold

9. School Systems above $500,000

10. Step 2 Identify Type A programs which are low-risk What makes a program low-risk? No audit findings (in at least one of the two most recent audit periods) Oversight exercised by Federal agencies and GaDOE Inherent Risk Auditor’s Professional Judgment

11. Step 3 Identify Type B programs which are high-risk What makes a program a high risk? Same factors considered for a low risk except they have the opposite characteristics Inherent risk is high rather than low

12. Step 3 Risk assessment of Type B programs Auditor does not have to all programs in their risk assessment. Only type B programs, which exceed the larger of: • $100,000 or .003 of total Federal awards ($100 million in total awards) • $300,000 or .0003 of total Federal awards ($greater than $100 million in total awards)

13. Step 4 Percentage of coverage rule Whatever the auditor decides must include at least 50% of the total Federal awards expended If you are deemed a low-risk auditee, then the auditor only has to audit at least 25% of the total Federal awards expended

14. Single Audit Examples Examples from the FY 2009 Audit

15. Major Programs Example #1

16. Major Programs Example #2

17. Major Programs Example #3

18. FY 2010 Example

19. What do auditors look at? • Depends on the program • This is covered in the A-133 compliance supplement • Matrix of Compliance Requirements

20. Title I Compliance Requirements • Activities allowed or unallowed • Allowable costs/cost principles • Cash management • Eligibility • Equipment and real property management • Matching, level of effort, earmarking • Period of availability • Procurement and suspension and debarment • Reporting • Subrecipient monitoring • Special tests and provisions

21. Findings by Compliance Requirement

22. Findings by Fiscal Year

23. Findings issued in FY 2009 • 13 findings were issued • These findings had $2,168,181 in questioned costs. • Of this amount, $12,478 has been paid back and an additional $17,800 has been requested to be paid back.

24. FY 2009 Findings • Split funded personnel did not keep a personnel activity report (4 findings) • Schoolwide elements missing: $10,274 repayment • One school did not prepare an annual school system report card • Draw down requests were prepared and authorized by the same person

25. FY 2009 Findings • Payments to vendor was not adequately documented: $1,952 repayment • Reimbursements made to teachers for tuition charges using highly qualified set aside funds • non-core content teachers working on a degree in their current field • school level administrators and counselors working on a degree • teachers working on a degree other than their current field Total repayment: $17,800 repayment

26. FY 2009 Findings • Employee reimbursed for lunch when the meal was furnished at the conference - $9 repayment • School system bought a three year software subscription (period of availability finding) • School system failed to provide documentation of eligibility determinations for Title I targeted assistance programs • Sports and music equipment purchased - $242 repayment

27. U.S. ED OIG Audits Office of Inspector General (OIG) Audit Objectives: • ARRA expenditures were expended and accounted for properly (i.e. applicable laws and regulations), and 2) ARRA data reported by State are accurate, complete, and compliance with requirements

28. Phases of the OIG Audits Phase I States selected for phase one reviews: California ($10.8B), Texas ($7.4B), New York ($6.2B), Illinois ($3.8B), Pennsylvania ($3.5B), Puerto Rico ($1.9B), Indiana ($1.9B) and Tennessee ($1.7B) Phase II States selected for phase two reviews: California ($10.8B), Illinois ($3.8B), Virgina ($2.1B), Missouri ($1.7B) Maryland($1.5B) Wisconsin($1.5B), Louisiana ($1.4B), South Carolina($1.3B), Oklahoma($1B), and Utah ($850M)

29. Recently Completed U.S. ED OIG Audits Office of Inspector General (OIG)

30. Louisiana Audit released on 9/20/2010 Looked at 2/17/09 through 12/31/2009 Four school systems audited: • East Baton Rouge • Lafayette Parish • Recovery • Algiers Charter School

31. LA Findings Algiers Charter School • Used sole source contracting without justification • Does not require verification that vendors have not been debarred or suspended from receiving Federal funds Recovery • Lacked written policies and procedures for the accounting and reporting of payroll funded with Federal funds

32. South Carolina Audit released on 4/20/2011 Looked at 2/17/09 through 12/31/2009 Three school systems audited: • Charleston • Greenville • Spartanburg

33. SC Findings Charleston • Insufficient expenditure reports to support draws • May have earned interest on Federal money • Did not follow budget amendment or contract modification procedures Greenville • Insufficient expenditure reports to support draws • May have earned interest on Federal money

34. Utah Audit released on 5/13/2011 Looked at 2/17/09 through 12/31/2009 Two school systems audited: • Nebo • Granite

35. UT Findings Nebo • $5,305 charged to Title I for an employee who did not work in the Title I program • $20,084 in capital improvement costs paid with Title I funds (no prior approval from the Utah Department of Education – not allowed OMB Circular A-87)

36. California Audit released on 4/28/2011 Looked at 7/1/09 through 4/30/2010 Three school systems audited: • Fresno • San Diego • San Francisco

37. CA Findings Fresno • $20,457 in charges for four employees not working in the Title I program – three were health services employees San Diego • $2,950 in field trips – considered entertainment expenses (not allowed OMB Circular A-87)

38. Oklahoma Audit released on 2/18/2011 Looked at 2/17/09 through 12/31/2009 Three school systems audited: • Oklahoma City • Tulsa • Broken Arrow

39. OK is OK! • No Title I findings directed to school systems. • Findings were either directed to the Oklahoma Department of Education or to school systems for other programs.

40. Pennsylvania Audit released on 12/21/2010 Site visits to school systems. Site visits done in July 2009, March 2010, and April 2010 Three school systems audited: • Philadelphia Academy Charter School • Pittsburgh • Chester-Upland

41. PA Findings Philadelphia Academy Charter School • Excess cash on-hand $163,722 more cash than expenditures • $9,264 earned in interest but not remitted • Semi-annual certifications done at the beginning of the period not at the end • $438,835 in unsupported payroll costs

42. PA Findings Pittsburgh • Excess cash on-hand • $2,167 earned in interest but not remitted • Interest of $100 per year is allowed to be kept for administrative expenses

43. PA Findings Chester-Upland • Did not have semi-annual certifications until April 2010 (funds awards February 2009) • Did not track Title I program expenditures as they were incurred. Made a journal adjustment at year end. • Opposite of having too much cash – paid everything with non-Federal sources then did an annual reimbursement with Title I funds

44. Kiryas Joel Village Union Free School District Audit released on 2/2/2011 Looked at 9/1/08 through 8/31/2009 • $276,443 in supplanting in lease payments for a public school building

45. Supplanting Finding • Used student count to allocate lease costs (Title I paid for 15% of the lease) • Did not incur any additional lease costs as a result of Title I using the building • No space in the building exclusively dedicated for providing Title I services

46. Other findings • Did not disclose conflict of interests with lease agreement • $191,124 in overtime charged to Title I – not adequately supported (no timesheets)

47. Milwaukee Public Schools Audit released on 4/21/2011 Looked at 4/1/09 through 12/31/2009 • No semi-annual certifications (done once a year) • Journal entry reclassifying $60,592 to Title I payroll not approved