The Elizabeth Audit A Case Study in Audit ResolutionBonnie Little, Esq.Brustein & Manasevit, PLLCSpring Forum email@example.com
Amount in Dispute • $1,946,925 in Title I, Part A funds were either unallowable or inadequately supported in FY 05.
Unsupported Expenditures • Teacher Tutor Salaries ($666,681) • Did not keep documentation to support salaries transferred from Title I, A to Title II, A • Supplies, Textbooks and Educational Services ($154,252) • Receiving reports missing required elements
NJDOE/EPSD’s Response • Reconstructed after-the-fact certifications for teacher tutors, stating that 100% of the effort during the audit year was on schoolwide program activities • Submitted contemporaneous invoices signed by Elizabeth personnel, UPS delivery notifications, and payment vouchers as verification of receipt
OIG Response • “Our position remains unchanged.” • Rejected the after-the-fact certifications verifying that teacher tutors work solely on Title I program • Response did not address the accounting methodology used that resulted in the improper accounting of teacher tutor salaries • Contemporaneous receiving reports were signed, but not dated. Therefore, could not verify receipt prior to payment.
ED Final Determination • Sustain finding, but no recovery of funds. • Elizabeth did not account for the charges to Title I for its teacher tutors because it did not maintain semi-annual certifications. • However, after-the-fact certifications, coupled with lesson plans, schedules and other supporting documentation, demonstrated no harm to the federal interest. • Contemporaneous receiving reports violated district procedures, but were enough to show no harm to the federal interest.
Unallowable expenditures • OIG found that Elizabeth spent $605,453 of Title I funds on non-Title I schools. • Received regular Title I allocation, despite losing eligibility • “The Grants Office was aware that the three schools lost eligibility as Title I schools for FY 2005, but failed to communicate this to the Business Office.”
NJDOE/EPSD Defense • The district elected to continue to serve the schools for one year, but inadvertently failed to designate the schools as Title I eligible in the application • Schools operated compliant Title I schoolwide programs • Provided the schoolwide program plans • Demonstrated compliance with ESEA notice requirements • TA from NJDOE on designating schools as eligible on the electronic application
ED Final Determination • Sustain finding, but no recovery of funds • The failure to include the three schools on the application “was far from a harmless error.” • But, Elizabeth demonstrated that the questioned funds were used to operate a compliant Title I program in schools it could have served.
Unallowable expenditures • $7,696 of Title I funds expended for computer equipment • Four computers to math coaches that provided professional development to all math teachers in the district • $5,243 of Title I funds expended for vendor purchases at non-Title I schools
ED Final Determination • Sustain finding – NJDOE return $12,939 • NJDOE/EPSD did not provide documentation supporting these charges
Supplanting • “Elizabeth used Title I funds to provide services to Title I students that were also provided to non-Title I students using non-federal funds.”
NJDOE/EPSD Defense EPSD’s after-school program met the requirements to be excluded from supplanting determinations • Supplemental State funding • Intents and purposes of Title I
ED Final Determination • Did not sustain auditors’ finding and recommendations • Concluded that Elizabeth’s after-school program satisfied the criteria in 34 CFR 200.79(b)(1) as a program that met the intent and purposes of Title I • One school did not meet threshold poverty rate, however, ED could not determine from auditors’ work papers the amount of funds expended, and thus cannot disallow that amount
Inadequate Internal Controls • Missing requisitions and receiving reports • Services rendered prior to contract approval • Time distribution not documented and Title I certification not maintained • Principals certified their own timesheets
ED Final Determination • Sustain findings, require corrective actions • Provide internal control procedures • Update Governance Manual to include changes to internal control procedures • Provide evidence that personnel adhere to policies and procedures outlined in the Governance Manual
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