Title I, Part A: Most Common Audit Findings

Dr. John D. Barge, State School Superintendent“Making Education Work for All Georgians”www.gadoe.org

Title I, Part A: Most Common Audit Findings

Sue Hawks Foster Education Program Specialist

June 2013


Why is this important?We are required by federal law to:

Issue a management decision on audit findings within six months after receipt of the subrecipient’s audit report and ensure that the subrecipient takes appropriate and timely corrective action [OMB Circular A-133]


Single Audit Process

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


Single Audit ElementsWhen is it done?

-Each yearWhat time period does it cover?

-State fiscal yearDoes it include all federal programs?

-NoWhich federal programs does it cover?

-Only major programs What is a major program?

-That requires a bit of explanation


Major Program Determination

The auditors are to use a risk-based approach to determine which programs are major programs.

1.How much money does the program get?

2.Is it a low-risk program?

3.Is it a high-risk program?

4.What is the audit coverage?


Single Audits of LEAs(Sample)

LEA Federal Award Amount Threshold usedRockdale County BOE 16,164,813$ 300,000$ 484,944$ 484,944$ Gwinnett County BOE 114,213,134$ 3,000,000$ 342,639$ 3,000,000$ Baker County BOE 1,306,276$ 300,000$ 39,188$ 300,000$

Thresholds (larger of)Major Program


Major Programs Example #1

School System Compliance Requirement Questioned Costs Program CFDA

Hancock County BOE Reporting $ 60,275.21 Title I-A 84.010

Hancock County BOE Reporting $ 4,975.18 Title II-A 84.367

Twiggs County BOEAllowable Costs/Cost Principles $ 11,812.81 Early Reading First 84.359

Twiggs County BOEAllowable Costs/Cost Principles $ 9,656.74 Title I-A 84.010, 84.389

White County BOE

Activities Allowed/Unallowed; Allowable Costs/Cost Principles $ 18,234.00 Race to the Top 84.395

$104,953.94


Major Programs Example #2Gwinnett

Federal awards amount 114,213,134$ Threshold 3,000,000$

Programs over threshold or audited Audited? ARRA Stabilization (84.394) 15,171,612$ Yes IDEA (84.027) 24,788,221$ No Title III (84.365) 3,358,813$ No Title I (84.010) 20,361,517$ Yes

Total audited 35,533,129$ Percent audited 31%


Major Programs Example #3Baker

Federal awards amount 1,306,276$ Threshold 300,000$

Programs over threshold or audited Audited? School Breakfast Program (10.553) 74,992$ Yes National School Lunch Program (10.555) 256,903$ Yes Summer Food Service Program for Children (10.559) 300,005$ Yes Title I (84.010) 310,325$ No

Total audited 631,900$ Percent audited 48%


What Programs at GaDOE?Program CFDA 2002 2003 2004 2005 2006 2007 2008 2009 2010Vocational Education - Basic Grants to States 84.048 Yes Yes No No Yes No No Yes YesChild Nutrition Cluster 10.CNC No Yes No No Yes No No Yes YesSchool Renovation Grant 84.352 No Yes No No No No No No NoImproving Teacher Quality State Grants 84.367 No Yes Yes No No Yes No No YesTwenty-First Century Community Learning Centers 84.287 No No No Yes Yes Yes Yes Yes NoReading First 84.357 No No No Yes Yes No No Yes YesTitle I Grants to Local Educational Agencies 84.010 No No Yes No No No No No YesSpecial Education Cluster 84.SEC No No Yes No No Yes No No YesChild Nutrition Discretionary Grants 10.579 No No No No No No No No YesEducation Technology Grants 84.318 No No No No No No No No NoState Fiscal Stabilization Fund 84.394 No No No No No No No No Yes


What do the auditors look at?It depends…on the program being audited.

Part 2 of the compliance supplement of the OMB Circular A-133 identifies what compliance requirements by program.


What do the auditors test?This is covered in part 4 of the compliance supplement•This section is organized by compliance requirement.•This section applies to LEAs and SEAs. • After each requirement and subrequirement the programs that must adhere to the requirement will be listed in italics by name and CFDA number.


Audit Process1. LEA is notified of the audit2. Entrance conference is held3. Audit fieldwork – look at prior year finding4. Exit conference is held5. LEA is given a draft copy of the report and asked

to respond6. Response placed in the report and report is

released


Single Audit Example


Single Audit ReportingWhat needs to be reported?

1.Opinion on financial statements2.Any significant deficiencies in internal control

3.Opinion on compliance with requirements

4.Findings

5.Major programs audited

6.Major program dollar threshold


Prior Year Findings

Report on unresolved findings:Findings from prior years will continue to be reported until they are resolved.

The management of the LEA has the responsibility for the resolution of the finding.


Audit Findings

Audit findings shall be presented in sufficient detail for the auditee to prepare a corrective action plan and for pass-through entities (GaDOE) to arrive at a management decision.


Elements of a FindingCondition – The issue identified by the auditor.

Criteria – The compliance requirement upon which the audit finding is based.

Cause – The cause is what happened or did not happen for the condition to have occurred. Effect – The impact of the condition.

Recommendation – The corrective action which needs to happen.


What we get and who gets it• Financial Review (FR) gets a copy of the audit report

and management letter• FR reviews to see if the audit report has findings• FR review response from LEA to see if their response

addresses the finding• If not, FR contacts LEA• Federal award findings are sent to program for

resolution


Resolving Audit Findings

Federal programs are only involved with the resolution when the findings pertain to federal programs.


Federal Award Findings

What Should I do?1. Obtain the working papers of the auditors

2. Review federal laws, regulations, and guidance

3. Contact US ED, if unsure

4. Contact program staff at the LEA

5. Conduct an on-site review


What about Questioned Costs?

Step 1: Contact the internal audit manager to obtain the working papers.

Step 2: Review the working papers to determine: -why the costs were questioned

-how the amount questioned was calculated

-what was reviewed and why


New Aspects of the Policy• 60 days to make a decision on questioned costs• Decision needs to be approved by GaDOE

management • Decision needs to come from the program• On an annual basis we will inform the Georgia

• Department of Audits regarding the amount of funds

repaid• Report on progress to Cabinet is provided by the

GaDOE internal audit


When to Expand the ScopeWhy? You find expenditures which should have been questioned but were not.

How to justify such an expansion?


Cost Benefit Example

During your review you note the following:•Program throws a party in a city park•Five kegs of beer purchased at $99.99 a keg.

Total cost $539.95.•Food, beverages, and pavilion rental - $1,634.18.•Rental of inflatable - $176.55.


Cost Benefit Example

Questioned costs: $2,350.68 Percent change that they should be repaid: 100%Costs needed to document findings: $235.10

$2,350.68 > $235.10


Conducting a Financial Review

When?1.If fraud, waste, or abuse is suspected.2.A tip, allegation, or complaint of wrong doing is received.3.Internal or external audit or investigation uncovers serious problems.4.Such a review is requested.


How to conduct a Financial Review

This process is organized by compliance requirement in the subrecipient audit resolution guide.

This is covered on pages 35-41 of the subrecipient audit resolution guide.


Where the audits are kept


Where can you get audit reports?


Single Audit Clearinghouse


Thank YouIf you have additional questions contact:

Sue Hawks FosterEducation Program Specialist

404.656.2636Email: [email protected]

mailto:[email protected]

Documents

Title I, Part A: Most Common Audit Findings