Town of Wiscasset, MaineLocal Government

Finding 2019-001 Criteria: Revenue should be recognized in the proper period. Condition: A weakness in internal control contributed to the School Department improperly recording a Title I revenue reimbursement as an accounts receivable on the June 30, 2018 financial statements prior to the amount being expended. Context: During review of the Title IA program as a part of Single Audit testing, it was noted that the reimbursement for the teacher salaries for July and August of 2018 had been recorded as accounts receivable in the prior year. The reimbursement request lists the billing period as 7/1/2018 to 8/17/2018 and the billing date on the reimbursement invoice is 9/11/2018. A reversing entry was posted to the Title IA revenue account, resulting in a reduction of Title IA revenue for expenses that occurred during fiscal year 2019. Effect: The School Department's Title IA revenue was misstated on their June 30, 2019 audit. Revenue was recorded in the incorrect period and was not offset by the expenses that were paid. Cause: Insufficient internal control procedures related to tracking grant activity and postings of revenue within the financial software and human error. Lack of experience with grant reporting.

Criteria: Reimbursement request revenue for ESEA grant funds need to be posted to the fund expenditures are paid from. Condition: Carry over Title IIA 2018 grant funds were used to offset the Title IA summer program expenses for the School Department's fiscal year June 30, 2019, however, that revenue was not transferred within the accounting software to offset the expense amounts recorded for Title IA. Context: During audit procedures, reviewing Title IA reimbursement requests for grant FY18 and FY19 awards, there was a handwritten note on the Title IIA final reimbursement request for grant FY18 that said "Used remaining for Title I Summer Salaries, in the amount of $8,773.64. This amount was not transferred to the Title I Fund Revenue accounts to offset the Title I summer salary expenses. Effect: This condition results in the Title IA fund balance being over expended and overstates the Title IIA fund balance on the June 30, 2019 Wiscasset School Department financial statements. Cause: Insuffient internal control procedures related to tracking grant activity and postings of revenue within the financial software.

Criteria: Reimbursement requests should be submitted for expense amounts that occurred in the appropriate fiscal year. Condition: The Wiscasset School Department financial reporting processes did not have adequate controls to prevent or detect an error in its accounting records and Title I reimbursement request submissions. This lead to a reimbursement request submission for expenses in fiscal year ending June 30, 2019 for the expense amount for the same time period for fiscal year ending June 30, 2018. Context: It was noted during review of the Title IA reimbursement request invoices, that the expense total for 9/1/2018 - 11/30/2018 in the client's accounting software did not match the reimbursement invoice that was submitted on 6/3/2019 for that time period. Reviewing the invoice and financial backup provided by the Wiscasset School Department, it was evident from the reported period dates at the top of the report that the period used to generate the amount for the invoice was 9/1/2017 - 11/30/2017. Effect: Title IA revenue was improperly recorded and doesn't match the actual expenses the school was reimbursed for. Cause: The school department lacks adequate internal controls to ensure that the appropriate expense amounts are being used to determine the reimbursement invoice amount to submit.