Town or Belchertown, Massachusetts

Finding 2020-001 Non-Compliance/Significant Deficiency in Internal Control Over Compliance ? Special Education Cluster (CFDA Nos. 84.027, 84.173) ? Cash Management ? Excess Cash on Hand Passed Through Commonwealth of Massachusetts Department of Elementary and Secondary Education Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (The Uniform Guidance) states in Section 200.305(b) that non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-federal entity for direct program or project costs. The Massachusetts Department of Elementary and Secondary Education has procedures for local educational agencies (municipal school departments and regional school districts) to request grant funds monthly. The requests for funds require that the local educational agencies report the total drawn to date, total funds expended to date, and cash balance as of the date of the request, as well as a projection of the anticipated expenditures in the next 30 days. Condition: The Belchertown Public Schools drew down and held on to excess amounts of cash on the Special Education 94-142 Allocation grant for fiscal year 2020. After an initial disbursement of $54,815 was made at the start of the grant period, Belchertown Public Schools filed payment requests in January 2020, February 2020, and March 2020, for $175,812, $89,130, and $91,722 respectively. The requests showed in January $219,262 spent to date with a cash balance of negative $164,447 and $45,679 in anticipated expenditures for the next month, February $274,078 spent to date with cash balance of negative $43,451 and $45,679 in anticipated expenditures for the next month, and March $365,618 spent to date with a cash balance of negative $45,861 and $45,861 in anticipated expenditures for the next month. The actual year to date expenditures were $3,772.96 in January, $4,429.99 in February, and $5,246.30 in March. The actual cash balances were positive balances of $51,042.04 in January, $226,197.07 in February, and $314,510.70 in March. As of the end of fiscal year 2020 the Town had a cash balance of $404,799.18 in the SPED 94-142 Allocation grant for FY2020. Cause: The client indicated that past practice has been to charge tuitions for special education program out-of-district to the school department?s special education budget in the general fund and at the end of the year make a journal entry to charge a portion of the tuitions to the grant. In FY2020, after Covid shutdowns hit, the school department saved money on larger budget items, particularly bussing, which made the reclassification of expenses for special education tuitions unnecessary. Furthermore, when purchase orders for special education tuitions are processed, they are all charged to the school budget at the beginning of the school year and are not charged to the grant, making the need to reclassify expenses at the end of the year necessary. Effect: The effect of this condition is that the Town has an excess amount of cash on hand for the grant at the end of the fiscal year. Questioned Costs: None noted. Recommendation: We recommend that at the start of the school year when purchase orders are processed, a portion of the special education tuitions should be charged to the grant on the purchase order. Furthermore, when monthly payment requests are submitted to the Massachusetts Department of Elementary and Secondary Education, the actual year to date costs indicated on the Town?s Munis general ledger should be used to report funds expended to date. Views of Responsible Officials and Planned Corrective Action: Mark Chapulis, Belchertown Public Schools Interim Business Manager: In FY20, when I arrived, all SPED POs had been set in the general fund. Moving PO?s mid-year can cause split and duplicated POs which are sometimes difficult for staff and the vendors to follow, so I opted to leave them in the GF until an appropriate closeout. The General Fund tuition lines were over-expended by $588,228.80 by 3/31/20, with the expectation that funds would need to be reclassed to the IDEA-240 grant. Draws were done with the expectation that those excess funds were not expected to be supported by GF revenues, but would ultimately be charged to the 240 Grant, per the budget plan. However, 13 days later, Covid shutdown the school system, drastically changing the normal expenditure plan for the school, such that money in the general fund could now support additional expense. Had Covid not occurred, the expenses would have been classed to the 240, and matched with the draws. Beginning in April, when the expense situation changed, no further grant draws were done. So, first, I agree with the recommendation to charge purchase orders for Tuitions directly to the 240 grant where applicable, and that was done at the beginning of FY21 this year, with the tuition expenses are allocated to each. Also, FY20 was very unusual, and created a drop in expenses that would not normally have occurred.

Finding 2019-001 Significant Deficiency in Internal Control Over Compliance ? Special Education Cluster (CFDA Nos. 84.027, 84.173) ? Cash Management ? Lack of Timely Requests for Funds Passed Through Commonwealth of Massachusetts Department of Elementary and Secondary Education Criteria: Proper control over cash management would require timely requests for funds on grant projects to receive funds as they are needed to pay expenses. Condition: The Massachusetts Department of Elementary and Secondary Education has a process for grantees to request funds monthly for their cash flow needs to pay expenses for the following month. The Belchertown Public Schools did not request funds timely for the Special Education 94-142 Entitlement Grant for fiscal year 2019. The Town received an initial upfront payment of one-tenth of the grant award in October 2018. No additional funds were requested until September 2019. As of June 30, 2019, the end of the fiscal year, the account balance was a deficit of $499,331, which was eliminated when funds were requested in September and October 2019 and received in October and November 2019. Cause: The bulk of the expenditures charged to the grant were a result of a journal entry to reclassify eligible special education expenses from the school department?s general fund budget to the grant in May 2019. However, the management at the Belchertown Public Schools did not request funds from the Massachusetts Department of Elementary and Secondary Education at the time that the expenses were charged to the grant. Effect: The effect of not requesting funds timely results in an unfavorable cash flow position for the Town. Also, by not requesting funds prior to the end of the fiscal year, it could have a negative impact on the Town?s free cash when certified by the Massachusetts Department of Revenue. Questioned Costs: None Recommendation: Procedures have been implemented in the current fiscal year with a change in management at the Business Office of the Belchertown Public Schools to request funds monthly as expenses are incurred for the grants. We recommend that the Belchertown Public Schools continue to request funds monthly as cash flow is needed. Views of Responsible Officials and Planned Corrective Action: We agree with the recommendation. The current business management staff has been and will continue to review the grant status each month and draw revenues appropriately to match expenses.