CITY OF METHUEN

U.S. DEPARTMENT OF EDUCATION Passed through Massachusetts Department of Elementary and Secondary Education Special Education Cluster #84.027, 84.173 Title I #84.010 Education Stabilization Fund #84.425 2023-001: Controls for Monitoring Payroll Charged to the Grant Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Compliance and Internal Control Over Compliance – Other Matter Criteria or Specific Requirement: Grantees must provide reasonable assurance that Federal Awards are expended only for allowable activities and that the costs of goods and services charged to Federal awards are allowable and in accordance with applicable cost principles. Condition: Payroll expenditures charged to the grants are required to be supported with documentation (i.e., semi-annual certifications and personnel activity reports) substantiating that the employees are eligible to be charged to the grant and that the payroll charged relates to time spent accomplishing grant objectives. The City utilizes semi-annual time and effort certification forms to document the eligibility of the employees paid out of the grant. These forms, however, were not completed for each employee charged out of the grant for fiscal year 2023. Context: The City did not maintain sufficient documentation to demonstrate compliance with federal and state time and effort reporting requirements in accordance with the provisions of Title 2 U.S. Code of Federal Regulations Part 225 Cost Principals for State, Local, and Indian Tribal Governments. Effect: The City has not complied with the federal and state time and effort reporting requirements. Cause: Turnover in the grant manager role led to time and effort documentation not being completed for fiscal year 2023. Management should follow their written guidelines and procedures outlining the time and effort reporting and documentation requirements that department heads must adhere with to ensure compliance with federal and state time and effort reporting requirements. Such guidelines and procedures should indicate under what circumstances semi-annual certifications and personnel activity reports (PARS) are required. Questioned Costs: Total payroll costs charged to the grants in 2023 was as follows: (see table) Recommendation: The City should follow their written policies and procedures outlining the time and effort reporting and documentation requirements that must be adhered with to ensure compliance with federal and state time and effort reporting requirements. Management should ensure the standardized forms are approved by the individual in charge of the grant and overseen by grant management personnel. This will ensure compliance is not impacted by employee turnover in the future. Views of Responsible Officials and Planned Corrective Actions: The School District will immediately begin collecting the time and effort documentation for the impacted grans for the current fiscal year (FY24) and into future periods as required.

2019-001 Document Policies and Procedures Over Federal AwardsFederal Program InformationCluster/Program: All Federal ProgramsType of FindingCompliance ? Other MattersCriteria or Specific RequirementOMB?s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) established significant requirements related to Federal awards. The requirements stipulate that federal award recipients must document their policies and procedures over certain aspects of financial and program management. Specifically, written policies are required for the following:? Cash management? Determination of allowable costs? Employee travel? Procurement? Subrecipient monitoring and managementCondition and ContextThe City has not adopted policies and procedures related to Federal awards as required under Uniform Guidance. Specifically, there are no formalized written policies around allowable costs, program/income/requesting reimbursement, eligibility determination, equipment and real property management, and period of availability. Additionally, the written policies around procurement do not include standards of conduct over conflicts of interest and procedures for the evaluation vendors for suspension and debarment.CauseWeaknesses in the formal documentation of internal controls.EffectThere are no questioned costs as a result of this finding as there are no costs directly associated with this compliance requirement.Identification as Repeat FindingAs identified in Section IV, the Schedule of Prior Year Findings, this is a repeat of finding 2019-001. The reasons for this finding?s recurrence included that no formal policies and procedures were adopted in the past year.RecommendationWe recommend the City ensure that written policies and procedures are compiled and adopted as soon as practicable to ensure compliance with the Uniform Guidance.Views of Responsible OfficialManagement?s views and corrective action plan is included at the end of this report after summary Schedule of Prior Year Findings.

2019-002 Direct Charge Payroll Expenditures to Grants (Significant Deficiency)Federal Program InformationCluster/Program: Child Nutrition Cluster 10.553/10.555, Special Education Cluster 84.027/84.173, and Supporting Effective Instruction State Grant 84.367Type of FindingInternal Controls - Significant Deficiency over Payroll ExpendituresCriteria or Specific RequirementFederal and State regulations require that grant recipients must minimize the time elapsing between the transfer of funds from the pass-through entity (DESE) and disbursement by the non-Federal entity for direct program or project costs. The reimbursement payment method is the preferred payment method.Condition and ContextCurrent procedures for processing request for funds could result in excessive cash on hand.CauseCurrently, all payroll costs are charged to the operating budget and then subsequently trans?ferred to the various grants via a journal entry.EffectFederal funds may be on hand for an excessive time period, which is inconsistent with Federal guidelines.Identification as Repeat FindingAs identified in Section IV, the Schedule of Prior Year Findings, this is a repeat of finding 2018-002. The reasons for this finding?s recurrence included the City still not direct charging payroll expenditures to all respective grants.RecommendationWe recommend that the School direct charge payroll expenditures to all respective grants. This will ensure that the request for funds are being prepared on the most up-to-date infor?mation. If needed, the journal entries should include an explanation and supporting documentation.Views of Responsible OfficialManagement?s views and corrective action plan is included at the end of this report after summary Schedule of Prior Year Findings.

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