East Windsor Regional School DistrictLocal Government

Finding 2024-001 (ACFR Finding 2024-001) Compliance Finding - Reporting Education Stabilization Fund ALN: 84.425U FAIN: S425U210027 Grantor Agency: U.S. Department of Education Pass-Through Agency: State Department of Education Criteria: The Uniform Guidance requires financial reports to be accurate, complete, and supported by underlying accounting records. Additionally, the granting agency also requires that expenditures reported align with accounting records to ensure proper reporting of federal funds. Statement of Condition: The Education Stabilization Fund (ESF) final reports submitted to the oversight agency did not reconcile to the underlying accounting data maintained by the District. Specifically, discrepancies were identified between reported expenditures and the general ledger, including a $125,463 overstatement of expenditures. This amount was recorded by the District as a due to grantor in the Special Revenue Fund. Context: During our testing of Federal Award Programs, we audited the ESF final reports to determine compliance with the reporting requirement. Our testing included reviewing and reconciling the individual grant final reports to the underlying accounting data. Auditors reviewed nine individual grant final reports noting that three of the reports did not reconcile to the underlying accounting data. Cause and Effect: The discrepancy occurred because District staff did not perform a thorough reconciliation of expenditures prior to submission. Additionally, staff turnover contributed to the issue. Failure to reconcile the underlying accounting data increases the risk of inaccurate financial reports, which could result in noncompliance with grant requirements. This could lead to questioned costs, a loss of credibility with oversight agencies, or potential future funding restrictions. Questioned Costs: None. Recommendation: We recommend that the District develop and require a formal reconciliation process to ensure all financial reports align with underlying accounting records before submission, provide additional training to finance staff on reconciliation procedures and grant reporting requirements, enhance supervisory review process to identify and correct discrepancies prior to report submission, and periodically review grant reporting policies to ensure alignment with applicable regulations. Views of Responsible Officials: District management concurs with the finding and has developed a corrective action plan in response to the recommendations above and has begun to take action to address the finding.

Finding 2024-002 (ACFR Finding 2024-002) – Significant Deficiency Internal Control over Compliance Finding – Allowable Costs Education Stabilization Fund ALN: 84.425U FAIN: S425U210027 Grantor Agency: U.S. Department of Education Pass-Through Agency: State Department of Education Criteria: According to 2 CFR 200.403(a) and (g), for costs to be allowable under a federal awards, they must be necessary, reasonable, and adequately documented. Additionally, 2 CFR 200.430(a) requires that payroll costs charged to federal grants be based on records that accurately reflect the work performed and be properly authorized. Statement of Condition: The District charged payroll expenditures to the Educational Stabilization Fund (ESF) grant for employees who were not approved to be paid from the grant. Additionally, certain employees were paid at rates that were not authorized by the Board. Furthermore, journal entries related to payroll expenses were not supported by adequate documentation. As a result, we identified $51,682 in questioned costs. Context: During our testing of ESF, we tested the payroll expenditures charged to the grant. Our testing included reviewing and reconciling the individual employees to board approvals to be charged to the grant, reviewing the approved pay rates for the grant for hourly or stipend employees, and reconciling the underlying data on payroll-related journal entries and time sheets. Cause and effect: The District did not have adequate internal controls to ensure that only authorized employees and approved pay rates were used for payroll costs charged to the ESF grant. Additionally, there was a lack of review and oversight over payroll-related journal entries to ensure they were properly supported. Without proper controls over payroll charges and documentation, the District risks noncompliance with federal grant requirements, which could result in disallowed costs and potential repayment of federal funds. In this case, $51,682 in payroll expenditures are considered questioned costs, subject to further review by the granting agency. Questioned Costs: $51,682 Recommendation: We recommend that the District strengthen internal controls over payroll processing related to grants to ensure that only authorized employees and approved pay rates are charged to the ESF grant, implement a review process to verify that all payroll-related journal entries are adequately supported before posting, conduct a review of payroll charges to federal grants to identify and correct any additional instances of unapproved costs, provide training to finance and grant management staff on federal grant requirements for payroll expenditures, and coordinate with grantor agency to determine appropriate corrective action regarding the identified questioned costs. Views of Responsible Officials: District management concurs with the finding and has developed a corrective action plan in response to the recommendations above and has begun to take action to address the finding.