The Elizabeth Audit The Elizabeth Audit A Case Study in Audit ResolutionA Case Study in Audit Resolution

Bonnie Little, Esq.Brustein & Manasevit, PLLCSpring Forum 2011blittle@bruman.com

Amount in DisputeAmount in Dispute

$1,946,925 in Title I, Part A funds were either unallowable or inadequately supported in FY 05.

2

3

Finding #1Finding #1

Unsupported Unsupported ExpendituresExpenditures$822,796 $822,796

Unsupported ExpendituresUnsupported ExpendituresTeacher Tutor Salaries ($666,681)◦Did not keep documentation to support salaries transferred from Title I, A to Title II, A

Supplies, Textbooks and Educational Services ($154,252)◦Receiving reports missing required elements

4

NJDOE/EPSD’s ResponseNJDOE/EPSD’s ResponseReconstructed after-the-fact

certifications for teacher tutors, stating that 100% of the effort during the audit year was on schoolwide program activities

Submitted contemporaneous invoices signed by Elizabeth personnel, UPS delivery notifications, and payment vouchers as verification of receipt

5

OIG ResponseOIG Response“Our position remains unchanged.”

◦Rejected the after-the-fact certifications verifying that teacher tutors work solely on Title I program

◦Response did not address the accounting methodology used that resulted in the improper accounting of teacher tutor salaries

◦Contemporaneous receiving reports were signed, but not dated. Therefore, could not verify receipt prior to payment.

6

ED Final DeterminationED Final Determination

7

Sustain finding, but no recovery of funds.◦Elizabeth did not account for the

charges to Title I for its teacher tutors because it did not maintain semi-annual certifications.

◦However, after-the-fact certifications, coupled with lesson plans, schedules and other supporting documentation, demonstrated no harm to the federal interest.

◦Contemporaneous receiving reports violated district procedures, but were enough to show no harm to the federal interest.

8

Finding #2Finding #2

Unallowable Unallowable expendituresexpenditures$618,392$618,392

Unallowable expendituresUnallowable expendituresOIG found that Elizabeth spent

$605,453 of Title I funds on non-Title I schools.◦Received regular Title I allocation, despite

losing eligibility

“The Grants Office was aware that the three schools lost eligibility as Title I schools for FY 2005, but failed to communicate this to the Business Office.”

9

NJDOE/EPSD DefenseNJDOE/EPSD DefenseThe district elected to continue to

serve the schools for one year, but inadvertently failed to designate the schools as Title I eligible in the application

Schools operated compliant Title I schoolwide programs◦Provided the schoolwide program plans◦Demonstrated compliance with ESEA

notice requirements◦TA from NJDOE on designating schools

as eligible on the electronic application10

ED Final DeterminationED Final DeterminationSustain finding, but no recovery of funds◦The failure to include the three schools on the application “was far from a harmless error.”

◦But, Elizabeth demonstrated that the questioned funds were used to operate a compliant Title I program in schools it could have served.

11

Unallowable expendituresUnallowable expenditures$7,696 of Title I funds expended

for computer equipment◦Four computers to math coaches

that provided professional development to all math teachers in the district

$5,243 of Title I funds expended for vendor purchases at non-Title I schools

12

ED Final DeterminationED Final DeterminationSustain finding – NJDOE return $12,939◦NJDOE/EPSD did not provide documentation supporting these charges

13

14

Finding #3Finding #3

SupplantingSupplanting$505,737$505,737

SupplantingSupplanting“Elizabeth used Title I funds to provide services to Title I students that were also provided to non-Title I students using non-federal funds.”

15

NJDOE/EPSD DefenseNJDOE/EPSD Defense

EPSD’s after-school program met the requirements to be excluded from supplanting determinationsSupplemental State fundingIntents and purposes of Title I

16

ED Final DeterminationED Final DeterminationDid not sustain auditors’ finding and recommendations◦Concluded that Elizabeth’s after-school program satisfied the criteria in 34 CFR 200.79(b)(1) as a program that met the intent and purposes of Title I One school did not meet threshold poverty

rate, however, ED could not determine from auditors’ work papers the amount of funds expended, and thus cannot disallow that amount

17

18

Finding #4Finding #4

Inadequate Internal Inadequate Internal ControlsControls

Inadequate Internal Inadequate Internal ControlsControlsMissing requisitions and receiving reports

Services rendered prior to contract approval

Time distribution not documented and Title I certification not maintained

Principals certified their own timesheets

19

ED Final DeterminationED Final DeterminationSustain findings, require corrective actions◦Provide internal control procedures ◦Update Governance Manual to include changes to internal control procedures

◦Provide evidence that personnel adhere to policies and procedures outlined in the Governance Manual

20

21

This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstance