Schedule of Federal Audit Findings and Questioned Costs Monroe School District No. 103 Snohomish County September 1, 2009 through August 31, 2010 correct amount of safety net funding. CFDA Number and Title: 84.027 Special Education — Grant to States. Federal Grantor Nam: U.S. Department of Education Federal AwardiContract Number: NA. Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract ma ‘Number: Questioned Cost Amount: $27,892 Background School districts may apply for Special Education Safety Net money through the state Office of Superintendent of Public Instruction. Districts use the money to pay to educate a special needs student when the cost exceeds available resources. These awards are made up of state and federal funding Districts apply for these awards mid-year, based on projections of expenditures and resources. During fiscal year 2010, the District received $66,712 in Safety Net funding: $38,820 in state money and $27,892 in federal money. ‘Description of Condition’ We found the District overstated: its demonstrated need for Safety Net funding» by » “Grate raglan ony nares obo reduced or eed cn sch evens Sica Cause of Condition ‘The District based its application on budgeted expenditure and enrollment numbers and it did not have internal controls in place to compare its projections to actual, year-end ‘numbers when that information became available. Washingion State Auditors Ofc 3Effects of Condition ‘The District may have received up to $27,892 in federal Safety Net funds and $38,820 in state Safety Net funds not due to it. Recommendation We recommend the District develop procedures to ensure it complies with Federal Safety Net requirements related to returning funds when appropriate. We further recommend the District contact OSPI to determine the amount of funds that should be recovered, if any. trict’s Response Monroe Schoo! District respectfully disagrees with the finding “demonstrating inadequate internal controls". OSPI routinely reviews yearend financial statements and recovers any “excess” funds through a customary recovery process: typically any overpayment would be recovered by deduction from either the January apportionment, or, in this case, from future Safety Net Awards. In the absence of any specific written Safety Net Award recovery guidelines or procedures, we anticipated that the Safety Net Award would be ‘subject to the same recovery process. Auditor's Remarks We thank District officials for their assistance during the audit. We will follow up on the status of this issue during our next scheduled audit. Applicable Laws and Regulations Title 34, Code of Federal Regulations, Section 300.704, State-level activities states in part: (c)(1)() for the purpose of assisting LEAs (including a charter schoo! that is an LEA or a consortium of LEAs) in addressing the needs of high need children with disabilities, each Stale has the option to reserve for each fiscal year 10 percent of the amount of funds the State reserves for other State-level activities U.S. Office of Management and Budget Circular A-87, Cost Principles for State, Local and Indian Tribal Governments (2 CFR Part 225), states: Appendix A, Section C(1): To be allowable under Federal awards, costs must ‘meet the following general criteria (b) Be allocable to Federal awards under the provisions of this Circular. (c) Be authorized or not prohibited under State or local laws or regulations, ‘Washingion State Auditors Office 4(a) Conform to any limitations or exclusions set forth in these Principles, Federal laws, terms and conditions of the Federal award, or other governing regulations as to types or amounts of cost items (i) Be the net of all applicable credits. Appendix A, Section C(4) Applicable credits. ‘a. Applicable credits refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to Federal awards as direct or indirect costs. Examples, of such transactions are: . .. adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the governmental unit relate to allowable costs, they shall be credited to the Federal award either as a cost reduction or ‘cash refund, as appropriate. OMB Circular _A-133, Audits of States, Local Governments, and Non-Profit Organizations, Section 510 - Audit findings, states in part. (@) ‘The auditor shall report the following as audit findings in a ‘schedule of findings and questioned costs: 3) Known questioned costs which are greater than $10,000 for a type of compliance requirement for a major program. (4) Known questioned costs which are greater than $10,000 for a Federal program which is not audited as a major program....if the auditor does become aware of questioned costs for a Federal program which is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than $10,000, then the auditor shall report this as an audit finding, Washington Administrative Code 392-140-630, Special education safety net — Special ‘education program audit team — Purpose, procedures, states: Special education program audits by staff of the state auditor's office may be requested to assist the special education safely net committee. When reviewing a school district's special education program, the auditors may review and verify any certifications and supporting information provided by the district in a safety net application. The auditors may provide the results of the review to the state oversight committee. The results of the auditor's review may be considered by the oversight committee in determining, adjusting, or recovering safety net awards. Washington Administrative Code 392-140-675, Special education safely net — Adjustments to special education safety net allocations, states in part Safely net allocations may be adjusted as follows: Wiashingion Sale Audiors Office(2) Special education safety net allocations. for a school district may be adjusted to reflect changes in factors for which additional or revised information becomes available after the awarding of the initial safety net allocation. This means: (@) High need awards andior community impact awards may be reduced or nullified when the schoo! district's actual revenues and expenditures for the school year differ significantly from the estimates on which the initial safety net award was based. ‘Washington Administrative Code 392-140-685, Special education safety net — Recovery of state and/or federal allocations to school districts, states: High need student state and/or federal special education safety net allocations and state community impact awards (1) Shall be recovered or awards reduced for the following reasons; (a) The application contains a falsification or deliberate misrepresentation, including omission of a material fact. (b) The allocation is unexpended for the purpose allocated including but not limited to situations where the student leaves the district or has a change in services. For students who transfer to another Washington public school district, expenditures for specialized equipment purchased with these funds shall not be recovered provided the district transfers the equipment to the other school district (©) The IEP is determined at a later date, through state audit or child count verification, to be inappropriate or improperty prepared and appropriate and proper preparation would materially affect the justification or ‘amount of need for safety net funding (2) May be recovered or awards reduced for the following reasons: (2) The school district has carryover of state and/or federal flow-through special education funding from the school year for which the award was made. (b) The district's actual revenues are significantly higher than estimated revenues on which the award was based or the district's actual expenditures are significantly lower than the estimated expenditures on which the award was based. ‘Washinglon State Auditors Office é(©) The state oversight committee finds grounds for adjustment in the special education program audit team's review pursuant to WAC 392-140-630. Recovery adjustments not made in the current school year shall be added to the amount calculated pursuant to WAC 392-140-616 (2)(c) for the following school year. Such amounts reduce state andlor federal safety net awards in the following year. ‘Washingion Slate Audiors Offca 7