Amount in Dispute

1. The Elizabeth Audit A Case Study in Audit ResolutionBonnie Little, Esq.Brustein & Manasevit, PLLCSpring Forum 2011blittle@bruman.com

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

3. Finding #1Unsupported Expenditures$822,796

4. Unsupported Expenditures • Teacher 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

5. NJDOE/EPSD’s Response • Reconstructed 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

6. OIG 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.

7. ED Final Determination • 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 #2Unallowable expenditures$618,392

9. Unallowable expenditures • OIG 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.”

10. NJDOE/EPSD Defense • The 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 application

11. ED Final Determination • Sustain 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.

12. Unallowable 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

13. ED Final Determination • Sustain finding – NJDOE return $12,939 • NJDOE/EPSD did not provide documentation supporting these charges

14. Finding #3Supplanting$505,737

15. Supplanting • “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.”

16. NJDOE/EPSD Defense EPSD’s after-school program met the requirements to be excluded from supplanting determinations • Supplemental State funding • Intents and purposes of Title I

17. ED Final Determination • Did 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

18. Finding #4Inadequate Internal Controls

19. Inadequate Internal Controls • Missing 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

20. ED Final Determination • Sustain 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

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