Montgomery Township audit issues prompt accounting changes for federal grants

The Montgomery Township School District received an unmodified (clean) annual audit on Dec. 17, 2024, and auditors recommended stronger accounting controls to track grant expenditures and reporting periods.

The recommendation matters because federal program fiscal years often end Sept. 30 while the district’s fiscal year ends June 30, creating a “run-out” period in which expenditures are still incurred and submitted for reimbursement. District auditors told the board that a combination of reporting-system coding and encumbrance processes led to some grant expenditures being missed in the intended reporting period and, in other cases, to duplicate reimbursement claims that were processed twice.

Eric Zimmerman, the district auditor who presented the report, said the auditors will issue a corrective-action requirement that must be read into the minutes. “The recommendation in the report is that accounting controls be improved to better track grant expenditures and the proper reporting periods,” Zimmerman said. He told the board the audit opinion remains unmodified because the net effect was below materiality for the financial statements as a whole.

The audit identified two recurring operational causes: (1) the district’s finance system produced multiple, separate reports (including encumbrance listings) that were not always reconciled, and (2) program coding did not consistently distinguish a grant’s carryover funds from the new fiscal-year award. That combination, Zimmerman said, made it difficult to tell whether expenditures on a single-line budget report occurred in the run-out period or in the following year.

To address the problems, auditors recommended—and district staff reported they have implemented—separate program codes for carryover and for the current-year grant, more frequent drawdowns (monthly claims) during the year as expenditures occur, and tighter reconciliation between drawdown records and the district’s finance system. Zimmerman said those steps should prevent carryover expenditures from being missed and reduce the risk of duplicate reimbursements.

Board members asked for context on the financial impact. The auditor pointed the board to the audit schedules (exhibit C-1 beginning on page 84 of the audit report) for budgetary revenues, expenditures and fund balances as of June 30, 2024, and said the adjustment that drove the recommendation was included on those schedules. He also said the adjustment did not change the audit opinion because it was below materiality for the financial statements.

District business-office staff told the board they had already implemented the corrective-action plan and were monitoring carryover balances in real time so that remaining grant funds could be drawn down within the correct period. The auditor recommended continuing monthly reconciliations between the state/federal drawdown reports and the district’s accounting system.

The board was told the Department of Education’s smaller report accompanying the audit includes the formal recommendation and that a corrective-action plan is required; staff said the plan has been implemented. The auditor emphasized that the central control points are coding and monthly drawdowns and that improved program codes should make run-out expenditures clear on financial reports.

The presentation concluded with no formal board vote on the audit itself; the audit opinion and the recommendation will be part of the district’s audit record and corrective-action reporting to the county and state.