AICPA Special Education Support 3 — Questions and Answers
Question 1: A school district contracts with a private therapy provider to deliver speech services under an IEP. What documentation is most critical for a federal auditor reviewing these costs?
- A signed contract, service delivery logs, and evidence that services were actually rendered to eligible students (Correct answer)
- Only the provider's invoice and a board-approved purchase order
- The provider's professional license and a general services agreement
- A letter from the special education director confirming services were needed
Correct answer: A signed contract, service delivery logs, and evidence that services were actually rendered to eligible students
Federal auditors require a contract, detailed service logs, and evidence of actual delivery to verify that costs are allowable, allocable, and supported for students with IEPs.
Question 2: Which federal legislation primarily governs the financial obligations of public schools to provide a 'free appropriate public education' (FAPE) to students with disabilities?
- Individuals with Disabilities Education Act (IDEA) (Correct answer)
- Section 504 of the Rehabilitation Act of 1973
- Americans with Disabilities Act (ADA)
- Every Student Succeeds Act (ESSA)
Correct answer: Individuals with Disabilities Education Act (IDEA)
IDEA is the primary federal statute mandating FAPE for students with disabilities and establishes the funding and accountability framework for special education programs.
Question 3: A district's special education fund shows a year-end deficit. Which accounting treatment is most appropriate under GASB?
- Report the deficit as a negative fund balance and disclose the cause in the notes to the financial statements (Correct answer)
- Transfer unrestricted general fund balance to eliminate the deficit before year-end close
- Defer recognition of expenditures to the next fiscal year to eliminate the deficit
- Reclassify restricted revenues as unrestricted to cover the shortfall
Correct answer: Report the deficit as a negative fund balance and disclose the cause in the notes to the financial statements
GASB requires that deficits be reported transparently as negative fund balances with adequate note disclosure explaining the nature and resolution plan.
Question 4: Under the Single Audit Act, a school district receiving $750,000 in IDEA funds is subject to:
- A program-specific audit or inclusion in a Single Audit if total federal expenditures exceed $750,000 (Correct answer)
- An annual review by the U.S. Department of Education's Office of Special Education Programs
- Quarterly financial reporting to the state education agency only
- No audit requirement since IDEA funds are entitlement grants
Correct answer: A program-specific audit or inclusion in a Single Audit if total federal expenditures exceed $750,000
Entities expending $750,000 or more in federal awards in a fiscal year must undergo a Single Audit or program-specific audit under the Single Audit Act and 2 CFR Part 200.
Question 5: A CPA reviewing a district's special education budget notices that paraprofessional salaries are charged 100% to IDEA funds. What question should the CPA ask first?
- Do the paraprofessionals work exclusively with students with disabilities, or do they also support general education students? (Correct answer)
- Are the paraprofessionals unionized, and does the collective bargaining agreement permit this charge?
- Has the district received prior written approval from HHS for this allocation?
- Are the salary rates competitive with neighboring districts?
Correct answer: Do the paraprofessionals work exclusively with students with disabilities, or do they also support general education students?
Costs charged 100% to a federal program must benefit only that program; if paraprofessionals serve general education students, costs must be allocated proportionately.
Question 6: What is the primary purpose of an Individualized Education Program (IEP) from a financial accountability standpoint?
- It serves as the authorizing document that justifies expenditures for a specific student's special education services (Correct answer)
- It establishes the annual budget for the district's entire special education department
- It provides legal protection for the district against parent lawsuits
- It documents the student's academic progress for college admissions purposes
Correct answer: It serves as the authorizing document that justifies expenditures for a specific student's special education services
The IEP is the legally binding plan that authorizes specific services for an eligible student, making it the foundational document for validating special education expenditures.
Question 7: A district receives Medicaid reimbursement for health-related services provided to students with disabilities. How should these revenues be treated?
- Credited against the cost of services or recorded as program revenue to offset special education expenditures (Correct answer)
- Recorded as general fund revenue unrestricted for any district purpose
- Returned to the federal government as program income under IDEA
- Deposited into a capital projects fund for facility improvements
Correct answer: Credited against the cost of services or recorded as program revenue to offset special education expenditures
Medicaid reimbursements are program income that should either offset the cost of services or be tracked as restricted revenue to support ongoing special education expenditures per federal guidelines.
AICPA Special Education Support 3
A school district contracts with a private therapy provider to deliver speech services under an IEP.
What documentation is most critical for a federal auditor reviewing these costs?