Audit 292293

Finding No. 2022-003 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Allowable Costs/Cost Principles Questioned Costs: $0 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.430(i)(1)(i) requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was lower by $480,743 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under the program but were reclassified to the Education Stabilization Fund (ESF) federal program through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. 2. For 3 (or 8%) of 40 transactions tested aggregating $61,202 out of $3,196,892 in total payroll expenditures, employee timecards were not provided. No questioned costs are raised as summary timesheets were provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – Based on our understanding of PSS’ internal controls, timecards are required to be provided every pay period to support the payment of salaries and wages. The condition remains.

Finding No. 2022-003 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Allowable Costs/Cost Principles Questioned Costs: $0 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.430(i)(1)(i) requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was lower by $480,743 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under the program but were reclassified to the Education Stabilization Fund (ESF) federal program through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. 2. For 3 (or 8%) of 40 transactions tested aggregating $61,202 out of $3,196,892 in total payroll expenditures, employee timecards were not provided. No questioned costs are raised as summary timesheets were provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – Based on our understanding of PSS’ internal controls, timecards are required to be provided every pay period to support the payment of salaries and wages. The condition remains.

Finding No. 2022-004 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Allowable Costs/Cost Principles Questioned Costs: $28,975 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 25 (or 63%) of 40 transactions tested, aggregating $39,942 out of $4,631,757 in total payroll expenditures, the Notice of Personnel Action (NOPA) form was not provided for differential payments paid to employees. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-049031-US and PS-055730-US, which were acquired within fiscal year 2022, totaling $14,299. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $28,975. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with Condition 1. Management agrees with Condition 2. Auditor response: Condition 1 – Part T60-30.1-448 (Approval of Proposals to Provide Premium Pay or Differentials) of the PSS Personnel Rules and Regulations states that all proposals for pay differentials as defined herein shall be submitted by the Commissioner of Education on a request for personnel action (form CSC P 1) to the Personnel Management Officer for review and approval. The request must be accompanied by a letter of justification addressing each of the criteria required to support the particular differential. PSS is in noncompliance with its personnel rules and regulations as it failed to provide documentation supporting a request for personnel action, which is determined to be the NOPA for these instances. The NOPA also determines whether the employee is validly employed at date of payment of the differential. The condition remains.

Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.

Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-008 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Equipment and Real Property Management Questioned Costs: $29,988 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. § T60-20-815 Section (c)(5) provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 equipment transactions tested, aggregating $29,988 of $59,723 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), the custodian’s name and the condition of the equipment was not indicated on the property master information record for PS-012478-US and PS-047509-US, with a total amount tested of $4,872. Evidence that custodian records were matched and updated after physical inspection was not obtained. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $29,988. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-008 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Equipment and Real Property Management Questioned Costs: $29,988 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. § T60-20-815 Section (c)(5) provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 equipment transactions tested, aggregating $29,988 of $59,723 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), the custodian’s name and the condition of the equipment was not indicated on the property master information record for PS-012478-US and PS-047509-US, with a total amount tested of $4,872. Evidence that custodian records were matched and updated after physical inspection was not obtained. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $29,988. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-009 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Equipment and Real Property Management Questioned Costs: $36,244 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. § T60-20-815 Section (c)(5) also provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 transactions tested, aggregating $36,244 of $243,308 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. 2. For 1 (or 20%), the following were noted for PS-039791-US, with amount tested of $3,332: a. The custodian’s name was not indicated on the property master information record from the JD Edwards system. Evidence that custodian records were matched and updated after physical inspection was not obtained. b. The property master information record states that the asset is in “working” condition, however, evidence obtained of a survey performed on August 8, 2022 has concluded that the asset is no longer useful for PSS operations and is recommended for destruction or scrapping. The same evidence showed that the destruction/scrapping occurred in September 15, 2022. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $36,244. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Identification as a repeat finding: 2021-005 Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-010 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: 84.425 Education Stabilization Fund Area: Equipment and Real Property Management Questioned Costs: $854,432 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. Condition: 1. As of September 30, 2022, the total amount of equipment acquired under ALN 84.425X per equipment schedule or subsidiary ledger was lower by $18,147 as compared to the total amount of equipment expenditures identified in the general ledger journal entry details supporting the SEFA. 2. For 10 (or 100%) of 10 equipment transactions tested, aggregating $854,432 of $2,296,719 in total amount of equipment costs identified as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $854,432. Identification as a repeat finding: 2021-004 Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-010 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: 84.425 Education Stabilization Fund Area: Equipment and Real Property Management Questioned Costs: $854,432 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. Condition: 1. As of September 30, 2022, the total amount of equipment acquired under ALN 84.425X per equipment schedule or subsidiary ledger was lower by $18,147 as compared to the total amount of equipment expenditures identified in the general ledger journal entry details supporting the SEFA. 2. For 10 (or 100%) of 10 equipment transactions tested, aggregating $854,432 of $2,296,719 in total amount of equipment costs identified as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $854,432. Identification as a repeat finding: 2021-004 Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-012 Federal Agency: U.S. Department of Agriculture Assistance Listing No. and Title: 10.555 National School Lunch Program Area: Procurement and Suspension and Debarment Questioned Costs: $261,889 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must be based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. § T60-40-225(c) further provides that adequate public notice of the request for proposals shall be given in the same manner as provided for in competitive sealed bids. Condition: Of 60 non-payroll transactions tested aggregating $263,083 of $14,119,504 in total program non-payroll expenditures, we noted the following: 1. For 2 (or 3%), Doc. Nos. 333590 and 28221, totaling $26, pertained to small purchases not exceeding $500 and for which no price quotations were made. No written determination of the reasonableness of price was provided in accordance with § T60-40-210(b). 2. For 2 (or 3%), Doc. Nos. 332318 and 333718, totaling $739 pertained to small purchases not exceeding $10,000 and for which no price quotations were obtained in accordance with § T60-40-210(d). Condition, continued: 3. For 1 (or 2%), Doc. No. 27345, amounting to $575, pertained to a small purchase not exceeding $10,000 and for which only 2 price quotations were obtained, instead of the 3 quotations required by § T60-40-210(d). 4. For 49 (or 82%), transactions totaling $260,549 were procured through competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $261,889. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Upon review of the supporting documents provided, only one vendor provided a supporting quotation. Evidence of effort to obtain the remaining two vendor quotations or justification of not being able to obtain additional quotations were not provided. The condition remains. Condition 3 – Upon review of the supporting documents provided, only two vendor quotations were sought. Evidence of effort to obtain the third vendor quotation or justification of not being able to obtain the additional quotation was not provided. The condition remains. Condition 4 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-013 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Procurement and Suspension and Debarment Questioned Costs: $105,959 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. Also, § T60-40-225(g) provides that after proposal evaluation, a notice of intent to award the contract to the responsible offeror whose proposal is determined in writing to be the most advantageous to PSS, taking into consideration price and the evaluation factors set forth in the request for proposals, shall be issued to all offerors. Condition: Of 60 non-payroll transactions tested aggregating $120,642 of $1,895,080 in total program non-payroll expenditures, we noted the following: 1. For 7 (or 12%), transactions totaling $1,356 pertained to small purchases not exceeding $500 and for which no price quotations were made. Evidence was not provided showing that a written determination of the reasonableness of price was performed in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 18 (or 30%) transactions totaling $104,603 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). Further, Notices of Intent to Award were not provided for the reason that there was only one proposer. § T60-40-225(g) does not discuss exemptions for instances where there is only one proposer. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $105,959. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-013 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Procurement and Suspension and Debarment Questioned Costs: $105,959 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. Also, § T60-40-225(g) provides that after proposal evaluation, a notice of intent to award the contract to the responsible offeror whose proposal is determined in writing to be the most advantageous to PSS, taking into consideration price and the evaluation factors set forth in the request for proposals, shall be issued to all offerors. Condition: Of 60 non-payroll transactions tested aggregating $120,642 of $1,895,080 in total program non-payroll expenditures, we noted the following: 1. For 7 (or 12%), transactions totaling $1,356 pertained to small purchases not exceeding $500 and for which no price quotations were made. Evidence was not provided showing that a written determination of the reasonableness of price was performed in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 18 (or 30%) transactions totaling $104,603 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). Further, Notices of Intent to Award were not provided for the reason that there was only one proposer. § T60-40-225(g) does not discuss exemptions for instances where there is only one proposer. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $105,959. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-014 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Procurement and Suspension and Debarment Questioned Costs: $24,595 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225 Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to PSS, a contract may be entered into by competitive sealed proposals. Condition: Of 60 non-payroll transactions tested aggregating $57,035 of $13,545,658 total program non-payroll expenditures: 1. For 18 (or 30%), transactions totaling $5,747 pertained to small purchases not exceeding $500 and for which no price quotations were made. No written determination of the reasonableness of price was provided in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 4 (or 7%), transactions totaling $18,848 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reportable questioned cost is $24,595 because the projected questioned cost exceeds the threshold. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-003 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Allowable Costs/Cost Principles Questioned Costs: $0 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.430(i)(1)(i) requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was lower by $480,743 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under the program but were reclassified to the Education Stabilization Fund (ESF) federal program through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. 2. For 3 (or 8%) of 40 transactions tested aggregating $61,202 out of $3,196,892 in total payroll expenditures, employee timecards were not provided. No questioned costs are raised as summary timesheets were provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – Based on our understanding of PSS’ internal controls, timecards are required to be provided every pay period to support the payment of salaries and wages. The condition remains.

Finding No. 2022-003 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Allowable Costs/Cost Principles Questioned Costs: $0 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.430(i)(1)(i) requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was lower by $480,743 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under the program but were reclassified to the Education Stabilization Fund (ESF) federal program through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. 2. For 3 (or 8%) of 40 transactions tested aggregating $61,202 out of $3,196,892 in total payroll expenditures, employee timecards were not provided. No questioned costs are raised as summary timesheets were provided. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – Based on our understanding of PSS’ internal controls, timecards are required to be provided every pay period to support the payment of salaries and wages. The condition remains.

Finding No. 2022-004 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Allowable Costs/Cost Principles Questioned Costs: $28,975 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented to be considered allowable under Federal awards. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 25 (or 63%) of 40 transactions tested, aggregating $39,942 out of $4,631,757 in total payroll expenditures, the Notice of Personnel Action (NOPA) form was not provided for differential payments paid to employees. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-049031-US and PS-055730-US, which were acquired within fiscal year 2022, totaling $14,299. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $28,975. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with Condition 1. Management agrees with Condition 2. Auditor response: Condition 1 – Part T60-30.1-448 (Approval of Proposals to Provide Premium Pay or Differentials) of the PSS Personnel Rules and Regulations states that all proposals for pay differentials as defined herein shall be submitted by the Commissioner of Education on a request for personnel action (form CSC P 1) to the Personnel Management Officer for review and approval. The request must be accompanied by a letter of justification addressing each of the criteria required to support the particular differential. PSS is in noncompliance with its personnel rules and regulations as it failed to provide documentation supporting a request for personnel action, which is determined to be the NOPA for these instances. The NOPA also determines whether the employee is validly employed at date of payment of the differential. The condition remains.

Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.

Finding No. 2022-005 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: COVID-19 84.425 Education Stabilization Fund ED Subprogram: 84.425A Education Stabilization Fund – State Educational Agency (Outlying Areas; 84.425X American Rescue Plan – State Agency Educational Agency (Outlying Areas) Federal Award No.: COVID-19 S425A200001, COVID-19 S425X210001 Area: Allowable Costs/Cost Principles Questioned Costs: $246,285 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. 2 CFR 200.403(a) provides that costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto. 2 CFR 200.403 (g) also provides that costs must be adequately documented. In an e-mail communication to PSS, U.S. Department of Education (ED) had stated that the proposed use of ESF funds for the purpose of paying a 10% retention incentive in response to the COVID-19 pandemic is allowable. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For the year ended September 30, 2022, the total amount of payroll expense under ALN 84.027 determined from the journal entry details supporting the SEFA (or general ledger) was higher by $802,789 as compared to the total amount of payroll expense per labor cost summary (or subsidiary ledger). It was further noted that $404,198 out of this amount pertains to costs initially charged under ALN 84.027 but were later reclassified to ALN 84.425A through a general ledger entry only. No questioned costs are raised as the payroll costs that caused the variance were identified in detail. Condition, continued 2. For 2 (or 5%) of 40 payroll transactions tested, totaling $58,493 out of $32,152,897 in total gross wages incurred under the program, the employee was paid a retention incentive amounting to $3,000 instead of 10% of the employee’s annual salary, as provided by the retention incentive policy. We further noted that PSS provided fixed retention incentive payments amounting to $3,000 for employees whose annual salaries amounted to $30,000 and below, instead of using the rate of 10% as allowed by ED. No evidence was provided to justify the allowability of retention incentives in excess of the allowable amount for the aforementioned group of employees. Total known questioned costs for this condition amounted to $236,490 under ALN 84.425X. Below is a computation of the excess incentive amount for employees actively employed at fiscal year-end: See Schedule of Findings and Questioned Costs for chart/table. 3. For 1 (or 10%), no evidence of prior approval from the federal agency was provided for equipment acquisition PS-069896-US, which was acquired within fiscal year 2022 amounting to $9,795. Cause: PSS did not perform a reconciliation of the general ledger and subsidiary ledger for payroll costs. In addition, PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. Total known questioned costs of $246,285 are reported. Identification as a repeat finding: 2021-003 Recommendation: PSS should implement a regular reconciliation of its labor cost summary report with the general ledger journal entries and ensure that any discrepancies are resolved or validly supported. Further, PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings described in Conditions 1 and 2. Management agrees with Condition 3. Auditor response: Condition 1 – The finding does acknowledge that PSS reclassified the amount under ESF funds. Given the knowledge of the journal entry limitation, PSS failed to show evidence of effort to regularly reconcile the labor cost summary report with the general ledger. The condition remains. Condition 2 – A review of the communications between PSS and the U.S. Department of Education shows the latter’s approval to provide a retention incentive of 10% of annual salaries. There was no specific approval on the fixed amount of retention incentive provided for those employees with annual salaries not exceeding $30,000. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-006 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Area: Allowable Costs/Cost Principles Questioned Costs: $132,591 Criteria: 2 CFR 200.403 (g) provides that costs must be adequately documented. 42 U.S. Code (USC) § 9839 (g) and (h) provide that with prior written approval from the Administration for Children and Families (ACF), Head Start Agencies (HSAs) may use funds for capital expenditures (including paying the cost of amortizing the principal, and paying interest on, loans), such as construction of new facilities, purchase of new or existing facilities, major renovations of existing facilities, and purchase of vehicles used for programs conducted at the Head Start facilities. 42 USC 9839 (c) provides that shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services. 2 CFR 200.439(b) provides that capital expenditures for general purpose equipment, buildings, and land; special purpose equipment with a unit cost of $5,000 or more; and, improvements to land, buildings, or equipment which materially increase their value or useful life, are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass-through entity. Condition: 1. For 1 (or 2%) out of 40 payroll transactions tested totaling $45,917 out of $3,036,667 in total Program payroll costs, gross wages of $1,101 were incurred by the program under FAIN 09CH01116703 for Employee No. 21199 during the pay period ended 06/18/2022. No evidence of fair allocation of the employee’s payroll cost was provided. 2. For 2 (or 40%) out of 5 samples totaling $131,490 out of $165,367 of equipment tested, no evidence of prior approval from the federal agency was provided for equipment acquisitions PS-067026-US and PS-078607-US, which were acquired within fiscal year 2022 under FAIN COVID-19 09HE0009410C6. Cause: PSS failed to ensure that costs charged to the grant are adequately supported. Effect: PSS is in noncompliance with applicable allowable costs/cost principles requirements. The reportable questioned cost is $132,591. Recommendation: PSS should strengthen recordkeeping procedures so that documents are readily available to substantiate costs charged to the grant. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the findings. Auditor response: Condition 1 – The evidence of fair allocation was not provided. The condition remains. Condition 2 – The evidence of prior approval was not received. The condition remains.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-007 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.356/93.600 Head Start Cluster Federal Award No.: 09ND000031, 09CH011167 Area: Special Tests and Provisions – Program Governance Questioned Costs: $0 Criteria: The 2022 OMB Compliance Supplement page 4-93.600-12 through 13 provides that a Head Start Agency (HSA) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: (a) approval of all major financial expenditures of the agency; (b) annual approval of the operating budget of the agency; (c) selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and (d) monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The HSA or the auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Condition: 1. Instead of the monthly requirement, PSS’ Director of Finance meets quarterly with the Board of Education’s (BOE’s) Fiscal, Personnel and Administration (FPA) Committee to discuss financial statements and expenditures. 2. No evidence was provided of the BOE’s monitoring of PSS’ actions to correct any audit findings. 3. No evidence was provided that training and technical assistance related to fiscal responsibilities was received by members of the FPA Committee of the BOE. Cause: PSS failed to ensure compliance with applicable special tests and provisions for program governance requirements. Effect: PSS is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Recommendation: PSS should improve its coordination with members of the BOE with regard to the BOE’s oversight over financial statements and the related Single Audits. PSS should proactively communicate with the BOE with regard to the status of corrective actions for audit findings. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-008 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Equipment and Real Property Management Questioned Costs: $29,988 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. § T60-20-815 Section (c)(5) provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 equipment transactions tested, aggregating $29,988 of $59,723 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), the custodian’s name and the condition of the equipment was not indicated on the property master information record for PS-012478-US and PS-047509-US, with a total amount tested of $4,872. Evidence that custodian records were matched and updated after physical inspection was not obtained. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $29,988. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-008 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Equipment and Real Property Management Questioned Costs: $29,988 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. § T60-20-815 Section (c)(5) provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 equipment transactions tested, aggregating $29,988 of $59,723 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Condition, continued: 2. For 2 (or 40%), the custodian’s name and the condition of the equipment was not indicated on the property master information record for PS-012478-US and PS-047509-US, with a total amount tested of $4,872. Evidence that custodian records were matched and updated after physical inspection was not obtained. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $29,988. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-009 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Equipment and Real Property Management Questioned Costs: $36,244 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. § T60-20-815 Section (c)(5) also provides that the Procurement and Supply Department and the Fiscal and Budget Division along with the responsible school principals, program managers and site coordinators shall be responsible for taking an inventory of all fixed assets. During that inventory, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. All discrepancies between custodians and their respective fixed assets must be cleared by 90 days after the closing of the fiscal year. Further, § T60-20-815 Section (e) provides that the disposition of fixed assets shall be in accordance with procedures established by the Commissioner. Condition: Of 5 transactions tested, aggregating $36,244 of $243,308 in total amount of equipment identified under the program as of September 30, 2022: 1. For 5 (or 100%), no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. 2. For 1 (or 20%), the following were noted for PS-039791-US, with amount tested of $3,332: a. The custodian’s name was not indicated on the property master information record from the JD Edwards system. Evidence that custodian records were matched and updated after physical inspection was not obtained. b. The property master information record states that the asset is in “working” condition, however, evidence obtained of a survey performed on August 8, 2022 has concluded that the asset is no longer useful for PSS operations and is recommended for destruction or scrapping. The same evidence showed that the destruction/scrapping occurred in September 15, 2022. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $36,244. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Identification as a repeat finding: 2021-005 Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-010 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: 84.425 Education Stabilization Fund Area: Equipment and Real Property Management Questioned Costs: $854,432 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. Condition: 1. As of September 30, 2022, the total amount of equipment acquired under ALN 84.425X per equipment schedule or subsidiary ledger was lower by $18,147 as compared to the total amount of equipment expenditures identified in the general ledger journal entry details supporting the SEFA. 2. For 10 (or 100%) of 10 equipment transactions tested, aggregating $854,432 of $2,296,719 in total amount of equipment costs identified as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $854,432. Identification as a repeat finding: 2021-004 Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-010 Federal Agency: U.S. Department of Education (ED) Assistance Listing No. and Title: 84.425 Education Stabilization Fund Area: Equipment and Real Property Management Questioned Costs: $854,432 Criteria: The Schedule of Expenditures of Federal Awards (SEFA) must be supported by underlying accounting and other records used in preparing the financial statements. § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. Condition: 1. As of September 30, 2022, the total amount of equipment acquired under ALN 84.425X per equipment schedule or subsidiary ledger was lower by $18,147 as compared to the total amount of equipment expenditures identified in the general ledger journal entry details supporting the SEFA. 2. For 10 (or 100%) of 10 equipment transactions tested, aggregating $854,432 of $2,296,719 in total amount of equipment costs identified as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $854,432. Identification as a repeat finding: 2021-004 Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-011 Federal Agency: U.S. Department of Health and Human Services Assistance Listing No. and Title: 93.600 Head Start; 93.600 COVID-19 Head Start Area: Equipment and Real Property Management Questioned Costs: $165,367 Criteria: § 2 CFR 200.313(b) provides that a state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. PSS Rules and Regulations § T60-20-815 Inventory Requirements Section (c)(1) provides that a fixed asset at its inception shall be assigned to one individual, who will be responsible for the care and maintenance of the specified fixed asset. The employee, who is in direct control of the fixed asset (not the supervisor of the employee), and who is using the fixed asset, shall sign for the fixed asset. Refusal to sign as the custodian of a fixed asset shall prohibit the employee from custody of the fixed asset. The 2022 OMB Compliance Supplement page 4-93.600-9 provides that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: For 5 (or 100%) of 5 equipment transactions tested, aggregating $165,367 of $176,733 in total amount of equipment costs as of September 30, 2022, no evidence of custodian signature at inception of the fixed asset was provided. However, printed copies of the property master information record from the JD Edwards system were signed and dated by the custodian and a verifier as evidence of the most recent physical inspection in September 2022. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS’ existing fixed asset management policies are insufficient to ensure proper management of equipment and real property. Effect: PSS is in noncompliance with applicable equipment and real property requirements. The reportable questioned cost is $165,367. Recommendation: PSS should improve its existing fixed asset management policies to align with the Federal requirements on equipment and real property management. The Office of Procurement and Supply should consider developing standard forms and templates that can be used to document compliance with recordkeeping, custodianship, and physical count policies. Views of responsible officials: PSS agrees with the finding and describes corrective actions in the PSS Corrective Action Plan.

Finding No. 2022-012 Federal Agency: U.S. Department of Agriculture Assistance Listing No. and Title: 10.555 National School Lunch Program Area: Procurement and Suspension and Debarment Questioned Costs: $261,889 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must be based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. § T60-40-225(c) further provides that adequate public notice of the request for proposals shall be given in the same manner as provided for in competitive sealed bids. Condition: Of 60 non-payroll transactions tested aggregating $263,083 of $14,119,504 in total program non-payroll expenditures, we noted the following: 1. For 2 (or 3%), Doc. Nos. 333590 and 28221, totaling $26, pertained to small purchases not exceeding $500 and for which no price quotations were made. No written determination of the reasonableness of price was provided in accordance with § T60-40-210(b). 2. For 2 (or 3%), Doc. Nos. 332318 and 333718, totaling $739 pertained to small purchases not exceeding $10,000 and for which no price quotations were obtained in accordance with § T60-40-210(d). Condition, continued: 3. For 1 (or 2%), Doc. No. 27345, amounting to $575, pertained to a small purchase not exceeding $10,000 and for which only 2 price quotations were obtained, instead of the 3 quotations required by § T60-40-210(d). 4. For 49 (or 82%), transactions totaling $260,549 were procured through competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $261,889. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Upon review of the supporting documents provided, only one vendor provided a supporting quotation. Evidence of effort to obtain the remaining two vendor quotations or justification of not being able to obtain additional quotations were not provided. The condition remains. Condition 3 – Upon review of the supporting documents provided, only two vendor quotations were sought. Evidence of effort to obtain the third vendor quotation or justification of not being able to obtain the additional quotation was not provided. The condition remains. Condition 4 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-013 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Procurement and Suspension and Debarment Questioned Costs: $105,959 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. Also, § T60-40-225(g) provides that after proposal evaluation, a notice of intent to award the contract to the responsible offeror whose proposal is determined in writing to be the most advantageous to PSS, taking into consideration price and the evaluation factors set forth in the request for proposals, shall be issued to all offerors. Condition: Of 60 non-payroll transactions tested aggregating $120,642 of $1,895,080 in total program non-payroll expenditures, we noted the following: 1. For 7 (or 12%), transactions totaling $1,356 pertained to small purchases not exceeding $500 and for which no price quotations were made. Evidence was not provided showing that a written determination of the reasonableness of price was performed in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 18 (or 30%) transactions totaling $104,603 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). Further, Notices of Intent to Award were not provided for the reason that there was only one proposer. § T60-40-225(g) does not discuss exemptions for instances where there is only one proposer. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $105,959. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-013 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.027 Special Education – Grants to States (IDEA, Part B) Area: Procurement and Suspension and Debarment Questioned Costs: $105,959 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225(a) Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to the Public School System, a contract may be entered into by competitive sealed proposals. Also, § T60-40-225(g) provides that after proposal evaluation, a notice of intent to award the contract to the responsible offeror whose proposal is determined in writing to be the most advantageous to PSS, taking into consideration price and the evaluation factors set forth in the request for proposals, shall be issued to all offerors. Condition: Of 60 non-payroll transactions tested aggregating $120,642 of $1,895,080 in total program non-payroll expenditures, we noted the following: 1. For 7 (or 12%), transactions totaling $1,356 pertained to small purchases not exceeding $500 and for which no price quotations were made. Evidence was not provided showing that a written determination of the reasonableness of price was performed in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 18 (or 30%) transactions totaling $104,603 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). Further, Notices of Intent to Award were not provided for the reason that there was only one proposer. § T60-40-225(g) does not discuss exemptions for instances where there is only one proposer. See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reported questioned cost is $105,959. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.

Finding No. 2022-014 Federal Agency: U.S. Department of Education Assistance Listing No. and Title: 84.403 Consolidated Grants to the Outlying Areas Area: Procurement and Suspension and Debarment Questioned Costs: $24,595 Criteria: § 2 CFR 200.317 provides that when procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds. PSS Procurement Rules and Regulations Part § T60-40-210(b) provides that purchases not exceeding $500 may be made without securing bids or price quotations if the Chief of Procurement and Supply considers the price reasonable. Such determination shall be made in writing and shall indicate: (1) the reason why price quotations were not sought; (2) the utility of the purchase; (3) an explanation of why the price is reasonable under the circumstances. § T60-40-210(d) also provides that price quotations from at least three vendors must be obtained and the selection must based on competitive price and quality for procurement valued at under $10,000. Any price quotations obtained must be written, documented, and submitted to the Chief of Procurement and Supply for approval. PSS Procurement Rules and Regulations Part § T60-40-225 Competitive Sealed Proposals provides that when the Commissioner of Education determines in writing upon the advice of legal counsel that the use of a competitive sealed bidding is either not practical or not advantageous to PSS, a contract may be entered into by competitive sealed proposals. Condition: Of 60 non-payroll transactions tested aggregating $57,035 of $13,545,658 total program non-payroll expenditures: 1. For 18 (or 30%), transactions totaling $5,747 pertained to small purchases not exceeding $500 and for which no price quotations were made. No written determination of the reasonableness of price was provided in accordance with § T60-40-210(b). See Schedule of Findings and Questioned Costs for chart/table. 2. For 4 (or 7%), transactions totaling $18,848 pertained to procurements entered into by competitive sealed proposals. Evidence was not provided showing that the Commissioner of Education has determined in writing that the procurement satisfies the condition for use of competitive sealed proposals in accordance with § T60-40-225(a). See Schedule of Findings and Questioned Costs for chart/table. Cause: PSS failed to effectively implement its procurement rules and regulations. Effect: PSS is in noncompliance with applicable procurement and suspension and debarment requirements. The reportable questioned cost is $24,595 because the projected questioned cost exceeds the threshold. Recommendation: PSS should ensure compliance with its procurement rules and regulations. The Procurement and Supply office should implement additional controls to ensure that procurement documentation is complete in accordance with PSS Procurement Rules and Regulations § T60-40. PSS should also perform a regular review of its procurement rules and regulations to align with federal requirements on procurement. Views of responsible officials: The PSS Corrective Action Plan provides a detailed rationale for disagreement with the finding. Auditor response: Condition 1 – PSS’ procurement regulations in T60-40-210(b) specifically provides the information required to be made in writing by the Chief of Procurement and Supply, namely: (1) the reason why price quotations are sought, (2) the utility of the purchase; and (3) an explanation of why the price is reasonable under the circumstances. The supporting documents signed by the Chief of Procurement and Supply and the Commissioner of Education do not provide these representations. The condition remains. Condition 2 – Ultimately, written communication from the Commissioner of Education for the condition for use of competitive sealed proposals is required in T60-40-225(a). The condition remains.