Audit 303915

Condition Two employees were paid wages for activities coded to special education:  For one of the two special education employees tested, Ha:San prepared an employment contract, however, they were not signed by the employee or a school administrator.  For the other employee tested, Ha:San could not provide evidence it prepared or retained an employment contract to support the employee designation to provide special education services.  For all seven timecards tested for both employees the timecards did not contain a signature from either the employee or a School administrator. Criteria Accounting best practices specifies that supporting documentation should be prepared and retained to support all transactions. The Internal Revenue Service explains "An exempt organization must keep books and records needed to show that it complies with the tax rules. The organization must be able to document the sources of receipts and expenditures reported on its annual return and on any tax returns it must file. Records must support income, expenses, and credits reported on exempt organization annual returns and tax returns." Uniform Guidance §200.333 Retention requirements for records states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report..."must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. 2 CFR 200.430(i)(1)(vii) states: "Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are located using different allocation bases; or an unallowable activity and a direct or indirect cost activity." Cause There was a period of significant turnover in the administrative office for the past year. During the transition, existing controls were not followed to ensure complete documentation was retained. Effect Financial information Ha:San uses to make decisions and reports provided to the state of Arizona for oversight could have been materially misstated throughout the fiscal year. Further, Ha:San could end up being in noncompliance with federal and state laws. Recommendation Ha:San should procure a consultant or modify the organizational chart of the finance office to ensure individuals with the skills, knowledge and expertise prepare, review and retain required source documentation.

Condition Ha:San did not submit the single audit reporting package and related data collection form by the required deadline. Criteria The Uniform Guidance section 500.512 states: "...The audit must be completed and the data collection form....and reporting package....must be submitted within the earlier of 30 calendar days after receipt of the auditor’s reports, or nine months after the end of the audit period." Cause There was a period of significant turnover in the administrative office for the past year. During the transition, existing controls were not followed. Effect Ha:San is not in compliance with the requirements of the Uniform Guidance. Recommendation We recommend that Ha:San monitor federal grant expenditures and if it is expected that expenditures will exceed $750,000, Ha:San should procure audit services promptly.

Condition Two employees were paid wages for activities coded to special education:  For one of the two special education employees tested, Ha:San prepared an employment contract, however, they were not signed by the employee or a school administrator.  For the other employee tested, Ha:San could not provide evidence it prepared or retained an employment contract to support the employee designation to provide special education services.  For all seven timecards tested for both employees the timecards did not contain a signature from either the employee or a School administrator. Criteria Accounting best practices specifies that supporting documentation should be prepared and retained to support all transactions. The Internal Revenue Service explains "An exempt organization must keep books and records needed to show that it complies with the tax rules. The organization must be able to document the sources of receipts and expenditures reported on its annual return and on any tax returns it must file. Records must support income, expenses, and credits reported on exempt organization annual returns and tax returns." Uniform Guidance §200.333 Retention requirements for records states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report..."must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. 2 CFR 200.430(i)(1)(vii) states: "Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are located using different allocation bases; or an unallowable activity and a direct or indirect cost activity." Cause There was a period of significant turnover in the administrative office for the past year. During the transition, existing controls were not followed to ensure complete documentation was retained. Effect Financial information Ha:San uses to make decisions and reports provided to the state of Arizona for oversight could have been materially misstated throughout the fiscal year. Further, Ha:San could end up being in noncompliance with federal and state laws. Recommendation Ha:San should procure a consultant or modify the organizational chart of the finance office to ensure individuals with the skills, knowledge and expertise prepare, review and retain required source documentation.

Condition Ha:San did not submit the single audit reporting package and related data collection form by the required deadline. Criteria The Uniform Guidance section 500.512 states: "...The audit must be completed and the data collection form....and reporting package....must be submitted within the earlier of 30 calendar days after receipt of the auditor’s reports, or nine months after the end of the audit period." Cause There was a period of significant turnover in the administrative office for the past year. During the transition, existing controls were not followed. Effect Ha:San is not in compliance with the requirements of the Uniform Guidance. Recommendation We recommend that Ha:San monitor federal grant expenditures and if it is expected that expenditures will exceed $750,000, Ha:San should procure audit services promptly.