2024-003 Lack of Documentation to Support Distribution of Wages (Material Weakness) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Special Education Cluster Assistance Listing Number(s): 84.027, 84.173, 84.027X, 84.173X Passed-through Identification: 20221035, 20221036, 20230212, 2024188, 20240189, 20240190, 20240191, 20240199, 20240308 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: Federal regulations 2 CFR 200.303 states, the School Administrative Unit, as a recipient of Federal funds, must establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, under 2 CFR 200.430, it states that charges to the federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (1) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, (2) be incorporated into the official records of the non-Federal entity, (3) reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities, and (4) 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 ward or a federal award and non-Federal award. Condition: During current year testing, it was noted that the School Administrative Unit did not maintain semi-annual certifications for employees whose salaries were charged in whole or in part to federal programs for the second half of the fiscal year. Cause: The absence of certifications appears to be the result of oversight in the School Administrative Unit’s year-end grant compliance procedures. Specifically, management did not have an established monitoring process to ensure that semi-annual certifications were completed and retained for the full fiscal year. Effect: Without proper semi-annual certifications, the School Administrative Unit cannot fully demonstrate that salaries charged to federal programs were based on actual work performed for those programs. This creates the risk of questioned costs under the Uniform Guidance and may jeopardize the allowability of a portion of payroll expenditures charged to federal awards. Questioned Costs: $355,027 Identification as Repeat Finding: As identified in Schedule III, Summary Schedule of Prior Audit Findings, this is a repeat of finding 2023-002. Recommendation: We recommend the School Administrative Unit strengthen its grant compliance procedures by implementing a process to ensure that all required semi-annual certifications are completed timely and retained for each reporting period. This may include assigning responsibility to a specific individual for collecting certifications, establishing reminders at fiscal mid-year and year-end, and periodically reviewing files to confirm compliance. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.
2024-004 Inaccurate Maintenance of Effort Worksheets (Material Weakness) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Special Education Cluster Assistance Listing Number(s): 84.027, 84.173, 84.027X, 84.173X Passed-through Identification: 20220039, 20221010, 20221035, 20221036, 20221037, 20230209, 20230211, 20230212, 20230214, 20230215, 20230231, 20230232, 2024188, 20240189, 20240190, 20240191, 20240191, 20240199, 20240308 Compliance Requirement: Matching, Level of Effort, Earmarking Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: Under 34 CFR 300.203, school districts receiving federal Individuals with Disabilities Education Act (IDEA) funds must meet the Maintenance of Effort (MOE) requirement. MOE consists of two components: • Eligibility (Budgeted MOE): The district must budget at least the same amount of local or state and local funds for special education in the current fiscal year as it did in the prior fiscal year. • Compliance (Actual MOE): At year-end, the district must demonstrate that actual local or state and local expenditures for special education were at least equal to the prior year’s level. Additionally, the State of New Hampshire’s MOE worksheet is used to determine compliance with both requirements and must be completed separately for each school district within a School Administrative Unit (SAU). Each worksheet must use financial data that reflects only special education-related expenditures within the general fund. Condition: During our audit, we noted that the School Administrative Unit (SAU) did not properly complete the compliance (actual) section of the required State of New Hampshire MOE worksheet for fiscal year 2024 for any of its member districts. Specifically, none of the individual district worksheets included fiscal year 2024 actual expenditures. In addition, no revisions were subsequently provided to the State of New Hampshire Department of Education to correct these errors. We also observed inconsistencies across the district submissions, as some worksheets contained no data while others incorrectly included fiscal year 2025 budgeted amounts in the column designated for fiscal year 2024 actual expenditures. As a result, the MOE calculations for compliance were incomplete and inaccurate for each district, preventing a proper determination of whether the districts met the required level of effort. Effect: Because the worksheets for each district were submitted without the required fiscal year 2024 actual expenditures and included inconsistent or inaccurate data, the SAU did not ensure that its member districts accurately demonstrated compliance with the MOE requirement. This incomplete and misleading reporting could lead to noncompliance with federal and state regulations and, if found to be out of compliance, could result in financial consequences such as the repayment of federal IDEA funds or adjustments to future allocations for one or more districts. Cause: Insufficient review and oversight at the SAU level resulted in the omission of fiscal year 2024 actual expenditure data and the submission of incomplete and inconsistent MOE worksheets for the individual districts. Questioned Costs: $1,641,307 Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the SAU strengthen its internal procedures for completing the MOE worksheets to ensure that accurate and complete special education expenditure data is entered for each member district for both budgeted and actual years. Staff responsible for MOE reporting should receive training on the requirements, and a secondary review should be implemented at the SAU level before submission. If necessary, the SAU should work with the New Hampshire Department of Education to correct and resubmit the worksheets for each district using the proper fiscal year 2024 actual expenditures. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.
2024-005 Inadequate Contract Retention and Suspension/Debarment Verification (Material Weakness) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Special Education Cluster Assistance Listing Number(s): 84.027, 84.173, 84.027X, 84.173X Passed-through Identification: 20220039, 20221010, 20221035, 20221036, 20221037, 20230209, 20230211, 20230212, 20230214, 20230215, 20230231, 20230232, 2024188, 20240189, 20240190, 20240191, 20240191, 20240199, 20240308 Compliance Requirement: Procurement and Suspension and Debarment Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: Federal regulations require that non-federal entities, including school administrative units (SAUs), maintain adequate documentation for all procurement transactions and ensure that vendors are eligible to participate in federal programs. Specifically, 2 CFR 200.318–200.327 outlines standards for procurement, including maintaining documentation that demonstrates compliance with federal requirements, ensuring fair and open competition, and retaining executed contracts and related procurement records. Additionally, 2 CFR 180 and 2 CFR 200.213 require verification that vendors are not suspended, debarred, or otherwise excluded from participation in federal programs prior to entering into a contract. Federal guidance emphasizes that all procurement documentation, including executed contracts, bid evaluations, and vendor eligibility verification, must be retained to provide an audit trail demonstrating compliance and prudent use of federal funds. Maintaining proper documentation and performing required verification steps helps prevent the risk of fraud, waste, or improper payments and ensures transparency and accountability in the use of public resources. Condition: During testing of procurement activities, we noted that two signed and executed contracts could not be located. Furthermore, for all vendors reviewed except one, there was no evidence that the School Administrative Unit (SAU) performed procedures to verify that the vendors were not suspended or debarred. Cause: The SAU did not have a consistent process for retaining executed contracts or for documenting the verification of vendor eligibility under suspension/debarment requirements. Staff were not aware of the federal verification requirements or lacked formal procedures to ensure compliance. Effect: The absence of executed contracts and verification procedures increases the risk of noncompliance with federal procurement regulations. This could potentially result in questioned costs during a federal audit and may expose the SAU to financial or reputational risk if funds were improperly paid to ineligible vendors. Questioned Costs: $679,147 Identification as Repeat Finding: This is not a repeat finding. Recommendation: The SAU should implement a formal procurement policy that ensures all contracts are properly executed, signed, and retained. The policy should also establish a standardized process to verify all vendors against federal suspension and debarment lists prior to awarding contracts, with documentation of all verification steps maintained as part of the procurement record. Additionally, staff should be trained on these procedures to ensure ongoing compliance with federal requirements. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.
2024-006 Document Policies and Procedures over Federal Awards (Significant Deficiency) Cluster/Program: All Federal Awards Type of Finding: Internal Control over Compliance – Significant Deficiency Compliance – Other Matters Criteria or Specific Requirement: OMB’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (UG) established significant requirements related to Federal awards. The requirements stipulate that federal award recipients must document their policies and procedures over certain aspects of financial program management. Specifically, written policies are required for the following: • Determination of allowable costs • Employee travel • Cash Management • Procurement and Suspension and Debarment • Subrecipient monitoring and management. Condition: The School Administrative Unit (SAU) has not formalized written policies and procedures related to Federal awards as required under Uniform Guidance. Cause: Administrative oversight and weakness in the formal documentation of internal controls. Effect: There are no formal policies related to federal grant activity. Questioned Costs: There are no questioned costs as a result of this finding as there are no costs directly associated with this compliance requirement. Identification as Repeat Finding: As identified in Schedule III, Summary Schedule of Prior Audit Findings, this is a repeat of finding 2023-003. Recommendation: The SAU should ensure that written policies and procedures are compiled and adopted as soon as practicable to ensure compliance with the Uniform Guidance. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.