Audit 374610

2024-002- Inadequate Preparation of the Schedule of Expenditures of Federal Awards (SEFA) Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Finding Type: Material weakness in in internal control over compliance and noncompliance. Criteria: Management is responsible for the preparation of the Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the financial statements. The SEFA must be complete, accurate and include all federal awards expended, properly identified by Assistance Listing Number. Condition: The Schedule of Expenditures of Federal Awards presented for audit required multiple drafts. During the audit, it was noted that the original SEFA provided by management was incomplete and materially misstated. Supporting documentation was not readily available to reconcile the SEFA to the financial statements or to provide a clear audit trail for the federal expenditures reported. Cause of Condition: The deficiencies were the result of inadequate internal controls and oversight over the SEFA preparation process. There was no formal reconciliation of federal expenditures to the general ledger, and supporting documentation was not organized or maintained in a way that allowed for accurate SEFA preparation or audit review. The District received guidance from the grantor to charge multiple years’ worth of expenditures to the grant which also led to difficulties preparing the SEFA. Effect of Condition: The materially misstated SEFA may result in noncompliance with Uniform Guidance reporting requirements and hinder the auditor’s ability to properly identify major programs and assess the risk of material noncompliance. The lack of documentation also increases the risk of errors or omissions going undetected. Recommendation: It is recommended that management establish formal procedures for SEFA preparation, including timely reconciliation of federal expenditures to the general ledger, documentation and retention of supporting schedules and source data, and review and approval of the SEFA prior to submission to the auditors. View of Responsible Officials and Planned Corrective Action: The complexity of the grant reporting caused a misunderstanding as to exactly what costs were relevant to be included in the SEFA. The District is now better informed as far as what needs to be included in the SEFA. Planned Implementation Date of Corrective Action: July 2025 Person Responsible for Corrective Action: F.X. Flinn, Board Chair

2024-003- Inaccurate Indirect Cost Rate Applied Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Finding Type: Material weakness in internal control over compliance and noncompliance Criteria: Federal rules state that if an organization has never had a negotiated indirect cost rate, it can choose to use a flat 10% rate—called the de minimis rate—on certain direct costs. This 10% rate must be used the same way on all federal grants unless the organization gets an approved rate from the government. In this case, the grant agreement stated that the organization should use the 10% de minimis rate. Condition: During audit testing, it was noted that the District applied indirect cost rates ranging from 10% to 50% to calculate and allocate indirect costs to the federal award. However, the grant agreement specifies that the District must use the 10% de minimis indirect cost rate if they decide to charge indirect costs to the grant. Cause of Condition: The District incorrectly applied a higher indirect cost rate. Effect of Condition: The use of varying indirect cost rates resulted in excess indirect cost charges to the federal award. Preliminary estimates indicate that indirect costs were overstated by $48,370 including $47,805 that were requested for reimbursement. Recommendation: It is recommend that the District review all applicable grant agreements and ensure compliance with specified indirect cost requirements. If there is no negotiated indirect cost rate, it is recommended the District elect the de minimis rate at 10%. The District should implement stronger review controls during grant budgeting and invoicing processes to ensure only allowable indirect cost rates are applied. View of Responsible Officials and Planned Corrective Action: The District will use the correct overhead rate for future reporting. Planned Implementation Date of Corrective Action: July 2025 Person Responsible for Corrective Action: F.X. Flinn, Board Chair

2024-004- Reporting Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Compliance: Reporting Finding Type: Significant deficiency in internal control over compliance and noncompliance Criteria: Management is responsible for submitting timely, accurate reporting based on the terms of the grant agreement. Reports must be supported by accounting records. Condition: During audit testing it was noted that the District did not submit required quarterly reports. Cause of Condition: The failure to submit the required reports was due to an unclear process for tracking due dates. No one at the District was assigned to make sure the reports were prepared and submitted. Effect of Condition: Failure to submit required reports impairs the federal awarding agency’s ability to monitor grant progress. Recommendation: It is recommended that management develop and implement procedures to ensure timely submission of all required reports. This should include establishing a tracking system and designating responsible personnel for monitoring compliance with grant reporting deadlines.View of Responsible Officials and Planned Corrective Action: The District will work with the granting Agency to get the form to properly report on a quarterly basis. Planned Implementation Date of Corrective Action: July 2025/Ongoing Person Responsible for Corrective Action: F.X. Flinn, Board Chair

2024-005- Vendor Records Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Compliance: Allowable Costs/Cost Principles Finding Type: Significant deficiency in internal controls over compliance Criteria: All costs charged to a federal award must be adequately documented and supported. Condition: During the review of vendor invoices submitted for reimbursement, several instances were noted in which invoice amounts were not properly reduced for retainages that had not yet been paid. Cause of Condition: The District lacked a process to differentiate estimated versus actual costs included in vendor invoices. Effect of Condition: There is an increased risk that unallowable or inaccurate costs may have been charged to the federal program. Recommendation: It is recommended the entity implement procedures to ensure all invoiced amounts are supported with appropriate documentation. View of Responsible Officials and Planned Corrective Action: The District will instruct the operator to indicate on the invoice amounts held back for retainage to be paid at a later date when the work invoiced can be verified as complete. And will also adjust the requisitions to reflect only amounts actually paid. Planned Implementation Date of Corrective Action: October 2025 Person Responsible for Corrective Action: F.X. Flinn, Board Chair

2024-06- Vendor Records Federal Agency: U.S. Department of the Treasury Award Name: Coronavirus State and Local Fiscal Recovery Funds Program Year: 2024 Assistance Listing Number: 21.027 Compliance: Allowable Costs/Cost Principles Finding Type: Significant deficiency in internal control over compliance and noncompliance Criteria: Costs charged to a federal award must be necessary, reasonable, allocable, and adequately documented. Duplicate charges for the same goods or services are unallowable. Condition: During testing of expenditures charged to the grant, an instance was identified in which the same invoice in the amount of $22,006 was charged twice to the grant.Cause of Condition: The duplication occurred due to a lack of sufficient review procedures. The accounting system did not flag the duplicate entry, and no secondary review was conducted to detect the error. Effect of Condition: Federal expenditures reported were overstated by $22,006. This resulted in an unallowable cost being charged to the grant. Questioned Costs: $22,006 Recommendation: It is recommended that the District implement stronger internal controls including reviews of grant expenditures. The District should also ensure the unallowable cost is removed from the grant and reimbursed to the federal agency as necessary. View of Responsible Officials and Planned Corrective Action: The accounting software used for the District’s financial records failed to flag a duplicate invoice (#310725) in this instance. The District will remove these costs on a subsequent submission for reimbursement. Planned Implementation Date of Corrective Action: Next request for reimbursement Person Responsible for Corrective Action: F.X. Flinn, Board Chair