Audit 391757

U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES - AL NUMBER 84.010A PASS-THROUGH NUMBER 3212 AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 2025-001. Allowable Costs/Cost Principles Criteria or specific requirement: Office of Management and Budget (OMB) 2 CFR part 200, subpart E - Cost Principles, establishes principles determining the allowable costs incurred by the District under federal funds. Such costs are to be necessary and reasonable for the performance of the federal award. Condition: During our test of payroll expenditures, we identified $9,213 in salary and fringe benefits paid from the Title I program for a non-Title I certified teaching position. The employee was previously in a Title I position and reassigned to a non-Title I position for the 2025 fiscal year, and the District continued to pay the employee from the Title I program. Cause: Lack of internal controls and management oversight over program expenditures. Effect: Unallowable costs of $7,525 (gross salary) and $1,688 (fringe benefits) were paid from the Title I program. Questioned costs: The amount of actual questioned costs was $9,213. Context: A test of Title I salary expenditures for 3 employees ($11,002) from a population of 24 employees ($278,138). Our sample was not statistically valid. Identification as a repeat finding: No Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance and implement proper controls over program expenditures. Views of responsible officials: During the 2024-2025 fiscal year, Title I program funds continued to be used for salary and benefits for an employee whose position had changed from a Title I-funded role in the prior year to a non-Title I role. The payroll funding source was not updated to reflect the position change, and the error was not identified during year-end redistribution processes. Upon notification, the District reviewed payroll coding and has taken steps to correct the funding classification. To prevent recurrence, the District has implemented a formal monitoring procedure requiring the Federal Programs Coordinator to review payroll funding reports and audit trail documentation on a monthly and quarterly basis. This review will be conducted in coordination with the District Treasurer to ensure proper alignment of staffing assignments and federal funding sources. Any necessary payroll redistributions will be completed promptly upon identification. The additional oversight layer strengthens internal controls over federal program expenditures and ensures compliance with allowable cost requirements.