2025-001 Approval of Invoices (Material Weakness) Federal Agency: U.S. Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425U Passed-through Identification: 20220810 Compliance Requirement: Activities Allowed or Unallowable and Allowable Costs / Cost Principles Type of Finding: Internal Control over Compliance – Material Weakness Criteria or Specific Requirement: Per 2 CFR 200.303, non-Federal entities are required to establish and maintain effective internal control over Federal awards that provides reasonable assurance that the entity is managing such awards in compliance with Federal statutes, regulations, and the terms and conditions of the award. These controls should be designed in accordance with established internal control frameworks and include appropriate supervisory review and approval processes. In addition, 2 CFR 200.403 requires that all costs charged to Federal awards be necessary, reasonable, and adequately documented. Adequate documentation includes evidence that expenditures were reviewed and approved by appropriate personnel to ensure allowability, allocability, and compliance with program requirements prior to payment. Condition: During our testing of expenditures, we identified two invoices totaling $818,074 that did not contain evidence of formal supervisory review and approval. Specifically, the invoices were not initialed, signed, or otherwise documented to demonstrate that a compliance review had been performed prior to payment. Although the School District has established procedures requiring review and approval of invoices, these procedures were not consistently followed. As a result, there was no documented evidence to support that the expenditures were reviewed for allowability, allocability, and compliance with applicable Federal requirements prior to disbursement. Cause: This deficiency appears to be the result of inconsistent adherence to established internal control procedures and a lack of effective monitoring to ensure that required review and approval controls are performed and documented. While a review process exists, it is not operating effectively in practice, and responsibilities for documenting approval may not be clearly enforced or consistently applied. Effect: As a result of the lack of documented supervisory review, the School District is unable to demonstrate that expenditures charged to the grant were evaluated for compliance with Federal requirements prior to payment. This control deficiency increases the risk that unallowable, unsupported, or noncompliant costs could be charged to the Federal program and not be detected in a timely manner. In addition, the absence of documented approval weakens the audit trail and reduces transparency and accountability over Federal expenditures, which may result in increased scrutiny from oversight agencies and the potential for questioned or disallowed costs. Questioned Costs: None. While a control deficiency was identified, our testing did not identify any instances of noncompliance or unallowable costs charged to the program. Identification as Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the School District strengthen its internal controls over Federal expenditures by ensuring that all invoices charged to Federal programs are subject to a documented supervisory review and approval prior to payment. This review should include consideration of allowability, allocability, and compliance with program requirements. Evidence of such review should be consistently documented (e.g., signature, initials, or electronic approval) and retained in accordance with Federal record retention requirements. In addition, management should implement monitoring procedures to verify that established controls are operating effectively and consistently across all applicable transactions. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.