Audit 404529

Item 2023-007 Activities Allowed/Allowable Costs/Costs Principles Education Stabilization Fund ALN# 84.425D and 84.425U US Department of Education Passed through Alabama State Department of Education Federal Grant/Contract Number: 2021-802-004295; 2021-802-004296; 2021-802-004298; X230168 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the recipient or subrecipient. Condition – A detail of $423,029 of costs associated with payroll expenditures could not be obtained and therefore not tested. We were unable to obtain sufficient, appropriate audit evidence related to these amounts. Cause – Employee fund allocations and payroll documentation were not retained by the Academy to substantiate activities allowed and allowable costs. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – $423,029 of payroll expenditures were unable to be tested as a population of expenditures related to payroll could not be obtained. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2023-008 Activities Allowed/Allowable Costs/Costs Principles Education Stabilization Fund ALN# 84.425D and 84.425U US Department of Education Passed through Alabama State Department of Education Federal Grant/Contract Number: 2021-802-004295; 2021-802-004296; 2021-802-004298; X230168 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing theFederal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition – During testing of program disbursements there were 2 instances where the purchase order or request used to identify approval of the disbursement could not be located and 1 invoice that could not be located out of 7 program disbursements sampled. Deficiencies occurred in approximately 42.85% of the population sampled. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Supporting invoices were not retained by the Academy to substantiate activities allowed and allowable costs. Effect – Inadequate or inconsistent documentation and review of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – Total of expenses sampled in which documentation could not be provided was $5,041 that amount extrapolated to the population was $26,072. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2023-009 Activities Allowed/Allowable Costs/Costs Principles Child Nutrition Program ALN# 10.555 and 10.553 US Department of Agriculture Passed through Alabama State Department of Education Federal Grant/Contract Number: 802 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the recipient or subrecipient. Condition – During testing of program disbursements there was 2 instances where the purchase order or request used to identify approval of the disbursement could not be located, which was approximately 28.5% of the population sampled. In our payroll testing, we noted multiple instances where an approved pay rate and hours covering the appropriate time period could not be obtained. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Effect – Inadequate or inconsistent review of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – Total of expenses sampled in which documentation could not be provided was $9,926 that amount extrapolated to the population was $17,759. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2023-010 Net Cash Resource Compliance Child Nutrition Program ALN# 10.555 and 10.553 US Department of Agriculture Passed through Alabama State Department of Education Federal Grant/Contract Number: 802 Grant period – 2023 Criteria - Per 7 CFR Subpart C – 210.14(b), the school food authority shall limit its net cash resources to an amount that does not exceed its 3-month average expenditures for its nonprofit school food service or such other amount as may be approved by the State agency in accordance with 7 CFR Subpart D – 210.19(a). Condition – The cumulative net cash resources as of September 30, 2023, totaled $401,854 which exceeded the net cash resource limit by $261,641. Cause – The Academy has not formulated a plan for the use of excess net cash resources and has not communicated with the Alabama Department of Education to determine the remedy for its excess net cash resources. Effect – The school is not in compliance with 7 CFR Subpart C – 210.14(b). Noncompliance with this guidance exposes the school to the risk of forfeiture of Child Nutrition Program funds. Questioned Costs – None. Recommendation – It is recommended that management and the Academy review potential use for the net cash resources or communicate with the Alabama Department of Education for appropriate return of funds. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.