#2025-002 FINDING: Financial Statement and Schedule of Expenditure of Federal Awards (SEFA) Preparation and Audit Adjustments Federal Program Affected: All major federal programs Compliance Requirement: Reporting Questioned Costs: None Condition and Cause: As a matter of practicality and efficiency, we have assisted in drafting the financial statements and schedule of expenditures of federal awards, in both form and content, based on information provided by management during the audit. In addition, material audit adjustments were approved and recorded by management. The School did not have an internal control process to prepare the financial statements and SEFA. In addition, material audit adjustments were approved and recorded by management. These adjustments resulted in an approximate $622,000 increase in fund balance. Criteria and Effect: Management and those charged with governance are ultimately responsible for adjusting account balances and preparing and presenting the financial statements and SEFA in accordance with the applicable financial reporting framework. The auditor’s responsibility for the financial statements is to express an opinion on them based on the audit evidence obtained. Repeat Finding from Prior Year: Yes, Finding #2024-002 Recommendation: Management and if applicable, governance, should review the financial statements, SEFA, and audit adjustments for accuracy of account balances and context of note disclosures. Management and governance should inquire of the auditors about any balances or disclosures which management does not understand or cannot reconcile to internal records prior to signing the management representation letter. Response/Corrective Action Plan: See Corrective Action Plan.
#2025-003 FINDING: Grant Tracking Federal Program Affected: Substance Abuse and Mental Health Projects of Regional and National Significance (ALN 93.243) Compliance Requirement: Period of Performance Questioned Costs: None due to adjustments Condition and Cause: An adjustment was made to a three-year prepaid curriculum subscription charged to the Substance Abuse and Mental Health Projects of Regional and National Significance. The prepaid expense was erroneously charged to the program in the amount of $82,000. Criteria and Effect: The SEFA is prepared on the accrual basis of accounting and only expenditures incurred are eligible for reimbursement. The current internal control structure did not identify the errors in draw down request for reimbursement-based federal programs during the year. This could have resulted in material noncompliance. Repeat Finding from Prior Year: Yes, #2024-003 Recommendation: Curriculum subscriptions are allowable under the grant, however, only the amount actually incurred as an expenditure during the period should be charged to the grant period. Response/Corrective Action Plan: See Corrective Action Plan.
#2025-004 FINDING: Documentation of Internal Controls Federal Program Affected: All major federal programs Compliance Requirement: Allowable Costs, Special Tests and Provisions, Procurement and Suspension and Debarment Questioned Costs: None Condition and Cause: Although discussions with management indicate controls are in place, the School was unable to provide internal documentation verifying the existence of the following internal control processes: • Stipends and Bonus Pay: The School provided in excess of $775,000 in stipend, incentive, and bonus pay to employees. The School was not able to provide support for School Board approval of all forms of special payments to employees. • Journal Entries: Documentation was not retained to support proper review of journal entries prior to posting. • Bank Reconciliation: Documentation was not retained to support proper review of monthly bank reconciliations. • While cash accounts were properly collateralized and documentation is maintained for one bank account regarding adequate collateralization, documentation supporting internal controls for bank collateralization for several other bank accounts was not maintained. • A search for suspended and debarred vendors was not performed for one contracted instructor paid in excess of $25,000 from the Substance Abuse and Mental Health projects of Regional and National Significance program and for one vendor from the Administrative Cost Grants for Indian Schools program. • The School was not submitting timely reimbursement requests for reimbursement-based grants. • The School was not reconciling balances to underlying subsidiary listings resulting in material audit adjustments. See finding 2025-002. Criteria and Effect: Records of approval of special pay should be maintained and retained by the business office. Without this documentation, it creates an opportunity for misappropriation of funding. Journal entries should be reviewed prior to posting and this review should be documented. Bank reconciliations should be reviewed upon completion, and this review should be documented. Retaining documentation of approvals supports the monitoring function necessary for proper segregation of duties. If bank accounts were not properly collateralized, it could result in noncompliance. Uniform Guidance requires that any covered transactions expected to exceed $25,000 must be searched for through the list of suspended and debarred vendors on Sam.gov. A contracted instructor and vendor for professional services meets the definition of a covered transaction. Failure to request reimbursement timely impacts the availability of federal funds. Repeat Finding from Prior Year: Yes, #2024-004 Recommendation: If special pay to employees are approved, adequate documentation must be maintained to support the activity. Additionally, we recommend that the business manager indicates her review with a signature on all bank reconciliations and journal entries prior to posting. The School should maintain documentation supporting proper collateralization for all bank accounts. The School should perform and retain support for the search of suspended and debarred vendors if there is a reasonable estimation that they will be paid in excess of $25,000. Reimbursement requests should be submitted timely to minimize the lapse of time between the reimbursement and the underlying expenditure. Management should reconcile general ledger accounts to underlying subsidiary balances. Response/Corrective Action Plan: See Corrective Action Plan.
#2025-005 FINDING: Payroll Testing Federal Program Affected: Substance Abuse and Mental Health Projects of Regional and National Significance (ALN 93.243), Indian School Equalization Program (ALN 15.042) Compliance Requirement: Allowable Costs/Activities Allowed Questioned Costs: None exceeding $25,000 Condition and Cause: The School did not have an internal control process in place to identify errors in payroll prior to being paid, resulting in one Project Aware employee being paid $600 over the approved contract and one ISEP employee underpaid due to an incorrect daily pay rate used to calculate the employee’s leave without pay deduction. The total Project Aware payroll tested was $49,953 and total payroll charged to the program was $870,515. Criteria and Effect: Employee payroll charged to federal programs must agree to employee contracts and approved timesheets. Repeat Finding from Prior Year: Yes, #2024-005 Recommendation: We recommend the School begin reconciling payroll reports to the employee contracts to ensure proper payment of payroll each period. Response/Corrective Action Plan: See Corrective Action Plan.
#2025-006 FINDING: Reporting Federal Program Affected: All major federal programs Compliance Requirement: Reporting Questioned Costs: None Condition and Cause: The SF425 reported expenditures did not match internal records. The School did not have an internal control process in place to identify errors in program expenditures reported and actual expenditure activity per the general ledger. The report submission was filed late according to the grant agreement deadline for BIE programs. Additionally, documentation could not be obtained to support the submission of the SF425 and Sustainability Plan required by the Substance Abuse and Mental Health Projects of Regional and National Significance program. The School’s Data Collection Form was not filed by the 3/31/26 due date. Criteria and Effect: Reporting of federal program activity must agree to the recorded expenditures in the general ledger. Reporting requirements must follow the deadlines outlined by the agreements and Office of Management and Budget. Repeat Finding from Prior Year: Yes, #2024-006 Recommendation: We recommend the School begin reconciling individual program expenditure activity to the completed report before submission. We recommend timely filing submissions within the grant agreement specifications and retaining auditable documentation to support the submission. Response/Corrective Action Plan: See Corrective Action Plan.