2025-001. Internal Control APPLICABLE MAJOR FEDERAL PROGRAMS: U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION TITLE I GRANT TO LOCAL EDUCATION AGENCIES- AL NUMBER 84.010A PASS-THROUGH NUMBER 5008 AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION SPECIAL EDUCATION CLUSTER (IDEA) - AL NUMBERS 84.027A and 84.173A PASS-THROUGH NUMBER 5008 AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 The internal control deficiencies identified in Finding 2025-001 noted in Section II above also apply to these major federal programs. Financial statement finding 2025-001 detail below: Criteria: Internal control is a process consisting of five interrelated components - control environment, risk assessment, information and communication, control activities, and monitoring. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will, among other things, initiate, authorize, record, process, and report transactions (as well as events and conditions) consistent with management's assertions embodied in the financial statements. Condition: Deficiencies in the internal control component of control activities adversely affected the District’s ability to initiate, authorize, record, process, and report financial data in accordance with the regulatory basis of accounting such that there was a reasonable possibility that a material misstatement of the District’s financial statements would not be prevented, or detected and corrected on a timely basis. Financial accounting duties were not adequately segregated among employees. Specifically, non-payroll checks were prepared by the same employee responsible for the maintenance of the accounting records and such employee had unrestricted access to the District’s signature stamp pertaining to the District’s primary operating, activity, and food service accounts. The same employee who receipted monies collected, also deposited, posted, and reconciled the District’s primary operating and activity accounts, without compensating controls. The same employee who receipted and obtained monies collected in the food service area, prepared daily count records and deposited monies collected in the District’s food service account, without compensating controls. The same employee, who prepared payroll checks and maintained and reconciled payroll records, was responsible for changes to payroll amounts, without compensating controls. Cause: District management, due to cost/benefit implications, which hindered the District's ability to adequately segregate financial accounting duties among employees, did not effectively address the deficiencies in internal control. Effect or potential effect: The District's ability to initiate, authorize, record, process, and report transactions consistent with management's assertions embodied in the financial statements, as well as the ability to safeguard District assets, was adversely affected by the identified weaknesses in the above internal control component. Recommendation: District management should adopt sound accounting policies and establish and maintain internal controls that will initiate, authorize, record, process, and report transactions consistent with management's assertions embodied in the financial statements and that will safeguard District assets. Views of responsible officials: District management will adopt sound accounting policies and establish and maintain internal control that will initiate, authorize, record, process, and report transactions consistent with management's assertions embodied in the financial statements and that will safeguard District assets.