Audit 406467

2025-001 Internal Control over Financial Reporting and Accounting Records (Material Weakness) - Repeated and Modified (Prior Year Finding 2024-001) Criteria or Specific Requirements: According to generally accepted accounting principles (GAAP), the School management is responsible for establishing and maintaining a system of internal controls over financial reporting. The School’s systems of internal controls must extend beyond the cash basis general ledger and the supporting schedules prepared by the School; rather, it must also include controls over the GAAP basis financial statements to ensure that a material misstatement would be prevented and/or detected. The School's management is responsible for the design and implementation of internal controls over the recording of activity in the accounting records, account balances, and financial statement disclosures. This internal control structure is established to ensure misstatements in the financial statements are prevented and/or detected. Maintenance of adequate supporting documentation is an integral part of a sound internal control system to safeguard assets and accomplish timely preparation and submission of financial reports. Good accounting and internal control practices require that all transactions must originate with authorizing documents and be supported by properly approved documents such as purchase orders, bills, petty cash reimbursement forms, payroll and time records, contracts, or other supporting documents. Additionally, regular and timely reconciliation of general ledger accounts to subsidiary ledgers and supporting documents is essential to ensure accuracy and integrity of financial information. Condition: During our review of the School’s accounting records and internal control processes, we identified that internal controls over financial reporting were not adequately designed or effectively implemented. The School lacks an effective internal control structure over its year-end financial close and reporting process, including controls over the timely and accurate recording and reconciliation of unearned revenue, grant receivable, and capital assets. Audit adjustments were recorded for unearned revenue, grant revenue, and accounts receivable to correct material misstatements identified during testing. Cause: The School’s policies and procedures related to financial reporting were not adequately established or implemented to ensure timely and accurate financial reporting. There was a lack of established internal controls and procedures over accounting records. The School staff did not ensure that all of the required documentation and procedures were in place. Effect: The lack of implementing adequate policies and procedures over accounting records may result in nonauthorized or incorrect calculation of invoices. Also, the probability that fraud or material errors will occur and go undetected generally increases. Without established and adequate internal controls over financial reporting and year-end reconciliation procedures, the School's balances lack certainty about the accuracy of the balances. Auditor's Recommendation: We recommend management to design and implement effective internal control procedures to ensure the accuracy and completeness of the general ledger and financial statements.

2025-002 Late Single Audit Submission - (Significant Deficiency) - Repeated (Prior Year Finding 2024- 002) Criteria or Specific Requirements: Section 200.512(a)(1) Report Submission of the Office of Management and Budget’s Uniform Guidance outlines the following requirement: “The audit must be completed, and the data collection form must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period.” Condition: The School did not submit the single audit reporting package to the Federal Audit Clearinghouse within nine months following their fiscal year-end as required (deadline of March 31, 2026). Cause: The School was unable to provide the necessary audit documentation timely due to improper record retention. Effect: Noncompliance with the Office of Management and Budget’s Uniform Guidance. Potential reduction or delay in federal and state funding as well as the effects of being placed on high-risk status by a federal and/or state agency. Auditor's Recommendation: Management should develop and implement policies regarding the retention of records and audit documentation.

2025-003 Internal Control over Payroll – (Significant Deficiency) - Repeated and Modified (Prior Year Finding 2024-003) Federal Program Information: Funding Agency Title Federal Assistance Listing Number(s) Award Year and Number U.S. Department of Interior Indian School Equalization Program 15.042 2024; A24AV00744 U.S. Department of Interior Indian Schools Student Transportation 15.044 2024; A24AV00744 U.S. Department of Interior Administrative Cost Grants for Indian Schools 15.046 2024; A24AV00744 U.S. Department of Interior Indian Education Facilities, Operations, and Maintenance 15.047 2024; A24AV00744 U.S. Department of Education Title I Grants to Local Educational Agencies 84.010 2024; A24AV00744 U.S. Department of Education Special Education Grants to States 84.027 2024; A24AV00744 U.S. Department of Education Education Stabilization Fund 84.425 2024; A24AV00744 Criteria or Specific Requirements: In accordance with 2 CFR § 200.302(b)(3) and § 200.430(i), recipients of federal funds must maintain documentation that supports the allowability and allocability of compensation costs. Personnel expenses must be supported by records that accurately reflect the work performed, and documentation must be maintained for each employee, including executed contracts, offer letters, pay rate approvals, timesheets, and separation documentation. Adequate support is necessary to demonstrate that federal funds were used in compliance with award conditions. Condition: During our review of internal controls over payroll processing, we selected 194 payroll transactions across seven major programs for testing. Exceptions were identified in 7 transactions. The School did not fully comply with its own adopted policies or applicable federal regulations concerning payroll documentation and processing. Cause: The deficiencies appear to be due to a lack of consistent personnel file maintenance and insufficient internal controls over payroll documentation, record retention, and post-hiring compliance reviews. Effect: The lack of complete personnel documentation increases the risk of charging unallowable or unsupported costs to federal awards. It also affects the ability to verify employee eligibility, compensation accuracy, and the proper use of federal funds, potentially resulting in questioned costs and potential repayment obligations to granting agencies. Auditor's Recommendation: We recommend that the School implement enhanced internal controls and standardized procedures to ensure complete and accurate personnel records are maintained. This should include routine documentation checks to ensure that all required items, such as offer letters, contracts, paystubs, pay rate verifications, timesheets, and termination letters, are present and properly filed. Management should also provide training to relevant staff on federal compliance requirements related to payroll and personnel documentation.

2025-004 Special Tests and Provisions Compliance Requirement (Material Weakness) - Repeated and Modified (Prior Year Finding 2024-004) Federal Program Information: Funding Agency Title Federal Assistance Listing Number(s) Award Year and Number U.S. Department of Interior Indian School Equalization Program 15.042 2024; A24AV00744 U.S. Department of Interior Indian Schools Student Transportation 15.044 2024; A24AV00744 U.S. Department of Interior Administrative Cost Grants for Indian Schools 15.046 2024; A24AV00744 U.S. Department of Interior Indian Education Facilities, Operations, and Maintenance 15.047 2024; A24AV00744 U.S. Department of Education Title I Grants to Local Educational Agencies 84.010 2024; A24AV00744 U.S. Department of Education Special Education Grants to States 84.027 2024; A24AV00744 U.S. Department of Education Education Stabilization Fund 84.425 2024; A24AV00744 Criteria or Specific Requirement: In accordance with the Indian Child Protection and Family Violence Prevention Act, the School is required to conduct an investigation of the character of each individual who is employed or is being considered for employment by the School in a position that involves regular contact with or control over Indian children. The individual should be re-investigated every five years. The Act further states that the School may employ individuals in those positions only if the individuals meet standards of character no less stringent than those prescribed under subpart B – Minimum Standards of Character and Suitability for Employment (25 CFR part 63). Condition: The School was unable to locate records indicating character investigations had been performed for two out of ten employees in positions that involve regular contact with children. Cause: The School did not adhere to written policy regarding the storage of character investigation. Effect: The School is not in compliance with the Indian Child Protection and Family Violence Prevention Act requirements. Auditor's Recommendations: The School should ensure adequate character investigations are performed and documentation is maintained in a timely manner to achieve full compliance with the Indian Child Protection and Family Violence Prevention Act.