Audit 408246

Significant Deficiency /Other Non-compliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Repeat Finding from prior year: Yes; 2024-002 Criteria: 2 CFR §200.112 – Conflict of Interest requires non-federal entities to disclose in writing any potential conflicts of interest to the federal awarding agency or pass-through entity. 2 CFR §200.302 - Financial Management requires funds to be expended and accounted for the federal award in accordance with state laws and procedures for expending and accounting for state funds which include Miss. Code Ann. §25-1-53 and Miss. Code Ann. §25-4-105. 2 CFR §200.303 – Internal Controls requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. 2 CFR §200.403- Factors Affecting Allowability of Costs states that federal award costs must be necessary, reasonable, and allowable. The COSO Internal Control—Integrated Framework and the GAO Standards for Internal Control in the Federal Government (Green Book) provide the accepted framework for evaluating internal control over compliance (Control Environment and Control Activities). Condition: As reported in the prior year, we observed that the District's system of internal controls is not adequate to ensure compliance with applicable federal and state laws and regulations governing conflicts of interest and personnel hiring practices. We observed that the Food Service Director's child was employed by the Food Service Department, creating a potential conflict-of-interest situation and a violation of applicable federal conflict-of-interest requirements and state nepotism laws. Specifically, we observed that the Board's minutes do not clearly identify the individual who recommended the employee to the board for hire, and the District failed to report the employment of individual to the appropriate division of the Mississippi Department of Education as required. This resulted in the payment of $22,194, including salary and related benefits paid to the related employee for potentially unallowable costs associated with the federal grant. Context/Perspective: This finding is a result of our statistically valid random sample of twenty-five payroll disbursements for single audit purposes and our follow up of a prior year audit finding. Cause: The District’s internal control system over personnel activities is not adequately designed to ensure that conflicts of interest related to hiring decisions are identified and prevented in accordance with applicable state and federal statutes and prevent unallowable cost being charged to the federal program. Effect: Failure to establish and maintain adequate internal controls over personnel hiring practices increases the risk of noncompliance with applicable federal and state laws and regulations which could result in unallowable costs charged to the program due to conflicts of interest. Recommendation: The District should strengthen internal controls over hiring of personnel to ensure compliance with applicable laws, regulations, and conflict-of-interest requirements and to ensure that only allowable costs are charged to the federal grant program. This should also include implementing procedures for the disclosure and independent review of potential conflicts of interest, providing periodic ethics training, and establishing monitoring processes to ensure ongoing compliance with state nepotism laws and federal conflict-of-interest requirements as well as improvements to the internal controls over the preparation of the board minutes to ensure that the position and name of person recommending personnel to the board for hiring is clearly identified. Questioned Cost: None. Views of Responsible Official(s): The Auditee’s Corrective Action Plan lists the District’s response to the finding.

Significant Deficiency/ Other Noncompliance Program: Assistance Listing: 10.553/10.555 – Child Nutrition Cluster Repeat Finding: No Criteria: 2 CFR §200.302 - Financial Management requires funds to be expended and accounted for the federal award in accordance with state laws and procedures for expending and accounting for state funds which includes the "Accounting Manual for School Districts" by the Mississippi Department of Education which emphasizes that one of the most important aspects of controls over expenditures is an efficient and effective system of purchasing. The objectives of an effective purchasing system are to buy materials, supplies, commodities, and services that are of the right quality, quantity, price and from the right source with delivery being at the right place. These objectives should be accomplished in accordance with management's purchasing policies and in accordance with applicable federal and state purchasing laws. Each school district shall adopt purchasing policies and establish a purchasing system which will meet these objectives. 2 CFR 200.303 requires that a non-federal entity must establish and maintain effective internal control over a federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statues, regulations, and the terms and conditions of the federal award. 2 CFR 214 states that recipients and subrecipients are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR 180. Condition: As part of our statistically valid random sample of sixty non-payroll disbursements from the District’s grant expenditures from major programs, we observed the following instances where information required to ensure that these expenditures fulfilled requirements of 2 CFR Part 200 as follows was not obtained by the District or was otherwise unavailable for our examination: • Several instances where the paid invoices exceeded the purchase order amount, which included instances where purchase orders were prepared for one dollar. • Several instances where certifications from SAM.gov were not obtained and included in the paid invoice packet to document that the District had verified that the vendor was not suspended or debarred. Context/Perspective: This finding is based on our statistically valid random sample of sixty non-payroll cash disbursements charged to major programs of the District. Effect: Failure to follow the federal and state requirements could affect future eligibility for federal award programs or could result in a loss or misappropriation of public assets. Questioned Costs: None Recommendation: We recommend that the District implement additional internal controls as necessary to ensure that purchase orders are prepared for accurate amounts where required and that written certifications are obtained to ensure that vendors have not been suspended or debarred. We specifically recommend that verifications from SAM.gov be obtained by printing or saving the “No Matches Found” page to a pdf and attaching it to the paid invoice packet or procurement file. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.