Audit 409279

2022-001 Improve Document Retention and Evidence of Supervisory Review and Approvals Federal Agency: U.S. Department of Education Award Name: COVID-19 – Education Stabilization Fund AL Number(s): 84.425D/U Award Year: 2022 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement In accordance with 2 CFR §200.303, non-Federal entities receiving Federal awards must establish and maintain effective internal controls over Federal programs that provide reasonable assurance that the entity is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective controls over payroll expenditures and vendor disbursements should include documented supervisory review and approval of payroll authorizations, invoices, and warrants prior to payment and retention of supporting documentation. Condition and Context During testing of ESSER expenditures, the following exceptions were identified: Payroll Testing Of 10 employee payroll transactions tested, payroll authorization forms supporting the salary rates charged to the ESSER program were provided; however, none of the forms contained evidence of supervisory or management approval of the rates paid. Accounts Payable Testing Of 15 vendor expenditures tested: • 7 invoices lacked evidence of review and approval prior to payment. • 3 invoices could not be located and were not provided for audit. • 13 related warrants could not be provided to support payment authorization and approval. Cause Management did not maintain or consistently operate internal controls designed to ensure that payroll rate authorizations, vendor invoices, and payment warrants were reviewed, approved, and retained in accordance with recordkeeping requirements. In addition, controls over document retention were not operating effectively. Effect or Potential Effect Without evidence of approval and supporting documentation, the Town cannot demonstrate that payroll and vendor expenditures charged to the ESSER program were properly authorized, accurately calculated, and supported. As a result, there is an increased risk that unallowable, inaccurate, or unauthorized expenditures could be charged to the Federal program and remain undetected. Questioned Costs No questioned costs are reported as they are below the questioned costs threshold of $25,000. Recommendation The Town should strengthen internal controls over compliance for Federal programs by requiring documented approval of all payroll rate authorizations before employees are compensated from Federal awards, require evidence of review and approval on all invoices prior to payment, and maintain complete supporting documentation, including invoices and warrants, in accordance with Federal record retention requirements. Views of Responsible Official and Planned Corrective Action Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.