Audit 47230

Finding Number: 2022-001 Repeat Finding: No Program Name/Assistance Listing Title: COVID-19 Education Stabilization Fund Assistance Listing Number: 84.425D Federal Agency: U.S. Department of Education Federal Award Number: S425D210038 Pass-Through Agency: Arizona Department of Education Questioned Costs: $233,091 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles CRITERIA Under 2CFR ?200.303, the District is required to establish and maintain effective internal controls over federal awards to provide reasonable assurance that the District is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Additionally, section 313(d) of the CRRSA Act and ESEA section 7013(3), 20 U.S.C 7713(3), authorize the use of Education Stabilization Funds for construction activities, including the debt service for such construction activities. CONDITION The District did not ensure that all debt service payments charged to the Education Stabilization Fund were related to construction expenditures incurred. CAUSE The District did not have adequate internal controls in place to ensure that only eligible debt service costs were charged to the program. EFFECT The District charged unallowable costs to the program. CONTEXT During fiscal year 2020-21, the district obtained financing of $1,160,000 to help fund the costs of various building improvements related to indoor air quality and filtration. According to construction invoices on file at the District, $233,091 of the original financing was not utilized on the building improvements and was still available for spending as of fiscal year end 2021-22. During fiscal year 2021-22, the District utilized $1,165,481 of Education Stabilization Funds to pay off the financing agreement, consisting of outstanding principal and accrued interest. As $233,091 of the original financing has yet to be expended, that portion of the debt service payoff is considered an unallowable cost to the program. The sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION Management should review transactions and ensure that program costs are allowable and in adherence to applicable federal requirements. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan.

Finding Number: 2022-001 Repeat Finding: No Program Name/Assistance Listing Title: COVID-19 Education Stabilization Fund Assistance Listing Number: 84.425D Federal Agency: U.S. Department of Education Federal Award Number: S425D210038 Pass-Through Agency: Arizona Department of Education Questioned Costs: $233,091 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles CRITERIA Under 2CFR ?200.303, the District is required to establish and maintain effective internal controls over federal awards to provide reasonable assurance that the District is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Additionally, section 313(d) of the CRRSA Act and ESEA section 7013(3), 20 U.S.C 7713(3), authorize the use of Education Stabilization Funds for construction activities, including the debt service for such construction activities. CONDITION The District did not ensure that all debt service payments charged to the Education Stabilization Fund were related to construction expenditures incurred. CAUSE The District did not have adequate internal controls in place to ensure that only eligible debt service costs were charged to the program. EFFECT The District charged unallowable costs to the program. CONTEXT During fiscal year 2020-21, the district obtained financing of $1,160,000 to help fund the costs of various building improvements related to indoor air quality and filtration. According to construction invoices on file at the District, $233,091 of the original financing was not utilized on the building improvements and was still available for spending as of fiscal year end 2021-22. During fiscal year 2021-22, the District utilized $1,165,481 of Education Stabilization Funds to pay off the financing agreement, consisting of outstanding principal and accrued interest. As $233,091 of the original financing has yet to be expended, that portion of the debt service payoff is considered an unallowable cost to the program. The sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION Management should review transactions and ensure that program costs are allowable and in adherence to applicable federal requirements. VIEWS OF RESPONSIBLE OFFICIALS See Corrective Action Plan.