Finding 1073833 (2023-003)

MW-2023-03 LACK OF PROPER CONTROLS OVER COMPLIANCE FOR PURCHASES FEDERAL AGENCY: U.S. DEPARTMENT OF EDUCATION CLUSTER/PROGRAM: COVID-19 - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ESSER) FUND AWARD NAME: COVID-19 - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ESSER) FUND AL NUMBER(S): 84.425D, 84.425U AWARD YEAR: 2023 COMPLIANCE REQUIREMENT: ACTIVITIES ALLOWED/ALLOWABLE COSTS TYPE OF FINDING Internal Control over Compliance – Material Weakness CRITERIA All purchase orders must be reviewed and approved by a department head prior to submission as per the City’s internal control policies. CONDITION During our audit, we found that the client was unable to provide purchase orders for 7 of the transactions tested under the ESSER program. This indicates a lapse in the adherence to the established review and approval process for expenditures. CAUSE The lack of proper documentation for the specified transactions was due to a breakdown in the internal control process, where purchase orders were either not generated or not retained as required. EFFECT OR POTENTIAL EFFECT Without proper documentation and adherence to the review and approval process, there is an increased risk of unauthorized or inappropriate expenditures. This could lead to financial mismanagement and non-compliance with funding agency requirements, potentially resulting in funding disallowances. SECTION III – FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS (CONTINUED) RECOMMENDATION We recommend that the City reinforces the importance of following established internal control procedures for reviewing and approving all expenditures. This can be achieved through regular training for staff involved in the procurement process and periodic audits to ensure compliance. Additionally, implementing a centralized document retention system for purchase orders and related documents will help in maintaining proper records and facilitating easier retrieval during audits. VIEWS OF RESPONSIBLE OFFICIAL AND PLANNED CORRECTIVE ACTION See accompanying Corrective Action Plan.