Finding 1137104 (2024-001)

2024-001. Internal Control APPLICABLE MAJOR FEDERAL PROGRAMS: U.S. DEPARTMENT OF AGRICULTURE PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION CHILD NUTRITION CLUSTER - AL NUMBERS 10.553, 10.555, and 10.582 PASS-THROUGH NUMBER 0901 AUDIT PERIOD - YEAR ENDED JUNE 30, 2024 U.S. DEPARTMENT OF EDUCATION PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES - AL NUMBER 84.010A PASS-THROUGH NUMBER 0901 AUDIT PERIOD - YEAR ENDED JUNE 30, 2024 The internal control deficiencies identified in Finding 2024-001 noted in Section II Financial Statement Findings apply to these major federal programs. Financial statement finding 2024-001 detail below: Criteria: Internal control is a process consisting of five interrelated components - control environment, risk assessment, information and communication, control activities, and monitoring. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will, among other things, initiate, authorize, record, process, and report transactions (as well as events and conditions) consistent with management’s assertions embodied in the financial statements. Condition and Context: Deficiencies in the internal control component of control activities adversely affected the District’s ability to initiate, authorize, record, process, and report financial data in accordance with the regulatory basis of accounting such that there was a reasonable possibility that a material misstatement of the District’s financial statements would not be prevented, or detected and corrected on a timely basis. Financial accounting duties were not adequately segregated among employees. Specifically, certain key weaknesses included the following: non-payroll checks were prepared by the same employee responsible for the maintenance of accounting records and such employee had unrestricted access to the District’s electronic signature stamp. Payroll checks were prepared by the same employee responsible for changes to the payroll amounts, without compensating controls. The District Treasurer was responsible for receiving and depositing monies collected and preparation of bank reconciliations, without compensating controls. Repeat of finding 2023-001. Cause: District management, due to cost/benefit implications which hindered the District’s ability to adequately segregate financial accounting duties among employees, did not effectively address the deficiencies in internal control. Effect or potential effect: The District’s ability to initiate, authorize, record, process, and report transactions consistent with management’s assertions embodied in the financial statements, as well as the ability to safeguard District assets, was adversely affected by the identified weaknesses in the above internal control component. Recommendation: District management should adopt sound accounting policies and establish and maintain internal control that will initiate, authorize, record, process, and report transactions consistent with management’s assertions embodied in the financial statements and that will safeguard District assets. Views of responsible officials: We concur with the recommendation and will implement corrective procedures to the extent possible.