Finding 1148526 (2024-002)

FA 2024-002 Improve Internal Control Activities Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants COVID-19 – 84.027 – American Rescue Plan – Special Education Grants to States COVID-19 – 84.173 – American Rescue Plan – Special Education Preschool Grants Federal Award Numbers: H027A220073 (Year: 2023), H027A230073 (Year: 2024), H173A220081 (Year: 2023), H173A230081 (Year: 2024), H027X210073 (Year: 2022), H173X210081 (Year: 2022) Questioned Costs: None Identified Description: A review of expenditures recorded in and related to the Special Education Cluster revealed that the School District’s internal control procedures were not designed appropriately to ensure that appropriate reviews and approvals occurred. Background Information: The Special Education Cluster (SEC), which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was authorized under the Individuals with Disabilities Education Act (IDEA). SEC funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. SEC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the expenditure of funds by LEAs. SEC funds totaling $993,921.19 were expended and reported on the Meriwether County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Condition: Internal controls over various compliance requirements associated with SEC were reviewed by the auditors. During our testing, it was determined the School District’s internal controls were not properly designed as it was discovered that the SEC Bookkeeper was using a stamp of the Program Director’s signature for approval of payment in the Director’s absence. Cause: The deficiency resulted from a lack of awareness that the existence of a stamp bearing the Director's signature could compromise separation of duties controls. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to adequately review expenditures for allowability exposes the School District to unnecessary risk of error and misuse of federal funds. Recommendation: The School District should review current internal control procedures related to the SEC programs. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect appropriate evidence of review for associated compliance requirements. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding. Appropriate review and approval procedures have been consistently followed throughout the expenditure approval process. The use of a signature stamp did not compromise the Director’s thorough review and authorization of expenditures. Under the established process, the Bookkeeper initiates approval by sending a detailed email to the Director. The signature stamp was applied only after the Director responded with explicit approval. Additionally, a printed copy of the Director’s email approval was attached to the corresponding invoice, which the Accounts Payable Clerk verified prior to processing payment. This procedure has been in place and closely monitored to ensure compliance. A sample of this process was provided as evidence to the reviewing auditor during the review. Auditor’s Concluding Remarks: The use of a signature stamp constitutes a significant control weakness and raises concerns regarding the integrity and authenticity of transaction approvals. This practice does not provide an adequate audit trail related to the expenditure approval process and increases the risk of unauthorized approvals and fraudulent transactions. We reaffirm our finding and will review the status of the finding during our next audit.