Finding Text
Finding 2022-004: Activities Allowed and Unallowed, Allowable Costs (Compliance; Internal Controls Over Compliance) Material Weakness Criteria: Uniform Guidance 2 CFR, Part §200.303(a) requires that non-federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The School District received and expended section 7007 Construction Impact Aid. According to program specific compliance requirements, the School District must use these funds for construction as defined in Section 7013(3) of the Elementary and Secondary Education Act. Under Section 7013(3), the term "construction" includes (a) preparing drawings and specifications for school facilities; (b) erecting, building, acquiring, altering, remodeling, repairing, or extending school facilities; (c) inspecting and supervising the construction of school facilities; and (d) debt servicing for such activities (sections 7007 and 7013(3) of ESEA (20 USC 7707 and 7713)). Condition: During the review of the School’s internal controls related to Impact Aid expenditures, a sample of 67 transactions was tested for both control effectiveness and compliance. The School did not provide evidence of appropriate approval for any of the transactions selected for control testing. In addition, none of the transactions selected for compliance testing included proper supporting invoice documentation. As a result, alternative audit procedures were performed, including direct confirmations to Dick Anderson Construction and Cushing Terrell. Through these confirmations, expenditures totaling $2,415,667.01 and $313,682.20, respectively, were confirmed. Questioned Costs: Known = $645,081.79 Cause: The School District does not have established internal control policies and procedures to ensure appropriate supporting documentation and approvals are obtained prior to the disbursements being processed. Effect: The School District is not in compliance with Activities Allowed and Unallowed and Allowable Costs compliance requirements for the Impact Aid major program. This could lead to sanctions by the funding agencies. Recommendation: We recommend the School District become familiar with requirements of 2 CFR, Part §200.303(a) and establish appropriate internal control policies and procedures and that all staff be trained on those policies and procedures so they are familiar with the requirements. We further recommend the School District does not process payment for disbursements that do not contain sufficient, appropriate supporting documentation and necessary approvals. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.