Management’s response/corrective action plan: Management concurs with the audit finding. During fiscal year 2024, the School Unit appropriately recorded the cost of a five-year software agreement as a prepaid expenditure. However, in fiscal year 2025, the entire amount was incorrectly recognized as a current-year expenditure and included in the calculation of grant reimbursements. To remedy this issue, management will enhance internal controls over prepaid expenditures charged to federal grants. Specifically, finance staff and the business manager, will review all prepaid items at year-end and during grant reimbursement preparation to ensure that expenditures are recognized in the proper fiscal period and in accordance with the underlying contract terms. A reconciliation between prepaid balances, contract terms, and reimbursement requests will be performed prior to federal grant submission. In addition, written procedures will be updated to clearly require verification that only allowable and incurred costs are included in reimbursement claims, and relevant staff will receive additional training on grant compliance requirements related to prepaid expenditures. Management believes these actions will prevent similar issues in the future.