Finding Text
MATERIAL WEAKNESS Finding Number: 2024-003 Material Weakness in Internal Control over Compliance Federal Program: 84.027 & 84.173 Special Education Cluster (IDEA) Federal Program: 84.425D/84.425U Education Stabilization Fund Criteria: 2 CFR §200.318(a) requires non-federal entities to establish and maintain effective internal control over procurement transactions to ensure compliance with applicable federal statutes and regulations. 2 CFR §§200.317–200.327 require non-federal entities to maintain written procurement policies and procedures that address procurement methods, documentation requirements, and contract administration. 2 CFR §200.430(i) requires charges to federal awards for salaries and wages to be supported by documentation that accurately reflects the work performed and supports the allowability and allocation of payroll costs.2 CFR §200.302(b)(3) requires financial management systems to maintain records that adequately identify the source and application of funds for federally funded activities. Condition: The entity did not maintain adequate internal controls over procurement and payroll expenditures charged to the federal program. Specifically: • The entity does not have a formally adopted, written procurement policy that complies with federal procurement requirements. • Invoices tested did not include supporting documentation such as purchase orders, executed contracts, or memoranda of understanding (MOUs) to substantiate the procurement of goods or services, approval of the transactions, or the basis for the costs incurred. • Payroll expenditures charged to the federal program lacked sufficient supporting documentation, including employment contracts or documentation identifying the employee’s placement on the applicable salary chart within the Teacher and Support Staff Association agreement. • As a result, the entity was unable to demonstrate that payroll costs were calculated in accordance with approved pay rates and were allowable and properly supported. Cause: The deficiencies resulted from the absence of formal procurement policies and insufficient internal controls over documentation standards and record retention for procurement and payroll transactions. Effect: Due to the lack of written procurement policies and insufficient supporting documentation for procurement and payroll expenditures, the entity is unable to demonstrate compliance with federal procurement and cost principles. These deficiencies increase the risk that unallowable or improperly supported costs could be charged to the federal program and not be detected in a timely manner. Identification of Questioned Costs:None identified. Context: The absence of formal procurement policies and consistent supporting documentation limited the ability to readily demonstrate compliance with federal procurement and cost principles and increased the extent of audit procedures required. Repeat Finding: This is a repeat finding of 2023-03.Recommendation: We recommend that management update its procurement policy to include all current requirements under 2 CFR 200 and implement a process to periodically review and revise the policy to remain compliant with future federal regulation changes. Require that all procurement transactions be supported by purchase orders, executed contracts, MOUs, invoices, and evidence of approval and receipt. Ensure payroll expenditures charged to federal programs are supported by employment contracts and documentation identifying employee placement on the applicable salary schedule in accordance with collective bargaining agreements, as required by 2 CFR §200.430. Implement monitoring and training procedures to ensure consistent compliance with federal documentation requirements. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the entity.