Finding Text
Significant Deficiency: Finding 2025-001 This finding impacts the activities allowed/disallowed and unallowable cost principle compliance requirement for the major program, Assistance Listing Number 84.287, Twenty-First Century Community Learning Centers, funded by the U.S. Department of Education and passed through by the State of Rhode Island, Department of Education (RIDE). Criteria: Per 2 CFR 200.303, the Collaborative must establish and maintain effective internal control over federal awards to provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of federal awards. Controls should ensure payroll transactions are properly authorized, disbursements agree to supporting documentation, and reimbursements are appropriately monitored. Condition: During testing of twenty-five payroll and twenty-five cash disbursement transactions we identified the following exceptions: • One employee timesheet did not match the hours paid to the employee. • A $6 variance was identified between the authorized pay rate and the amount paid in a selected payroll transaction. • A cash disbursement exceeded the related invoice by $5. Cause: These exceptions occurred due to insufficient review and monitoring controls over payroll approvals and cash disbursement reconciliations. Effect: Failure to consistently enforce payroll approval procedures and reconcile disbursements increases the risk of improper payments, misstatements, or noncompliance with federal requirements. Questioned Costs: There were no questioned costs as a result of the significant deficiency. Was the finding a repeat of a finding in the immediately prior year?: No Recommendation: AAFCPAs recommends the Collaborative strengthen internal controls by requiring supervisory approval of all timesheets prior to payroll processing, implementing review procedures to ensure payroll amounts agree to authorized pay rates, and reconciling disbursements to invoices and monitoring outstanding reimbursement checks to ensure resolution. Management Response: The Collaborative acknowledges the findings related to internal controls over payroll and cash disbursements. While the monetary values of the identified variances were minor, management recognizes the importance of maintaining rigorous oversight to ensure full compliance with federal laws and to mitigate the risk of misstatement. To address these concerns, the Collaborative is implementing the following corrective actions: 1. Enhanced Payroll Approval Process: Timesheets are approved by the respective supervisor and then sent to the Executive Director for final approval prior to payroll submission. 2. Pay Rate Verification: The finance department will implement a secondary review procedure to ensure that all payroll amounts align precisely with authorized pay rates. This cross-verification will occur prior to each payroll cycle to prevent future rate variances. 3. Disbursement Reconciliation: Management is updating its cash disbursement procedures to require a formal reconciliation of every check or payment against its original invoice. This process will ensure that no payment exceeds the authorized invoiced amount. 4. Monitoring Reimbursements: The Collaborative will establish a monthly review of all outstanding reimbursement checks and related documentation to ensure timely and accurate resolution of all financial obligations.