Finding 1218280 (2023-008)

Material Weakness Repeat Finding
Requirement
AB
Questioned Costs
-
Year
2023
Accepted
2026-06-24
Audit: 404529
Organization: Lead Academy (AL)

AI Summary

  • Core Issue: Missing documentation for 3 out of 7 sampled disbursements raises concerns about compliance with internal control requirements.
  • Impacted Requirements: Non-compliance with 2 CFR 200.303 and internal control standards may lead to erroneous or fraudulent transactions.
  • Recommended Follow-Up: Ensure all documentation is prepared, reviewed, and retained, clearly detailing who was involved and accurately reflecting expenditures.

Finding Text

Item 2023-008 Activities Allowed/Allowable Costs/Costs Principles Education Stabilization Fund ALN# 84.425D and 84.425U US Department of Education Passed through Alabama State Department of Education Federal Grant/Contract Number: 2021-802-004295; 2021-802-004296; 2021-802-004298; X230168 Grant period – 2023 Criteria - Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing theFederal 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). Condition – During testing of program disbursements there were 2 instances where the purchase order or request used to identify approval of the disbursement could not be located and 1 invoice that could not be located out of 7 program disbursements sampled. Deficiencies occurred in approximately 42.85% of the population sampled. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Supporting invoices were not retained by the Academy to substantiate activities allowed and allowable costs. Effect – Inadequate or inconsistent documentation and review of expenses may result in erroneous or fraudulent transactions occurring. Questioned Costs – Total of expenses sampled in which documentation could not be provided was $5,041 that amount extrapolated to the population was $26,072. Recommendation – Documentation should be prepared, reviewed, and retained to support the activities allowed and allowable cost of the expense. The documentation should clearly document who prepared the information and who reviewed the information as well as provide an accurate detail of expenditures recorded to the fund source. Management’s Response - Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Corrective Action Plan

Responsible Parties: Erik Estill and Russell Raney Finding: Due to the passage of time, the turnover of staff, supporting documentation necessary to verify and document vendor payment was not available, resulting in the inability to obtain sufficient, appropriate audit evidence related to these amounts. During the testing of ESSER funds, there were 2 instances where the purchase order could not be located and one invoice that could not be located. Corrective Action: The school (LEAD Academy) contracted with New Schools for Alabama (NSFA) during 2023 to handle all their finance and accounting needs. By the end of 2023, the school also transitioned all payroll services to New Schools for Alabama. NSFA helped establish a purchase order procedure and worked with the school to make sure a purchase order or signed contract is in place prior to the purchase of goods and services. Additionally, approval on all invoices is required before NSFA processes them for payment, in order to verify that all goods and services have been received. Prior to 2024, proper procedures were not in place to maintain vendor files and accounts payable documentation. All financial records are now maintained digitally, with the original documents residing at the school. Additionally, NSFA worked with existing staff regarding proper documentation and filing of financial records and helped establish a new filing system. NSFA requires the school to indicate the source of funding for purchases, in order to know how to code the expenditure. We utilize monthly budget to actual reports to verify that expenditures are in line with the approved budget, ensuring that the correct coding has been used. We also ensure that only allowable expenditures are charged to federal funds, based on approved federal Egap applications and budgets.

Categories

Procurement, Suspension & Debarment Allowable Costs / Cost Principles Matching / Level of Effort / Earmarking Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1218277 2023-007
    Material Weakness Repeat
  • 1218278 2023-008
    Material Weakness Repeat
  • 1218279 2023-007
    Material Weakness Repeat
  • 1218281 2023-009
    Material Weakness Repeat
  • 1218282 2023-010
    Material Weakness Repeat
  • 1218283 2023-009
    Material Weakness Repeat
  • 1218284 2023-010
    Material Weakness Repeat
  • 1218285 2023-009
    Material Weakness Repeat
  • 1218286 2023-010
    Material Weakness Repeat
  • 1218287 2023-009
    Material Weakness Repeat
  • 1218288 2023-010
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
84.425 COVID-19 EDUCATION STABILIZATION FUND $581,119
84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES $223,214
10.553 SCHOOL BREAKFAST PROGRAM $169,977
84.027 SPECIAL EDUCATION GRANTS TO STATES $86,736
84.367 SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (FORMERLY IMPROVING TEACHER QUALITY STATE GRANTS) $56,432
10.555 NATIONAL SCHOOL LUNCH PROGRAM $26,712
84.424 STUDENT SUPPORT AND ACADEMIC ENRICHMENT PROGRAM $15,640
84.027 COVID-19 - SPECIAL EDUCATION_GRANTS TO STATES $6,885
96.001 SOCIAL SECURITY DISABILITY INSURANCE $80