Finding 1218287 (2023-009)

Material Weakness Repeat Finding

Requirement

Questioned Costs

Year

2023

Accepted

2026-06-24

Audit: 404529

Organization: Lead Academy (AL)

Auditor: CARR RIGGS & INGRAM LLC

AI Summary

Core Issue: Missing documentation for 28.5% of sampled disbursements raises concerns about compliance with federal requirements.
Impacted Requirements: Internal controls over federal awards must ensure accurate and allowable costs, as outlined in 2 CFR 200.303 and 200.430(g).
Recommended Follow-Up: Implement a system to ensure all documentation is prepared, reviewed, and retained to support expenses, detailing who prepared and reviewed the information.

Finding Text

Item 2023-009 Activities Allowed/Allowable Costs/Costs Principles Child Nutrition Program ALN# 10.555 and 10.553 US Department of Agriculture Passed through Alabama State Department of Education Federal Grant/Contract Number: 802 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 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). Per 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the recipient or subrecipient. Condition – During testing of program disbursements there was 2 instances where the purchase order or request used to identify approval of the disbursement could not be located, which was approximately 28.5% of the population sampled. In our payroll testing, we noted multiple instances where an approved pay rate and hours covering the appropriate time period could not be obtained. Cause – Supporting documentation relevant to see that proper approval for controls had been performed could not be obtained. Effect – Inadequate or inconsistent 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 $9,926 that amount extrapolated to the population was $17,759. 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, and the use of a third-party payroll provider, supporting documentation necessary to verify and document vendor payments and payroll transactions was not available, resulting in the inability to obtain sufficient, appropriate audit evidence related to these amounts. 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. Prior to 2024, a third-party vendor was handling/processing payroll for LEAD Academy. Additionally, procedures were not in place to maintain monthly payroll data (timesheets, leave balances, documentation of annual salaries) prior to 2024. 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. In 2024, payroll processing for the school was transitioned to NSFA, utilizing the state approved accounting/payroll software. Monthly procedures are now in place for the submission, approval and documentation of all payroll transactions. Expected Completion Date: September 30, 2024

Other Findings in this Audit

1218277 2023-007

Material Weakness Repeat
1218278 2023-008

Material Weakness Repeat
1218279 2023-007

Material Weakness Repeat
1218280 2023-008

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
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