Finding Text
#2025-004 FINDING: Documentation of Internal Controls Federal Program Affected: All major federal programs Compliance Requirement: Allowable Costs, Special Tests and Provisions, Procurement and Suspension and Debarment Questioned Costs: None Condition and Cause: Although discussions with management indicate controls are in place, the School was unable to provide internal documentation verifying the existence of the following internal control processes: • Stipends and Bonus Pay: The School provided in excess of $775,000 in stipend, incentive, and bonus pay to employees. The School was not able to provide support for School Board approval of all forms of special payments to employees. • Journal Entries: Documentation was not retained to support proper review of journal entries prior to posting. • Bank Reconciliation: Documentation was not retained to support proper review of monthly bank reconciliations. • While cash accounts were properly collateralized and documentation is maintained for one bank account regarding adequate collateralization, documentation supporting internal controls for bank collateralization for several other bank accounts was not maintained. • A search for suspended and debarred vendors was not performed for one contracted instructor paid in excess of $25,000 from the Substance Abuse and Mental Health projects of Regional and National Significance program and for one vendor from the Administrative Cost Grants for Indian Schools program. • The School was not submitting timely reimbursement requests for reimbursement-based grants. • The School was not reconciling balances to underlying subsidiary listings resulting in material audit adjustments. See finding 2025-002. Criteria and Effect: Records of approval of special pay should be maintained and retained by the business office. Without this documentation, it creates an opportunity for misappropriation of funding. Journal entries should be reviewed prior to posting and this review should be documented. Bank reconciliations should be reviewed upon completion, and this review should be documented. Retaining documentation of approvals supports the monitoring function necessary for proper segregation of duties. If bank accounts were not properly collateralized, it could result in noncompliance. Uniform Guidance requires that any covered transactions expected to exceed $25,000 must be searched for through the list of suspended and debarred vendors on Sam.gov. A contracted instructor and vendor for professional services meets the definition of a covered transaction. Failure to request reimbursement timely impacts the availability of federal funds. Repeat Finding from Prior Year: Yes, #2024-004 Recommendation: If special pay to employees are approved, adequate documentation must be maintained to support the activity. Additionally, we recommend that the business manager indicates her review with a signature on all bank reconciliations and journal entries prior to posting. The School should maintain documentation supporting proper collateralization for all bank accounts. The School should perform and retain support for the search of suspended and debarred vendors if there is a reasonable estimation that they will be paid in excess of $25,000. Reimbursement requests should be submitted timely to minimize the lapse of time between the reimbursement and the underlying expenditure. Management should reconcile general ledger accounts to underlying subsidiary balances. Response/Corrective Action Plan: See Corrective Action Plan.