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2025-001. Internal Control APPLICABLE MAJOR FEDERAL PROGRAMS: U.S. DEPARTMENT OF AGRICULTURE PASSED THROUGH ARKANSAS DEPARTMENT OF EDUCATION CHILD NUTRITION CLUSTER - AL NUMBERS 10.553, 10.555 and 10.582 PASS-THROUGH NUMBER 2601 AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 The internal control deficiencies identified in Finding 2025-001 noted in the Financial Statement Findings Section also apply to this major federal program. Details of the finding are below. Criteria: Internal control is a process consisting of five interrelated components - control environment, risk assessment, information and communication, control activities, and monitoring. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will ensure the achievement of the entity's objectives. The control environment sets the tone of an organization, which influences control consciousness of its employees, and is the foundation for all other components of internal control, providing discipline and structure. Condition: In a prior audit report for the fiscal year ended June 30, 2023, an audit finding was issued which stated: "The Division of Elementary and Secondary Education (DESE) Office of Public School Accountability conducted a monitoring visit in April 2023. This review noted that the District enrolled students from All Children's Academy as full time Cutter Morning Star (CMS) students and did not provide educational services to those students. Additionally, CMS was not submitting accurate attendance data in cycle submissions and reported inaccurate enrollment data. As a result of these findings, the District's state aid funding was reduced by a total of $55,339, and the District reimbursed DESE an additional $45,649. The District was also placed on Accredited-Probation status for the 2022-2023 school year." Subsequent to the review performed by DESE Office of Public School Accountability, the Arkansas State Board of Education (Board) met on April 10, 2025, to review findings of the Professional Licensure Standards Board Ethics Hearing Subcommittee and consider disciplinary action against the teaching license of the District's Superintendent. The District's Superintendent was found by the Arkansas State Board of Education (Board) to have exhibited inappropriate disposition inclusive of professional and ethical behavior which included: violation of district, state or federal policies or law; failure to honestly report enrollment; misuse of public funds; and misuse of school property. The Board issued sanctions including a 30 day suspension of license, a two year probation of license, and completion of required coursework and readings. Cause: District management did not adhere to standards established by the Code of Ethics for Arkansas Educators. Effect or potential effect: Failure of leadership to model ethical behavior can impair the effectiveness of internal controls and increase the risk of noncompliance with laws and regulations. Recommendation: The Board should reinforce expectations regarding professional and ethical conduct for District leadership and ensure appropriate oversight mechanisms are in place to promote a strong ethical culture and accountability within the District's administrative structure. Views of responsible officials: The Cutter Morning Star is deeply disappointed by the findings identified through the audit and review involving the former superintendent. The State Board determined that violations occurred involving district, state, and/or federal policies and laws, including failure to honestly report enrollment, misuse of public funds, and misuse of school property. These actions do not reflect the values, expectations, or standards of the district. The findings exposed the district to unnecessary risk and damaged the trust that the community places in its school leadership. The district remains committed to operating with integrity, transparency, accountability, and full compliance with all applicable laws and policies moving forward.