Finding Text
2022-004 ? Expenditure Controls ? Material Weakness Compliance Requirement: Allowable Costs and Cost Principles ALN: 84.425 Criteria: Title 2 U.S. Code of Federal Regulations (CFR) 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) 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). Condition / Context: During our sample testing of 25 transactions for allowable costs and proper internal controls, we noted there was a lack of documentation of internal controls processes in place over compliance. For credit card charges and other expenditures, we found 17 of 25 transactions tested, did not have pre-authorized purchase order approval, prior to the charge. Additionally, we found that 4 of 25 transactions tested, were only supported by a quote and not an actual invoice. Furthermore, we were unable to trace 9 of 25 transactions to the authorized board minutes. Questioned Costs: None. Cause: Insufficient staffing and training to ensure proper protocols are followed seems to be the main cause of this finding. Effect: Without proper internal controls, there is greater risk of unallowable expenditures being charged to the grant. Allowable costs could be charged to federal awards with reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Recommendation: We recommend that the District continue to work on implementation of expenditure controls at all school levels before the expenditure is submitted to the accounting department for payment execution. Furthermore, the District should improve the organization of supporting documentation for all expenditures and care should be taken to ensure all payments are approved by the School Board listing for approval. Corrective actions: Please see the last page for management?s response as prepared on District letterhead.